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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 2000
REGISTRATION NO. 333-89995
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 2
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ALAMOSA PCS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 4812 75-2843707
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or organization) classification code number) identification no.)
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4403 BROWNFIELD HIGHWAY
LUBBOCK, TEXAS 79407
(806) 722-1100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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DAVID E. SHARBUTT
CHIEF EXECUTIVE OFFICER
4403 BROWNFIELD HIGHWAY
LUBBOCK, TEXAS 79407
(806) 722-1100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of communications to:
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WM. S. KLEINMAN MARC S. ROSENBERG
HAYNES AND BOONE, LLP CRAVATH, SWAINE & MOORE
901 MAIN STREET, SUITE 3100 WORLDWIDE PLAZA
DALLAS, TEXAS 75202-3789 825 EIGHTH AVENUE
(214) 651-5000 NEW YORK, NEW YORK 10019
(212) 474-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 19, 2000
PROSPECTUS
10,714,000 SHARES
[ALAMOSA LOGO]
ALAMOSA PCS HOLDINGS, INC.
COMMON STOCK
$ PER SHARE
We are selling 10,714,000 shares of our common stock. The underwriters
named in this prospectus may purchase up to 1,607,100 additional shares of
common stock from us after the closing of this offering.
This is an initial public offering of our common stock. We currently expect
the initial public offering price to be between $13.00 and $15.00 per share. We
have applied for quotation of the common stock on the Nasdaq National Market
under the symbol "APCS."
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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PER SHARE TOTAL
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Public Offering Price $ $
Underwriting Discount $ $
Proceeds to Alamosa PCS Holdings, Inc. (before expenses) $ $
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The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about
, 2000.
Joint Book-Running Managers
SALOMON SMITH BARNEY LEHMAN BROTHERS
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Co-Managers
CREDIT SUISSE FIRST BOSTON DEUTSCHE BANC ALEX. BROWN
, 2000
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[Pictures of the inside of three of our retail store locations, the Alamosa logo
and two wireless handsets]
[Fold-out page showing the Alamosa logo and a map of United States showing areas
where Alamosa PCS, a Sprint PCS affiliate, has the right to provide wireless
services and will derive its revenues in yellow and areas where Sprint PCS and
other Sprint PCS affiliates have the right to provide wireless services in red.]
Sprint PCS customers can use their phones in 280 major metropolitan areas and
connecting travel corridors throughout the United States.
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 6
This Prospectus Contains Forward-Looking Statements......... 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 31
Our Affiliation Agreements with Sprint PCS.................. 53
Description of Our Indebtedness............................. 62
Management.................................................. 70
Principal Stockholders...................................... 82
Certain Relationships and Related Transactions.............. 85
The Reorganization.......................................... 88
Regulation of the Wireless Telecommunications Industry...... 89
Description of Capital Stock................................ 94
Shares Eligible for Future Sale............................. 100
Important United States Federal Tax Consequences of Our
Common Stock to Non-U.S. Holders.......................... 102
Underwriting................................................ 105
Legal Matters............................................... 107
Experts..................................................... 107
Where You Can Find Additional Information................... 107
Index to Financial Statements............................... F-1
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PROSPECTUS SUMMARY
This summary highlights information that we believe is especially important
concerning our business and this offering of common stock. It does not contain
all of the information that may be important to your investment decision. You
should read the entire prospectus, including "Risk Factors" and our financial
statements and related notes, before deciding to invest in our common stock.
ALAMOSA
GENERAL
Alamosa is a provider of wireless personal communications services,
commonly referred to as PCS, in the southwestern and midwestern United States.
We are a network partner of Sprint PCS, the personal communications services
group of Sprint Corporation. Sprint PCS, directly and through affiliates such as
us, provides wireless services in more than 4,000 cities and communities across
the country. We have the exclusive right to provide digital personal
communications services under the Sprint and Sprint PCS brand names in a
territory comprising approximately 8.4 million residents. These residents are
primarily located in smaller cities and in markets with above average growth
rates in Texas, New Mexico, Arizona, Colorado and Wisconsin. We are a
development stage company with very limited operations, very limited revenues,
significant losses, substantial future capital requirements and an expectation
of continued significant losses.
We launched Sprint PCS service in Laredo in June 1999, and have since
commenced service in ten additional markets: Albuquerque, Santa Fe, El Paso, Las
Cruces, Lubbock, Amarillo, Midland, Odessa, Abilene and San Angelo. Our systems
cover approximately 2.7 million residents out of approximately 3.9 million total
residents in those markets. We expect to cover a total of approximately 4.1
million residents by the end of 2000 and 5.5 million residents by the end of
2001, at which point we expect to have completed our build-out obligations to
Sprint PCS and expect to have covered approximately 65% of the resident
population in our territory. The number of residents covered by our systems does
not represent the number of Sprint PCS subscribers that we expect to be based in
our territory. As of December 31, 1999, approximately 31,850 Sprint PCS
subscribers were based in our territory.
We were formed in July 1998, as a Texas limited liability company.
Immediately before the closing of this offering, we will reorganize into a
Delaware holding company structure. See "The Reorganization." Our principal
executive office is located at 4403 Brownfield Highway, Lubbock, Texas 79407.
Our telephone number is (806) 722-1100.
STRATEGIC RELATIONSHIP WITH SPRINT PCS
We believe that our strategic relationship with Sprint PCS provides
significant competitive advantages. Sprint PCS is a national provider of
wireless services and products. Sprint PCS's subscriber base has more than
tripled in size since the end of June 1998, making Sprint PCS one of the fastest
growing wireless service providers in the United States.
Under our affiliation agreements with Sprint PCS, we have the exclusive
right to provide wireless services under the Sprint and Sprint PCS brand names
in our territory. Sprint PCS handles our billing and collections and pays us 92%
of "collected revenues" from subscribers based in our territory and retains the
remaining 8%, as more fully described in "Our Affiliation Agreements with Sprint
PCS -- The Management Agreement -- Service Pricing, Roaming and Fees." We also
receive other revenues, including Sprint PCS roaming revenues for each minute
that Sprint PCS customers based outside our territory use our portion of the
Sprint PCS network and 100% of revenues from handset sales.
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We believe that our affiliation with Sprint PCS allows us to establish high
quality, branded wireless services more quickly, at a lower cost and with lower
initial capital requirements than would otherwise be possible. For example, we
benefit from Sprint PCS's:
- Marketing. We market products and services through Sprint PCS's existing
relationships with major national retailers under the highly recognizable
Sprint and Sprint PCS brand names.
- National Network. Customers in our territory can immediately access
Sprint PCS's growing network in 280 major metropolitan areas across the
country.
- Advanced Technology. We believe that the technology used by Sprint PCS
provides advantages in capacity and voice-quality, as well as access to
advanced features such as wireless Internet access.
- Handset and Equipment Availability and Pricing. Sprint PCS's purchasing
leverage allows us to acquire handsets and network equipment more quickly
and at a lower cost than we could without our affiliation with Sprint
PCS.
ATTRACTIVE TERRITORY
We believe that our territory is attractive for several reasons, including:
- High Growth Markets. The overall population growth rate in our territory
has been approximately 42% above the national average.
- Fewer Competitors. We expect to face fewer competitors in our markets
than is generally the case for wireless service providers operating in
more urban areas.
- Opportunity for Sprint PCS Roaming Revenue. We anticipate that we will
have significant roaming revenue from Sprint PCS subscribers based
outside our territory who use our portion of the Sprint PCS network.
ADEQUATE FUNDING TO COMPLETE OUR NETWORK
Starting in June 1999, we have launched Sprint PCS service in eleven
markets. We anticipate that the proceeds of this offering, when combined with
the committed level of debt financing from Nortel Networks, Inc., will be
adequate to fund future required capital expenditures, working capital
requirements, operating losses and other cash needs of our business. Further, we
believe that this level of financing is adequate to achieve the objective in our
business plan of covering approximately 65% of the resident population in our
territory by the end of 2001 and to exceed the build-out requirements contained
in our affiliation agreements with Sprint PCS. However, we may need additional
capital or debt financing due to greater than expected operating losses, the
addition of new markets to our territory or unanticipated increases in the
capital required to build-out our portion of the Sprint PCS network.
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THE OFFERING
Common stock offered....... 10,714,000 shares
Common stock outstanding
after the offering......... 59,214,000 shares
Use of proceeds............ We will use the proceeds from this sale of our
common stock, together with the financing provided
by Nortel, to fund the following:
- capital expenditures, including the build-out
of our portion of the Sprint PCS network;
- operating losses and working capital
requirements;
- interest expense, principal payments and loan
origination fees; and
- general corporate purposes.
See "Use of Proceeds" for more detailed
information.
Proposed Nasdaq National
Market symbol............ "APCS"
Dividend policy............ We do not intend to pay cash dividends on our
common stock in the foreseeable future. See
"Dividend Policy" for more information.
As part of this sale of our common stock, the underwriters have agreed to
reserve a maximum of 10% of the shares of our common stock to be sold in this
offering for sale to our current stockholders at a price per share equal to the
public offering price less the underwriting discount. Unless otherwise
indicated, the share and offering expense information in this prospectus assumes
that no shares are so purchased by our current stockholders.
Unless otherwise indicated, the share information in this prospectus
excludes:
- up to 1,607,100 shares that may be issued to the underwriters to cover
over-allotments. See "Underwriting."
- 145,500 shares of common stock issuable upon exercise of options at per
share exercise prices ranging from $1.12 to $1.42 granted to an employee
in connection with his employment agreement, but not under the 1999 Long
Term Incentive Plan. See "Management -- Employment Agreements."
- 7,000,000 shares of common stock reserved for issuance under our 1999
Long Term Incentive Plan, including grants to employees, directors and
consultants of options to acquire 5,543,000 shares at a per share
exercise price equal to the initial public offering price and 485,000
shares at a per share exercise price of $1.15, to be effective as of the
closing of this offering. See "Management -- Benefit Plans -- 1999 Long
Term Incentive Plan."
- 1,307,740 shares, or 1,339,882 shares if the underwriters exercise their
over-allotment option, of our common stock representing two percent of
the total equity outstanding as of the closing of the initial public
offering, which shares are issuable upon exercise of warrants at an
exercise price equal to the initial public offering price. See
"Description of Our Indebtedness -- The Nortel Credit
Facility -- Warrants."
THE NOTES OFFERING
We are also proposing to offer senior discount notes in a separate public
offering pursuant to a separate prospectus. The completion of this offering of
common stock is not conditioned on a successful completion of the offering of
senior discount notes and we cannot assure you that our offering of senior
discount notes will be completed. This prospectus relates only to the offering
of common stock and not to the offering of notes.
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SUMMARY FINANCIAL AND OPERATING DATA
The financial data presented below under the captions "Statement of
Operations Data," "Per Share Data," "Other Data" and "Balance Sheet Data" for,
and as of the end of, the period from inception to December 31, 1998, the
nine-month period ended September 30, 1999 and the period from inception to
September 30, 1999 are derived from the audited financial statements of Alamosa
PCS LLC, the predecessor to Alamosa PCS Holdings, Inc. These financial
statements have been audited by PricewaterhouseCoopers LLP, independent
certified public accountants.
It is important that you also read "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements for the periods ended December 31, 1998 and September
30, 1999, the related notes and the independent auditors' report.
The summary unaudited financial data presented below as of and for the
period from inception to September 30, 1998 are derived from our unaudited
financial statements included elsewhere in this prospectus. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, that management considers necessary for a fair presentation of
financial position and results of operations. Operating results for the
nine-month period ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 1999.
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FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
JULY 16, 1998 JULY 16, 1998 FOR THE NINE- JULY 16, 1998
(INCEPTION) (INCEPTION) MONTH PERIOD (INCEPTION)
THROUGH THROUGH ENDED THROUGH
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1999 1999
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(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND SUBSCRIBER DATA)
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STATEMENT OF OPERATIONS DATA:
Revenues................................ $ -- $ -- $ 2,000 $ 2,000
Cost of sales........................... -- -- 1,614 1,614
Total operating expenses................ 958 401 17,634 18,592
Operating loss.......................... (958) (401) (17,247) (18,206)
Net loss................................ (924) (400) (17,688) (18,612)
PER SHARE DATA:
Basic and diluted net loss per share of
common stock(1)(2)................... $(0.02) $(0.01) $ (0.36) $ (0.38)
Pro forma net loss per share of common
stock(1)(2).......................... (0.02) (0.01) (0.36) (0.38)
OTHER DATA:
Number of subscribers................... -- -- 9,850 9,850
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AS OF SEPTEMBER 30,
1999
AS OF -----------------------------------
DECEMBER 31, AS AS FURTHER
1998 ACTUAL ADJUSTED(3) ADJUSTED(4)
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(DOLLARS IN THOUSANDS)
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BALANCE SHEET DATA:
Cash and cash equivalents..................... $13,529 $ 7,454 $146,305 $237,587
Construction in progress...................... 1,979 28,940 28,940 28,940
Property and equipment, net................... 114 36,930 36,930 36,930
Total assets.................................. 15,674 88,412 227,263 323,585
Total debt.................................... 752(5) 60,885(6) 60,885(6) 157,207
Equity........................................ 14,076 13,210 152,061 152,061
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(1) For the period ended September 30, 1999, diluted weighted average shares
outstanding exclude the common shares issuable on exercise of stock options
because inclusion would have been antidilutive. The presentation of the pro
forma net loss per share of common stock gives effect to adjustments for
federal and state income taxes as if Alamosa had been taxed as a C
Corporation for the periods presented.
(2) Reflects the reorganization as if it had occurred upon inception of Alamosa
PCS, LLC.
(3) As adjusted Balance Sheet Data reflects the sale in this offering of
10,714,000 shares of common stock at an initial offering price of $14.00 per
share, the midpoint of the range on the cover of the prospectus, less
underwriting discounts and commissions and estimated offering expenses of
$11.1 million.
(4) As further adjusted Balance Sheet Data reflects (a) the sale in this
offering of 10,714,000 shares of common stock at an initial offering price
of $14.00 per share, the midpoint of the range on the cover of the
prospectus, less underwriting discounts and commissions and estimated
offering expenses of $11.1 million, (b) the issuance of an aggregate
principal amount at maturity of $ million in senior discount notes with
estimated gross proceeds of $156.0 million, less underwriting discounts and
commissions and estimated offering expenses of $5.0 million and (c) the
prepayment of an aggregate of $75.0 million of indebtedness under the Nortel
facility, consisting of the prepayment of $59.7 million outstanding on
September 30, 1999 and cash equal to $15.3 million designated to prepay
borrowings under the Nortel facility incurred after September 30, 1999.
(5) Reflects capital lease obligations of $728,219 and other notes payable of
$23,637.
(6) Reflects indebtedness incurred under the Nortel facility of $59,678,288,
other notes payable of $352,988 and capital lease obligations of $853,965.
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RISK FACTORS
You should carefully consider the following risk factors in addition to the
other information contained in this prospectus before purchasing our common
stock.
RISKS RELATED TO OUR RELATIONSHIP WITH SPRINT PCS
THE TERMINATION OF OUR AFFILIATION AGREEMENTS WITH SPRINT PCS WOULD
SEVERELY RESTRICT OUR ABILITY TO CONDUCT OUR BUSINESS
Our relationship with Sprint PCS is governed by our affiliation agreements
with Sprint PCS. Since we do not own any licenses to operate a wireless network,
our business depends on the continued effectiveness of those affiliation
agreements. However, Sprint PCS can terminate our affiliation agreements if we
materially breach them. Among other things, a failure to meet the build-out
requirements for any one of the individual markets in our territory or a failure
to meet Sprint PCS's technical or customer service requirements would constitute
a material breach of our management agreement with Sprint PCS that could lead to
its termination. If Sprint PCS terminates any of our affiliation agreements, we
would no longer be a part of the Sprint PCS network and would have extreme
difficulty conducting our business.
IF SPRINT PCS DOES NOT RENEW OUR AFFILIATION AGREEMENTS WITH THEM, OUR
ABILITY TO CONDUCT OUR BUSINESS WOULD BE SEVERELY RESTRICTED
Our affiliation agreements with Sprint PCS are not perpetual, and will
eventually expire. Sprint PCS can choose not to renew these agreements at the
expiration of the 20-year initial term or any ten-year renewal term. If Sprint
PCS decides not to renew our affiliation agreements with them, we would no
longer be a part of the Sprint PCS network and would have extreme difficulty
conducting our business.
PROVISIONS OF OUR AFFILIATION AGREEMENTS WITH SPRINT PCS MAY DIMINISH OUR
VALUE AND RESTRICT THE SALE OF OUR BUSINESS
Under specific circumstances and without further stockholder approval,
Sprint PCS may purchase our operating assets or capital stock for 72% or 80%,
depending on the circumstances, of the "entire business value" of Alamosa, which
value includes the spectrum licenses, business operations and other assets more
fully described in "Our Affiliation Agreements with Sprint PCS -- The Management
Agreement -- Determination of Entire Business Value." Sprint PCS must approve
any change of control of our ownership and consent to any assignment of our
affiliation agreements with them. In addition, Sprint PCS has a right of first
refusal if we decide to sell our operating assets to a third party. We are also
subject to a number of restrictions on the transfer of our business, including a
prohibition on the sale of Alamosa or our operating assets to competitors of
Sprint or Sprint PCS. These restrictions and other restrictions in our
affiliation agreements with Sprint PCS could adversely affect the value of our
common stock, may limit our ability to sell the business, may reduce the value a
buyer would be willing to pay for our business and may reduce the "entire
business value" of Alamosa.
SPRINT PCS MAY MAKE DECISIONS THAT COULD INCREASE OUR EXPENSES, REDUCE OUR
REVENUES OR MAKE OUR AFFILIATE RELATIONSHIP WITH THEM LESS COMPETITIVE
Sprint PCS, under our affiliation agreements with them, has a substantial
amount of control over the conduct of our business. Accordingly, Sprint PCS may
make decisions that adversely affect our business, such as the following:
- Sprint PCS prices its national plans based on its own objectives and
could set price levels that may not be economically sufficient for our
business.
- Sprint PCS could change the per minute rate for Sprint PCS roaming fees
and increase the costs for Sprint PCS to perform back office services.
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- Sprint PCS could withhold its consent, which is required for us to sell
non-Sprint PCS approved equipment.
- Sprint PCS may alter its network and technical requirements or request
that we build-out additional areas within our territory, which could
result in increased equipment and build-out costs or in Sprint PCS
building-out that area itself or assigning it to another affiliate.
- Sprint PCS could breach its payment or other obligations under our
affiliation agreements, which could result in a substantial reduction in
our revenues, difficulty in obtaining important financial or subscriber
information or a severe restriction on our ability to conduct business.
A CHANGE OF CONTROL OF SPRINT OR SPRINT PCS MAY RESULT IN A NAME CHANGE OR
COULD INCREASE THE LIKELIHOOD THAT OUR AFFILIATION AGREEMENTS WILL NOT BE
RENEWED
Sprint or Sprint PCS may experience a change of control, sale or merger
that could adversely affect our relationships with them or result in a name
change. MCI WorldCom Inc. and Sprint have announced a proposed merger in which
owners of each class of Sprint's common stock would exchange their Sprint stock
for MCI common stock. If the merger is completed, we expect that our affiliation
agreements with the merged company would be on the same terms as our current
affiliation agreements with Sprint PCS. However, the consummation of the merger
may increase the likelihood that our affiliation agreements will not be renewed
if, among other reasons, the combined company has a different strategy related
to affiliate relationships. Additionally, we may lose the use of the
recognizable Sprint and Sprint PCS brand names if the merger results in a name
change.
PROBLEMS EXPERIENCED BY SPRINT PCS WITH ITS INTERNAL SUPPORT SYSTEMS COULD
LEAD TO CUSTOMER DISSATISFACTION OR INCREASE OUR COSTS
We rely on Sprint PCS's internal support systems, including customer care,
billing and back-office support. As Sprint PCS has expanded, its internal
support systems have been subject to increased demand and, in some cases,
suffered a degradation in service. We cannot assure you that Sprint PCS will be
able to successfully add system capacity or that its internal support systems
will be adequate. It is likely that problems with Sprint PCS's internal support
systems could cause:
- delays or problems in our own operations or service;
- delays or difficulty in gaining access to customer and financial
information, which we are currently experiencing with respect to our
direct electronic access to significant aspects of Sprint PCS's internal
support systems and financial data;
- a loss of Sprint PCS customers; and
- an increase in the costs of customer care, billing and back office
services.
OUR COSTS FOR INTERNAL SUPPORT SYSTEMS MAY INCREASE IF SPRINT PCS
TERMINATES OUR SERVICES AGREEMENT
We estimate that our costs for the services provided to us by Sprint PCS
under our services agreement in the year 2000 will be approximately $12 million.
We expect this number to significantly increase as the number of Sprint PCS
subscribers based in our territory increases. Our services agreement with Sprint
PCS provides that, upon nine months' prior written notice, Sprint PCS may
terminate any service provided under that agreement. We do not have a
contingency plan if Sprint PCS terminates any such service. If Sprint PCS
terminates a service for which we have not developed a cost-effective
alternative or increases the amount it charges us for these services, our
operating costs may increase beyond our expectations and our operations may be
interrupted or restricted.
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WE MAY HAVE DIFFICULTY IN OBTAINING HANDSETS AND EQUIPMENT, WHICH ARE IN
SHORT SUPPLY
We depend on our relationship with Sprint PCS to obtain handsets and
equipment. The demand for the equipment we require to construct our portion of
the Sprint PCS network is considerable, and manufacturers of this equipment have
substantial order backlogs. In addition, the demand for specific types of
handsets is strong and the manufacturers of those handsets may have to
distribute their limited supply of products among the manufacturers' numerous
customers. If Sprint PCS modifies its handset logistics and delivery plan or if
we are not able to continue to rely on Sprint PCS's relationships with suppliers
and vendors, some of which provide us with vendor discounts on equipment, we
could have difficulty obtaining specific types of handsets and equipment in a
timely manner and our equipment costs would increase. As a result, we could
suffer delays in the build-out of our portion of the Sprint PCS network,
disruptions in service and a reduction in subscribers.
IF WE FAIL TO PAY OUR DEBT, OUR LENDERS MAY SELL OUR LOANS TO SPRINT PCS
AND GIVE SPRINT PCS RIGHTS OF A CREDITOR TO FORECLOSE ON OUR ASSETS
Sprint PCS has contractual rights to purchase Nortel's rights as a senior
lender under the Nortel financing documents. These rights are triggered by an
acceleration of the maturity of the Nortel financing. To the extent Sprint PCS
purchases these obligations, Sprint PCS's interests as a creditor could conflict
with ours. Sprint PCS's rights as a senior lender would enable it to exercise
rights with respect to our assets, including the right to foreclose on those
assets, in a manner not otherwise permitted under our affiliation agreements
with Sprint PCS.
IF SPRINT PCS DOES NOT MAINTAIN CONTROL OVER ITS LICENSED SPECTRUM, OUR
AFFILIATION AGREEMENTS WITH SPRINT PCS MAY BE TERMINATED
Sprint PCS, not Alamosa, owns the licenses necessary to provide wireless
services in our territory. The Federal Communications Commission requires that
licensees like Sprint PCS maintain control of their licensed systems and not
delegate control to third party operators or managers like Alamosa. Although our
affiliation agreements with Sprint PCS reflect an arrangement that the parties
believe meets the Federal Communications Commission requirements for licensee
control of licensed spectrum, we cannot assure you that the Federal
Communications Commission will agree with us. If the Federal Communications
Commission were to determine that our affiliation agreements with Sprint PCS
need to be modified to increase the level of licensee control, we have agreed
with Sprint PCS to use our best efforts to modify the agreements to comply with
applicable law. If we cannot agree with Sprint PCS to modify the agreements,
they may be terminated. If the agreements are terminated, we would no longer be
a part of the Sprint PCS network and we would have extreme difficulty in
conducting our business.
THE FEDERAL COMMUNICATIONS COMMISSION MAY NOT RENEW THE SPRINT PCS
LICENSES, WHICH WOULD PREVENT US FROM PROVIDING WIRELESS SERVICES
We do not own any licenses to operate a wireless network. We are dependent
on Sprint PCS's licenses, which are subject to renewal and revocation. Sprint
PCS's licenses in our territory will expire in 2005 or 2007 but may be renewed
for additional ten-year terms. The Federal Communications Commission has adopted
specific standards that apply to wireless personal communications services
license renewals. Any failure by Sprint PCS or us to comply with these standards
could cause revocation or forfeiture of the Sprint PCS licenses for our
territory. Additionally, if Sprint PCS does not demonstrate to the Federal
Communications Commission that Sprint PCS has met the five-year and ten-year
construction requirements for each of its wireless personal communications
services licenses, it can lose those licenses. If Sprint PCS loses its licenses
in our territory for any of these reasons, we would not be able to provide
wireless services without obtaining rights to other licenses.
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RISKS PARTICULAR TO ALAMOSA'S OPERATIONS
BECAUSE OF THE NATURE OF OUR RELATIONSHIP WITH CHR SOLUTIONS, INC., ANY
CONFLICTS THAT ARISE BETWEEN US AND CHR SOLUTIONS COULD NEGATIVELY AFFECT OUR
ABILITY TO EFFECTIVELY CONDUCT OUR BUSINESS
We rely heavily on CHR Solutions, Inc. for engineering, marketing,
operating and other consulting services. We have paid or will pay CHR Solutions
substantial amounts for these services, including approximately:
- $3.8 million paid during 1999;
- $3.5 million that we estimate will be paid during 2000;
- an aggregate of $7.4 million in current and prior contractual commitments
beginning in 1998; and
- an anticipated additional $5 million in contractual commitments that we
are currently negotiating with CHR Solutions.
If CHR Solutions interests become adverse to ours, we may be forced to
acquire consulting services from an alternate source, which could be very
difficult or costly or result in delays in our network build-out. Additionally,
Mr. David Sharbutt, our chairman and chief executive officer, is also a senior
consultant, director and shareholder of CHR Solutions. Consequently, if CHR
Solution's interests become adverse to ours, Mr. Sharbutt may face a conflict of
interest. In addition, although the employment agreement related to Mr.
Sharbutt's position as a senior consultant of CHR Solutions does not specify the
time requirements of his employment, his responsibilities as an employee of CHR
Solutions may require significant professional time and effort and may reduce
the time and effort he is able to devote to Alamosa. However, his employment
agreement with us requires Mr. Sharbutt to devote his full time and effort to
the business and affairs of Alamosa. See "Certain Relationships and Related
Transactions" for details related to this and other related party transactions.
OUR STOCKHOLDERS, MEMBERS OF MANAGEMENT AND DIRECTORS MAY BE SUBJECT TO
CONFLICTS OF INTEREST
Some of our stockholders and members of management have significant
investments in communications services companies that compete with Alamosa. In
addition, several of our directors serve as directors of other communications
services companies. As a result, these persons may be subject to conflicts of
interest because of their investments or status as director that will have to be
resolved by those persons and Alamosa. This conflict could require that such
persons not participate in the decision-making related to, or implementation of,
transactions or issues in which such conflicts arise. For a discussion of the
magnitude of these risks, please see "Management -- Directors and Executive
Officers" and "Certain Relationships and Related Transactions."
WE HAVE A VERY LIMITED OPERATING HISTORY AND MAY NOT ACHIEVE OR SUSTAIN
OPERATING PROFITABILITY OR POSITIVE CASH FLOWS, WHICH WOULD LIKELY RESULT IN A
DROP IN OUR STOCK PRICE
Our operating history is very limited. We initiated commercial operations
in our first market in June 1999. We expect to incur significant operating
losses and to generate significant negative cash flow from operating activities
at least through the year ending December 31, 2001. We have already incurred
$18.2 million in operating losses through September 30, 1999. Our operating
profitability will depend upon many factors, including, among others, our
ability to market Sprint PCS services, achieve our projected market penetration
and manage customer turnover rates. If we do not achieve and maintain operating
profitability and positive cash flow from operating activities on a timely
basis, our stock price could fall and you could lose all or part of your
investment.
FAILURE TO OBTAIN ADDITIONAL CAPITAL, IF NEEDED TO COMPLETE THE BUILD-OUT
OF OUR PORTION OF THE SPRINT PCS NETWORK, COULD CAUSE DELAY OR ABANDONMENT OF
OUR DEVELOPMENT PLANS
The build-out of our portion of the Sprint PCS network will require
substantial capital. As of January 1, 2000, we estimated that requirements to
complete the current build-out plan and fund working
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capital losses through the year 2001 were approximately $283 million. We plan to
finance these requirements using the funds received from this offering and the
remaining $178.1 million available under the Nortel financing as of December 31,
1999. Additional funds could be required for a variety of reasons, including
unforeseen delays, unanticipated expenses, increased capital requirements,
higher than expected operating losses, engineering design changes and other
technology risks or other corporate purposes. In addition, if we complete our
build-out more rapidly than currently anticipated, or if we contract to develop
additional markets, we will need to raise additional equity or debt capital.
These additional funds may not be available. Even if those funds are available,
we may not be able to obtain them on a timely basis, on terms acceptable to us
or within limitations permitted under our existing debt covenants or the
covenants with respect to the senior discount notes. Failure to obtain
additional funds, should the need for them develop, could result in the delay or
abandonment of our development and expansion plans and we may be unable to fund
our ongoing operations.
BECAUSE WE DEPEND HEAVILY ON OUTSOURCING, THE INABILITY OF THIRD PARTIES TO
FULFILL THEIR CONTRACTUAL OBLIGATIONS TO US MAY DISRUPT OUR SERVICES OR THE
BUILD-OUT OF OUR PORTION OF THE SPRINT PCS NETWORK
Because we decided to outsource portions of our business, we depend heavily
on third-party vendors, suppliers, consultants, contractors and local exchange
carriers. We have retained those persons to:
- design and engineer our systems;
- construct base stations, switch facilities and towers;
- lease base stations;
- install T-1 lines; and
- deploy our wireless personal communications services network systems.
Specifically, our financing arrangements with Nortel make us especially
dependent on them for network equipment, since we must use a specified amount of
any funds borrowed from Nortel to purchase their equipment. In addition, we
lease almost all of the tower sites for our wireless systems through a master
lease agreement with Speciality Capital Services, Inc., now a subsidiary of
American Tower Corporation. Speciality in turn has separate leasing arrangements
with each of the owners of the sites. If Speciality or American Tower
Corporation were to become insolvent or Speciality were to breach those
arrangements, we may lose access to those base stations and experience extended
service interruption in the areas serviced by those sites. The failure by any of
our vendors, suppliers, consultants, contractors or local exchange carriers to
fulfill their contractual obligations to us could materially delay construction
and adversely affect the operations of our portion of the Sprint PCS network.
OUR ROAMING ARRANGEMENTS MAY NOT BE COMPETITIVE WITH OTHER WIRELESS SERVICE
PROVIDERS, WHICH MAY RESTRICT OUR ABILITY TO ATTRACT AND RETAIN CUSTOMERS
We rely on roaming arrangements with other wireless service providers for
coverage in some areas. Some risks related to these arrangements are as follows:
- the quality of the service provided by another provider during a roaming
call may not approximate the quality of the service provided by Sprint
PCS;
- the price of a roaming call may not be competitive with prices of other
wireless companies for roaming calls;
- customers may have to use a more expensive dual-band/dual mode handset
with diminished standby and talk time capacities;
- customers must end a call in progress and initiate a new call when
leaving the Sprint PCS network and entering another wireless network; and
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- Sprint PCS customers may not be able to use Sprint PCS advanced features,
such as voicemail notification, while roaming.
If Sprint PCS customers are not able to roam instantaneously or efficiently onto
other wireless networks, we may lose current Sprint PCS subscribers and our
Sprint PCS services will be less attractive to new customers.
IF WE RECEIVE LESS REVENUES OR INCUR MORE FEES THAN WE ANTICIPATE FOR
SPRINT PCS ROAMING, WE MAY NOT BE ABLE TO OPERATE OUR BUSINESS PROFITABLY
We are paid a fee from Sprint PCS or a Sprint PCS affiliate for every
minute that a Sprint PCS subscriber based outside of our territory uses the
Sprint PCS network in our territory. Similarly, we pay a fee to Sprint PCS for
every minute that a Sprint PCS subscriber based in our territory uses the Sprint
PCS network outside our territory. Sprint PCS customers from our territory may
spend more time in other Sprint PCS coverage areas than we anticipate, and
Sprint PCS customers from outside our territory may spend less time in our
territory or may use our services less than we anticipate. As a result, we may
receive less Sprint PCS roaming revenue than we anticipate or we may have to pay
more Sprint PCS roaming fees than we collect. In addition, Sprint PCS could
change the current fee for each Sprint PCS roaming minute used. If we were to
receive less Sprint PCS roaming net revenue, we may not be able to operate our
business profitably. For more information on roaming, see "Business -- Roaming."
WE ARE LIKELY TO RECEIVE VERY LITTLE NON-SPRINT PCS ROAMING REVENUE SINCE
THE SPRINT PCS NETWORK IS NOT COMPATIBLE WITH MANY OTHER NETWORKS
A portion of our revenue may be derived from payments by other wireless
service providers for use by their subscribers of the Sprint PCS network in our
territory. However, the technology used in the Sprint PCS network is not
compatible with the technology used by many other systems, which diminishes the
ability of other wireless service providers' subscribers to use our services.
Sprint PCS has entered into few agreements that enable customers of other
wireless service providers to roam onto the Sprint PCS network. As a result, the
actual non-Sprint PCS roaming revenue that we receive in the future is likely to
be low relative to other wireless service providers. For more information on
roaming, see "Business -- Roaming." For further information on the Sprint PCS
network technology, see "Business -- Technology."
OUR RAPID GROWTH MAY IMPAIR OUR ABILITY TO EXPAND OUR COVERAGE AND MANAGE
OUR SYSTEMS
Since our inception in July 1998, we have experienced rapid growth and
development in a relatively short period of time. As we open more markets, we
expect to continue to experience growth. The management of that growth will
require, among other things:
- continued development of our operational and administrative systems;
- stringent control of costs of network build-out;
- integration of our network infrastructure with the rest of the Sprint PCS
network;
- increased marketing activities;
- the ability to attract and retain qualified management, technical and
sales personnel; and
- the training of new personnel.
Failure to successfully manage our expected rapid growth and development
could impair our ability to complete the build-out of our portion of the Sprint
PCS network, manage the expanding systems in our territory and achieve
profitability.
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OUR PROJECTED BUILD-OUT PLAN DOES NOT COVER ALL OF OUR TERRITORY, WHICH
COULD MAKE IT DIFFICULT TO MAINTAIN A PROFITABLE CUSTOMER BASE
Our projected build-out plan for our territory does not cover all areas of
our territory. Upon completion of our current build-out plan, we expect to cover
65% of the resident population in our territory. As a result, our plan may not
adequately serve the needs of the potential customers in our territory or
attract enough subscribers to operate our business successfully. To correct this
potential problem, we may have to cover a greater percentage of our territory
than we anticipate, which we may not have the financial resources to complete or
may be unable to do profitably.
PARTS OF OUR TERRITORY HAVE LIMITED LICENSED SPECTRUM, AND THIS MAY AFFECT
THE QUALITY OF OUR SERVICE OR RESTRICT OUR ABILITY TO PURCHASE SPECTRUM LICENSES
FROM SPRINT PCS IN THOSE AREAS
While Sprint PCS has licenses to use 30 MHz of spectrum throughout most of
our territory, it has licenses covering only 10 MHz in New Mexico and Durango
and 20 MHz in El Paso. In the future, as the number of subscribers in those
areas increases, this limited licensed spectrum may not be able to accommodate
increases in call volume and may lead to more dropped calls than in other parts
of our territory. In addition, Sprint PCS has no obligation to sell us spectrum
licenses in areas where Sprint PCS owns less than 20 MHz of spectrum.
Accordingly, if Sprint PCS were to terminate our affiliation agreements with
them, it is likely that we would be unable to operate our business in New Mexico
and Durango.
THE TECHNOLOGY WE USE MAY BECOME OBSOLETE OR LIMIT OUR ABILITY TO COMPETE
EFFECTIVELY WITHIN THE WIRELESS INDUSTRY
The wireless telecommunications industry is experiencing significant
technological change. We employ code division multiple access digital
technology, the digital wireless communications technology selected by Sprint
PCS for its network. Code division multiple access technology may not provide
the advantages expected by us or Sprint PCS. If another technology becomes the
preferred industry standard, we would be at a competitive disadvantage and
competitive pressures may require Sprint PCS to change its digital technology.
We may be unable to respond to these pressures and implement new technology on a
timely basis or at an acceptable cost. For more information on technology,
including code division multiple access technology, see
"Business -- Technology."
UNAUTHORIZED USE OF, OR INTERFERENCE WITH, THE SPRINT PCS NETWORK COULD
DISRUPT OUR SERVICE AND INCREASE OUR COSTS
We may incur costs associated with the unauthorized use of the Sprint PCS
network including administrative and capital costs associated with detecting,
monitoring and reducing the incidence of fraud. Fraudulent use of the Sprint PCS
network may impact interconnection costs, capacity costs, administrative costs,
fraud prevention costs and payments to other carriers for unbillable fraudulent
roaming. In addition, our border markets are susceptible to uncertainties
related to areas not governed by the Federal Communications Commission. For
example, unauthorized microwave radio signals near the border in Mexico could
disrupt our service in the United States.
RISKS RELATING TO THE YEAR 2000 ISSUE MAY CAUSE INTERRUPTIONS IN SERVICE
Our systems, the systems of Sprint or Sprint PCS and the systems of other
third parties upon whom we depend may experience system interruptions resulting
from the year 2000 date change. If difficulties do arise, our business may not
be operational for a period of time. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Impact of Year 2000 Issue on
the Operations and Financial Condition of Alamosa."
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RISKS PARTICULAR TO ALAMOSA'S INDEBTEDNESS
WE HAVE SUBSTANTIAL DEBT AND EXPECT TO INCUR SUBSTANTIAL ADDITIONAL DEBT,
WHICH WILL REQUIRE LARGE PAYMENTS AND MAY RESULT IN OUR LENDERS CONTROLLING OUR
ASSETS
As of December 31, 1999, our outstanding long-term debt totaled $72.9
million. In addition, under our current business plan, we expect to incur
substantial additional debt, including an anticipated $156.0 million if we
complete our senior discount notes offering, before achieving break-even
operating cash flow.
Our substantial debt will have a number of important consequences for our
operations and our investors, including the following:
- we will have to dedicate a substantial portion of any cash flow from
operations to the payment of interest on, and principal of, our debt,
which will reduce funds available for other purposes;
- we may not have sufficient funds to pay interest on, and principal of,
our debt; and
- due to the liens on substantially all of our assets that secure our
senior debt, lenders or holders of our senior debt may control our assets
or our subsidiaries' assets upon a default.
IF WE DO NOT MEET ALL OF THE CONDITIONS REQUIRED UNDER OUR NORTEL FINANCING
AGREEMENTS, WE MAY NOT BE ABLE TO DRAW DOWN ALL OF THE FUNDS WE ANTICIPATE
RECEIVING FROM NORTEL AND MAY NOT BE ABLE TO COMPLETE THE BUILD-OUT OF OUR
PORTION OF THE SPRINT PCS NETWORK
We have received $71.9 million as of December 31, 1999 under our financing
agreements with Nortel. The remaining $178.1 million, which we expect to receive
in the future, is subject at each funding date to several conditions, including:
- acquiring minimum numbers of Sprint PCS subscribers;
- providing coverage to a minimum number of residents; and
- adhering to financial covenants.
If we do not meet these conditions at each funding date, Nortel may choose
not to lend any or all of the remaining amounts. If other sources of funds are
not available, we may be unable to complete the build-out of our portion of the
Sprint PCS network. If we do not have sufficient funds to complete our network
build-out, we may be in breach of our management agreement with Sprint PCS and
be in default under our financing from Nortel.
IF WE DO NOT HAVE ACCESS TO THE CAPITAL MARKETS ON TERMS REASONABLY
SATISFACTORY TO US, WE MAY BE UNABLE TO REPAY THE NORTEL FACILITY AT MATURITY,
OR REFINANCE THE NORTEL FACILITY BEFORE WE ARE REQUIRED TO ISSUE WARRANTS TO
NORTEL
Failure to repay the Nortel facility at maturity will result in a default
under that agreement. It is unlikely that we can repay the Nortel facility
without refinancing the facility, and we may have inadequate access to the
capital markets to permit such refinancing. A default under the Nortel facility
could:
- prevent us from operating or completing the build-out of our portion of
the Sprint PCS network;
- constitute a default under the senior discount notes or a default under
our affiliation agreements with Sprint PCS; and
- could make it extremely difficult for us to obtain any future financing.
If we are unable to refinance and repay a portion of the Nortel financing
prior to the second anniversary of the closing date of the Nortel facility, we
will likely be required to issue warrants to purchase shares of our stock to
Nortel, which would be dilutive to our stockholders if Nortel exercises those
warrants.
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OUR NEW INDEBTEDNESS WILL PLACE RESTRICTIONS ON US WHICH MAY LIMIT OUR
OPERATING FLEXIBILITY AND OUR ABILITY TO PAY DIVIDENDS
The indenture governing the senior discount notes we plan to sell will
impose material operating and financial restrictions on us. These restrictions,
subject to ordinary course of business exceptions, may limit our ability to
engage in some transactions, including the following:
- consummating designated types of mergers or consolidations;
- paying dividends or other distributions to our stockholders;
- making investments;
- selling assets;
- repurchasing our common stock;
- changing lines of business;
- borrowing additional money; and
- engaging in transactions with affiliates.
These restrictions could limit our ability to obtain debt financing,
repurchase stock, refinance or pay principal or interest on our outstanding
debt, consummate acquisitions for cash or debt or react to changes in our
operating environment.
INDUSTRY RISKS
WE MAY EXPERIENCE A HIGH RATE OF CUSTOMER TURNOVER WHICH WOULD INCREASE OUR
COSTS OF OPERATIONS AND REDUCE OUR REVENUE
The wireless personal communications services industry in general and
Sprint PCS in particular have experienced a higher rate of customer turnover as
compared to cellular industry averages. In particular, our customer turnover may
be high because:
- Sprint PCS does not require its customers to sign long term contracts;
and
- Sprint PCS's handset return policy allows customers to return used
handsets within 30 days of purchase and receive a full refund.
A high rate of customer turnover could adversely affect our competitive
position, results of operations and our costs of, or losses incurred in,
obtaining new subscribers, especially because we subsidize some of the costs of
initial purchases of handsets by customers.
REGULATION BY GOVERNMENT AGENCIES AND TAXING AUTHORITIES MAY INCREASE OUR
COSTS OF PROVIDING SERVICE OR REQUIRE US TO CHANGE OUR SERVICES
Our operations and those of Sprint PCS may be subject to varying degrees of
regulation by the Federal Communications Commission, the Federal Trade
Commission, the Federal Aviation Administration, the Environmental Protection
Agency, the Occupational Safety and Health Administration and state and local
regulatory agencies and legislative bodies. Adverse decisions or regulations of
these regulatory bodies could negatively impact Sprint PCS's operations and our
costs of doing business. For example, changes in tax laws or the interpretation
of existing tax laws by state and local authorities could subject us to
increased income, sales, gross receipts or other tax costs or require us to
alter the structure of our current relationship with Sprint PCS.
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CONCERNS OVER HEALTH RISKS POSED BY THE USE OF WIRELESS HANDSETS MAY REDUCE
THE CONSUMER DEMAND FOR OUR SERVICES
Media reports have suggested that radio frequency emissions from wireless
handsets may:
- be linked to various health problems resulting from continued or
excessive use, including cancer;
- interfere with various electronic medical devices, including hearing aids
and pacemakers; and
- cause explosions if used while fueling an automobile.
Widespread concerns over radio frequency emissions may expose us to
potential litigation or discourage the use of wireless handsets. Any resulting
decrease in demand for our services could impair our ability to profitably
operate our business.
WORSE THAN EXPECTED FOURTH QUARTER RESULTS MAY CAUSE OUR STOCK PRICE TO
DROP AND SIGNIFICANTLY REDUCE OUR OVERALL RESULTS OF OPERATIONS
The wireless industry is heavily dependent on fourth quarter results. Among
other things, the industry relies on significantly higher customer additions and
handset sales in the fourth quarter as compared to the other three fiscal
quarters.
The price of our common stock may drop and our overall results of
operations could be significantly reduced if Alamosa has a worse than expected
fourth quarter for any reason, including the following:
- Alamosa's inability to match or beat pricing plans offered by
competitors;
- the failure to adequately promote Sprint PCS's products, services and
pricing plans;
- the inability of Alamosa to obtain an adequate supply or selection of
handsets;
- a downturn in the economy of some or all markets in our territory; or
- a poor holiday shopping season.
SIGNIFICANT COMPETITION IN THE WIRELESS COMMUNICATIONS SERVICES INDUSTRY
MAY RESULT IN OUR COMPETITORS OFFERING NEW SERVICES OR LOWER PRICES THAT WOULD
PREVENT US FROM OPERATING PROFITABLY
Competition in the wireless communications services industry is intense. We
anticipate that competition will cause the market prices for two-way wireless
products and services to decline in the future. Our ability to compete will
depend, in part, on our ability to anticipate and respond to various competitive
factors affecting the telecommunications industry.
Our dependence on Sprint PCS to develop competitive products and services
and the requirement that we obtain Sprint PCS's consent to sell non-Sprint PCS
approved equipment may limit our ability to keep pace with our competitors on
the introduction of new products, services and equipment. Some of our
competitors are larger than us, with greater resources and more extensive
coverage areas, and may market other services, such as landline telephone
service, cable television and Internet access, with their wireless
communications services. In addition, we may be at a competitive disadvantage
since we may be more highly leveraged than some of our competitors.
Furthermore, there has been a recent trend in the wireless communications
industry towards consolidation of wireless service providers through joint
ventures, mergers and acquisitions. We expect this consolidation to lead to
larger competitors over time. We may be unable to compete successfully with
larger competitors who have substantially greater resources or who offer more
services than we do. For more information on the competition we face in the
wireless communications industry, see "Business -- Competition."
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A LACK OF SUITABLE TOWER SITES MAY DELAY THE BUILD-OUT OF OUR PORTION OF
THE SPRINT PCS NETWORK AND RESTRICT OUR OPERATING CAPACITY
A lack of tower site availability due to difficulty in obtaining local
regulatory approvals or other reasons may delay the build-out of our portion of
the Sprint PCS network, delay the opening of markets, limit network capacity or
reduce the number of new Sprint PCS subscribers. The local governmental
authorities in various locations in our territory have at times placed
moratoriums on the construction of additional towers and base stations. These
moratoriums may materially and adversely affect the timing of the planned
build-out and quality of the network operations in those markets. We have
experienced difficulty, and may continue to have difficulty, in obtaining tower
sites in some areas of our territory on a timely basis.
RISKS RELATING TO THE OFFERING
OUR EXISTING STOCKHOLDERS, DIRECTORS AND OFFICERS MAY BE ABLE TO CONTROL
THE OUTCOME OF SIGNIFICANT MATTERS PRESENTED TO STOCKHOLDERS FOLLOWING THE
COMPLETION OF THIS OFFERING
Upon completion of this offering of common stock, our existing
stockholders, directors and officers will beneficially own approximately 84% of
our outstanding common stock on a diluted basis. Consequently, those persons, if
they act as a group, will be able to control the outcome of matters submitted
for stockholder action including the election of members to our board of
directors and the approval of significant change in control transactions. This
may have the effect of delaying or preventing a change in control even though a
change in ownership may be economically beneficial to us and our stockholders.
For more information on this subject, please refer to "Management" and
"Principal Stockholders."
ACTUAL OR ANTICIPATED SALES OF OUR COMMON STOCK BY OUR CURRENT STOCKHOLDERS
COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECREASE
Many of our current stockholders hold large portions of our common stock.
Six months after the completion of this initial public offering, approximately
45,818,000 shares of common stock, including shares underlying options
immediately exercisable upon completion of this offering, will no longer have
transfer restrictions imposed by a lock-up period. One year after the completion
of this initial public offering, approximately 48,500,000 shares of common stock
will be eligible for sale pursuant to Rule 144 of the Securities Act of 1933.
The occurrence of sales of a large number of these shares, or the perception
that these sales could occur, could cause a drop in our stock price and could
impair our ability to obtain capital through an offering of equity securities.
See "Shares Eligible for Future Sale" for more information.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BYLAWS COULD LIMIT OUR SHARE
PRICE AND DELAY A CHANGE IN CONTROL OF ALAMOSA
Our certificate of incorporation provides that our board of directors may
issue preferred stock without stockholder approval. In addition, our bylaws
provide for a classified board, with each board member serving a three-year
term. These provisions, among others, may have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of Alamosa, even though a change in ownership might be economically beneficial
to us and our stockholders. See "Description of Capital Stock -- Provisions of
the Certificate of Incorporation and Bylaws That May Prevent Takeovers" for more
information.
THE PRICE OF OUR COMMON STOCK MAY BE VOLATILE, WHICH COULD RESULT IN WIDE
FLUCTUATIONS IN OUR STOCK PRICE
The market price of initial public offerings of growth stage
technology-industry stocks have recently experienced wide fluctuations. Our
stock price may fluctuate in a manner unrelated to or disproportionate to our
performance.
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THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
This prospectus contains statements about future events and expectations,
which are "forward-looking statements." Any statement in this prospectus that is
not a statement of historical fact may be deemed to be a forward-looking
statement. These forward-looking statements include:
- forecasts of growth in the number of consumers using wireless personal
communications services and in estimated populations;
- statements regarding our plans for, schedule for and costs of the
build-out of our portion of the Sprint PCS network;
- statements regarding our anticipated revenues, expense levels, liquidity
and capital resources, operating losses and projections of when we will
launch commercial wireless personal communications service in particular
markets;
- statements regarding expectations or projections about markets in our
territory;
- statements regarding the year 2000 date change; and
- other statements, including statements containing words such as "may,"
"might," "could," "would," "anticipate," "believe," "plan," "estimate,"
"project," "expect," "seek," "intend" and other similar words that
signify forward-looking statements.
These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements.
Specific factors that might cause such a difference include, but are not limited
to:
- our dependence on our affiliation with Sprint PCS;
- the need to successfully complete the build-out of our portion of the
Sprint PCS network on our anticipated schedule;
- our limited operating history and anticipation of future losses;
- our dependence on Sprint PCS's back office services;
- potential fluctuations in our operating results;
- our potential need for additional capital or the need for refinancing
existing indebtedness;
- our potential inability to expand our services and related products in
the event of substantial increases in demand for these services and
related products;
- changes or advances in technology;
- our competition; and
- our ability to attract and retain skilled personnel.
For a discussion of some of these factors, see "Risk Factors" beginning on
page 6.
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USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of the
common stock we are offering, after deducting underwriting discounts and
commissions and estimated offering expenses, will be approximately $139 million,
or an aggregate of approximately $160 million if the underwriters exercise their
over-allotment option in full, based on an assumed initial public offering price
of $14.00 per share, the midpoint of the range set forth on the cover page of
this prospectus. We intend to use the net proceeds from the common stock
offering, together with remaining cash proceeds available under the Nortel loan
financing at January 1, 2000 of $152.5 million, to fund the following cash
expenditures through 2002:
- capital expenditures of approximately $216 million, representing the
build-out of markets in Wisconsin, Arizona and Colorado, as well as the
further expansion of coverage in existing markets in Texas and New
Mexico;
- net operating losses and working capital requirements of approximately
$11 million;
- interest expense, principal payments and loan origination fees of
approximately $45 million; and
- general corporate purposes.
We will retain broad discretion in the allocation of the net proceeds of
this offering. This discussion represents our best estimate of the allocation of
the net proceeds of this offering based upon our current plans. Actual
expenditures may vary substantially from these estimates and we may find it
necessary or advisable to reallocate the net proceeds within the above-described
categories or to use portions for other purposes. The timing and the coverage of
our build-out plan may change due to various reasons, including shifts in
populations or network focus, changes or advances in technology, acquisition of
other markets, businesses, products or technologies and factors causing a delay
in the build-out of some markets. Any changes in the timing or build-out plan
may cause changes in our use of proceeds. Additionally, we may use a portion of
the net proceeds to acquire or invest in businesses, products or technologies
that are complementary to our business. We currently do not have any commitments
or agreements for any acquisitions or investments of this kind.
Pending these uses, we expect to invest the net proceeds from the sale of
the common stock in short-term investment grade securities, which will earn
interest.
We anticipate that the proceeds from our proposed offering of senior
discount notes will not be needed to fund the required capital expenditures,
working capital requirements, operating losses and other cash needs of our
current business plan. However, we cannot assure you that our notes offering
will be completed.
DIVIDEND POLICY
We do not expect to pay cash dividends on our capital stock in the
foreseeable future. We currently intend to retain our future earnings, if any,
to fund the development and growth of our business. Future dividends, if any,
will be determined by our board of directors and will depend upon our results of
operations, financial condition and capital expenditure plans, as well as other
factors that our board of directors considers relevant. The Nortel financing
does not restrict Alamosa PCS Holdings, Inc.'s ability to pay dividends.
However, the Nortel financing prohibits our subsidiaries from paying dividends
or making distributions, except for stock dividends and for distributions to
fund the payment of the interest on our senior discount notes, without Nortel's
consent. Accordingly, the Nortel financing makes it very difficult for us to pay
any cash dividends to our stockholders.
18
<PAGE> 23
CAPITALIZATION
The following table shows our cash and cash equivalents, short term debt
and capitalization:
- as of September 30, 1999;
- as adjusted to reflect the sale in the offering of 10,714,000 shares of
common stock at an initial offering price of $14.00 per share, the
midpoint of the range on the cover of the prospectus, less underwriting
discounts and commissions and estimated offering expenses of $11.1
million; and
- as further adjusted to reflect (1) the sale in the offering of 10,714,000
shares of common stock at an initial offering price of $14.00 per share,
the midpoint of the range on the cover of the prospectus, less
underwriting discounts and commissions and estimated offering expenses of
$11.1 million, (2) the issuance of an aggregate principal amount at
maturity of $ million in senior discount notes with estimated gross
proceeds of $156.0 million, less underwriting discounts and commissions
and estimated offering expenses of $5.0 million and (3) the prepayment of
an aggregate of $75.0 million of indebtedness under the Nortel facility,
consisting of the prepayment of $59.7 million outstanding on September
30, 1999 and cash equal to $15.3 million designated to prepay borrowings
under the Nortel facility incurred after September 30, 1999.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
---------------------------------------
AS FURTHER
ACTUAL(1) AS ADJUSTED ADJUSTED
--------- ----------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 7,454 $146,305 $237,587
======== ======== ========
Short-term debt
Notes payable........................................... $ 144 $ 144 $ 144
Long-term debt:
Nortel financing........................................ 59,678 59,678 --
Senior discount notes -- -- 156,000
Other notes payable..................................... 209 209 209
Capital lease obligations(2)............................ 854 854 854
-------- -------- --------
Total long-term debt.................................... 60,741 60,741 157,063
Stockholders' equity (deficit):
Preferred stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and
outstanding.......................................... -- -- --
Common stock, par value $.01 per share, 290,000,000
shares authorized; 48,500,000 shares outstanding,
actual; 59,214,000 shares outstanding, as adjusted... 485 592 592
Additional paid-in capital.............................. 35,709 174,453 174,453
Unearned compensation................................... (4,372) (4,372) (4,372)
Accumulated deficit..................................... (18,612) (18,612) (18,612)
-------- -------- --------
Total stockholders' equity (deficit)................. 13,210 152,061 152,061
-------- -------- --------
Total capitalization............................ $ 74,095 $212,946 $309,268
======== ======== ========
</TABLE>
- ---------------
(1) Reflects the reorganization as if it had occurred upon the inception of
Alamosa PCS, LLC.
(2) Includes current maturities.
19
<PAGE> 24
DILUTION
Our net tangible book value at September 30, 1999, was $13.2 million or
$0.27 per share of common stock. Net tangible book value per share represents
the amount of our total tangible assets reduced by the amount of total
liabilities and divided by the number of shares of common stock outstanding.
Assuming an initial public offering price of $14.00 per share, after giving
effect to our sale of 10,714,000 shares of common stock in the offering, and
deducting underwriting discounts and commissions and estimated offering
expenses, our as-adjusted net tangible book value as of September 30, 1999 would
have been approximately $152 million, or $2.57 per share. This represents an
immediate dilution of $11.43 per share to new investors purchasing shares of
common stock in the offering and an immediate increase in net tangible book
value to existing stockholders of $2.30 per share.
Dilution per share represents the difference between the price per share to
be paid by new investors and the net tangible book value per share immediately
after the sale of common stock in this offering. The following table illustrates
the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Net tangible book value per share as of September 30,
1999...................................................... $0.27
Increase in net tangible book value per share attributable
to the offering........................................... 2.30
-----
As adjusted net tangible book value per share after the
offering.................................................. 2.57
------
Dilution per share to new investors......................... $11.43
======
</TABLE>
The following table summarizes, on an as-adjusted basis as of September 30,
1999, the number of shares of common stock purchased, the total consideration
paid and the average price per share paid by our existing stockholders and by
new investors purchasing shares of common stock in the offering, assuming an
offering price of $14.00 per share, the midpoint of the range on the cover page
of this prospectus, before the deduction of underwriting discounts and
commissions and estimated offering expenses of $11.1 million payable by us:
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION AVERAGE
---------------------- ------------------------- PRICE PER
NUMBER PERCENT AMOUNT ($) PERCENT SHARE($)
----------- -------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........ 48,500,000 81.9% 37,000,000 19.8% 0.76
New investors................... 10,714,000 18.1% 149,996,000 80.2% 14.00
----------- -------- ------------- -------- --------
Total................. 59,214,000 100% 186,996,000 100% 3.16
</TABLE>
- ---------------
(1) Reflects the reorganization as if it had occurred upon the inception of
Alamosa PCS, LLC.
The foregoing tables assume no exercise of the underwriters' over-allotment
option and no exercise of outstanding stock options and warrants. To the extent
that any shares are issued at exercise prices below the net tangible book value
per share in connection with outstanding options, you will experience further
dilution. See "Management -- Benefit Plans -- 1999 Long Term Incentive Plan,"
"Management -- Employment Agreements" and "Description of Our
Indebtedness -- The Nortel Credit Facility -- Warrants."
As part of this sale of our common stock, the underwriters agreed to
reserve a maximum of 10% of the shares of our common stock to be sold in this
offering for sale to our current stockholders at a price per share equal to the
public offering price less the underwriting discount. The underwriters will not
be entitled to any discount or commission on these shares and the proceeds to us
will be the same as if the shares were sold to the general public. However, the
number of shares of common stock available for sale to the general public will
be reduced to the extent of sales of shares to our current stockholders.
20
<PAGE> 25
SELECTED FINANCIAL DATA
The selected financial data presented below under the captions "Statement
of Operations Data," "Per Share Data," "Other Data" and "Balance Sheet Data"
for, and as of the end of, the period from inception to December 31, 1998, the
nine month period ended September 30, 1999 and the period from inception to
September 30, 1999 are derived from the audited financial statements of Alamosa
PCS LLC, the predecessor to Alamosa PCS Holdings, Inc. These financial
statements have been audited by PricewaterhouseCoopers LLP, independent
certified public accountants.
It is important that you also read "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements for
the periods ended December 31, 1998 and September 30, 1999, the related notes
and the independent auditors' report.
The selected unaudited financial data presented below as of and for the
period from inception to September 30, 1998 are derived from our unaudited
financial statements included elsewhere in this prospectus. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, that management considers necessary for a fair presentation of
financial position and results of operations. Operating results for the
nine-month period ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 1999.
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD FOR THE PERIOD
JULY 16, 1998 JULY 16, 1998 FOR THE NINE- JULY 16, 1998
(INCEPTION) (INCEPTION) MONTH PERIOD (INCEPTION)
THROUGH THROUGH ENDED THROUGH
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1999 1999
-------------- -------------- -------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND SUBSCRIBER DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. $ -- $ -- $ 2,000 $ 2,000
Cost of sales......................... -- -- 1,614 1,614
Total operating expenses.............. 958 401 17,634 18,592
Operating loss........................ (958) (401) (17,247) (18,206)
Net loss.............................. (924) (400) (17,688) (18,612)
PER SHARE DATA:
Basic and diluted net loss per share
of common stock(1)(2).............. $ (.02) $ (.01) $ (.36) $ (.38)
Pro forma net loss per share of common
stock(1)(2)........................ (.02) (.01) (.36) (.38)
OTHER DATA:
Number of subscribers................. -- -- 9,850 9,850
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1999
AS OF -----------------------------------
DECEMBER 31, AS AS FURTHER
1998 ACTUAL ADJUSTED(3) ADJUSTED(4)
------------ ------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $13,529 $ 7,454 $146,305 $237,587
Construction in progress...................... 1,979 28,940 28,940 28,940
Property and equipment, net................... 114 36,930 36,930 36,930
Total assets.................................. 15,674 88,412 227,263 323,585
Short-term debt(5)............................ 44 165 165 165
Long-term debt................................ 708(6) 60,720(7) 60,720(7) 157,042
Total liabilities............................. 1,598 75,202 75,202 171,524
Equity........................................ 14,076 13,210 152,061 152,061
</TABLE>
21
<PAGE> 26
- ---------------
(1) For the period ended September 30, 1999, diluted weighted average shares
outstanding exclude the common shares issuable on the exercise of stock
options because inclusion would have been antidilutive. Pro forma net loss
per share of common stock has been presented for the latest fiscal year and
interim period. The presentation of the pro forma net loss per share of
common stock gives effect to adjustments for federal and state income taxes
as if Alamosa had been taxed as a C Corporation for the periods presented.
(2) Reflects the reorganization as if it had occurred upon inception of Alamosa
PCS, LLC.
(3) As adjusted Balance Sheet Data reflects the sale in this common stock
offering of 10,714,000 shares of common stock at an initial offering price
of $14.00 per share, the midpoint of the range on the cover of the
prospectus, less underwriting discounts and commissions and estimated
offering expenses of $11.1 million.
(4) As further adjusted Balance Sheet Data reflects (a) the sale in this common
stock offering of 10,714,000 shares of common stock at an initial offering
price of $14.00 per share, the midpoint of the range on the cover of the
prospectus, less underwriting discounts and commissions and estimated
offering expenses of $11.1 million, (b) the issuance of an aggregate
principal amount at maturity of $ million in senior discount notes with
estimated gross proceeds of $156.0 million, less underwriting discounts and
commissions and estimated offering expenses of $5.0 million and (c) the
prepayment of an aggregate of $75.0 million of indebtedness under the Nortel
facility, consisting of the prepayment of $59.7 million outstanding on
September 30, 1999 and cash equal to $15.3 million designated to prepay
borrowings under the Nortel facility incurred after September 30, 1999.
(5) Reflects notes payable of $20,145 and capital lease obligations of $23,637
as of December 31, 1998 and notes payable of $143,690 and capital lease
obligations of $21,281 as of September 30, 1999.
(6) Reflects capital lease obligations of $708,074.
(7) Reflects indebtedness incurred under the Nortel facility of $59,678,288
capital lease obligations of $832,684 and other long term notes payable of
$209,298.
22
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis when you read the
consolidated financial statements and the related notes included in this
prospectus. The discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results anticipated in these forward-looking statements as a result of factors
including, but not limited to, those under "Risk Factors" and "This Prospectus
Contains Forward-Looking Statements."
OVERVIEW
Since our inception, we have incurred substantial costs to negotiate our
contracts with Sprint PCS and our debt financing from Nortel, to engineer our
wireless system, to develop our business infrastructure and distribution
channels and to begin the build-out of our portion of the Sprint PCS network.
Prior to the opening of Laredo on June 22, 1999, we did not have any markets in
operation. As of September 30, 1999, we had not generated significant revenues
from customers, and our accumulated deficit was $18.6 million. Through September
30, 1999 we incurred $66.8 million, and through December 31, 1999 we incurred
$75.1 million, of capital expenditures and construction in progress related to
the build-out of our portion of the Sprint PCS network. While we anticipate
operating losses to continue, we expect revenue to increase substantially as the
base of Sprint PCS subscribers located in our territory increases.
On July 17, 1998, we entered into our affiliation agreements with Sprint
PCS. We have recently amended our affiliation agreements with Sprint PCS to
expand our territory so that it will include approximately 8.4 million
residents.
As a Sprint PCS affiliate, we have the exclusive right to provide digital
wireless personal communication services under the Sprint and Sprint PCS brand
names in our territory. We are responsible for building, owning and managing the
portion of the Sprint PCS network located in our territory. We market wireless
products and services in our territory under the Sprint and Sprint PCS brand
names. We offer national plans designed by Sprint PCS and intend to offer
specialized local plans tailored to our market demographics. Our portion of the
Sprint PCS network is designed to offer a seamless connection with Sprint PCS's
100% digital wireless network. We market wireless products and services through
a number of distribution outlets located in our territory, including our own
Sprint PCS stores, major national distributors and third party local
representatives.
We launched Sprint PCS service in our first market, Laredo, in June 1999,
and have since commenced service in ten additional markets: Albuquerque, Santa
Fe, El Paso, Las Cruces, Lubbock, Amarillo, Midland, Odessa, Abilene and San
Angelo. Our systems cover approximately 2.7 million residents out of
approximately 3.9 million total residents in those markets. The number of
residents covered by our systems does not represent the number of Sprint PCS
subscribers that we expect to be based in our territory. As of December 31,
1999, approximately 31,850 Sprint PCS subscribers were based in our territory.
We recognize 100% of revenues from Sprint PCS subscribers based in our
territory, proceeds from the sales of handsets and accessories and fees from
Sprint PCS and other wireless service providers when their customers roam onto
our portion of the Sprint PCS network. Sprint PCS handles our billing and
collections and retains 8% of all collected revenue from Sprint PCS subscribers
based in our territory and fees from wireless service providers other than
Sprint PCS when their subscribers roam onto our portion of the Sprint PCS
network. We report the amount retained by Sprint PCS as an operating expense.
As part of our affiliation agreements with Sprint PCS, we have the option
of contracting with Sprint PCS to provide back office services such as customer
activation, handset logistics, billing, customer service and network monitoring
services. We have elected to delegate the performance of these services to
Sprint PCS to take advantage of Sprint PCS's economies of scale, to accelerate
our build-out and market launches and to lower our initial capital requirements.
The cost for these services is primarily calculated on a per subscriber and per
transaction basis and is recorded as an operating expense.
23
<PAGE> 28
REGULATORY DEVELOPMENTS
See "Regulation of the Wireless Telecommunications Industry" for a
discussion of regulatory developments that could have a future impact on us.
SEASONALITY
Our business is subject to seasonality because the wireless industry is
heavily dependent on fourth quarter results. Among other things, the industry
relies on significantly higher customer additions and handset sales in the
fourth quarter as compared to the other three fiscal quarters. A number of
factors contribute to this trend, including:
- the increasing use of retail distribution, which is dependent upon the
year-end holiday shopping season;
- the timing of new product and service announcements and introductions;
- competitive pricing pressures; and
- aggressive marketing and promotions.
RESULTS OF OPERATIONS
FOR THE PERIOD JULY 16, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998
Revenues, Direct Costs and Net Loss. From inception through December 31,
1998, our operating activities were directed towards the development of our
business. During July 1998, we signed our affiliation agreements with Sprint PCS
to operate as the exclusive affiliate of Sprint PCS in our territory. Our
operating activities were focused on executing our build-out plan and developing
our network infrastructure. As our first market did not launch until June 1999,
the 1998 period reflects no service revenues, product sales or related costs
associated with services or products. Our net loss for the period was $923,822,
which was principally comprised of selling, general and administrative expenses.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the period in the amount of $949,445 were comprised
primarily of legal and other professional services of $704,341 related to the
start up of our business and the development of our systems. In addition, we
incurred $167,246 of human resource costs related to preparation for the 1999
launch of our network. Virtually all selling, general and administrative
expenses during this period related to the start-up of the business and were
expensed according to American Institute of Certified Public Accountants
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999
Net Loss. Our net loss for the nine months ended September 30, 1999 was
$17,688,419 and was comprised primarily of the continued incurrence of start-up
expenses relative to the preparation of our initial commercial market launch in
June 1999 and six other market launches during the period.
Service Revenues. Service revenues during the period in the amount of
$1,187,008 are comprised of subscriber revenue, Sprint PCS roaming revenue,
non-Sprint PCS roaming revenue and long distance revenue, all of which initially
began accruing to us at or near our first initial commercial launch in June
1999. Subscriber revenue consists of payments received from Sprint PCS
subscribers based in our territory for monthly Sprint PCS service in our
territory under a variety of service plans. These plans generally reflect the
terms of national plans offered by Sprint PCS and are issued on a month-to-month
basis. We receive Sprint PCS roaming revenue at a per minute rate from Sprint
PCS or another Sprint PCS affiliate when Sprint PCS subscribers based outside of
our territory use our portion of the Sprint PCS network.
24
<PAGE> 29
Pursuant to our affiliation agreements with Sprint PCS, Sprint PCS can change
this per minute rate. Non-Sprint PCS roaming revenue primarily consists of fees
collected from Sprint PCS customers based in our territory when they roam on
non-Sprint PCS networks. These fees are based on rates specified in the
customers' contracts. However, it is possible that in some cases these fees may
be less than the amount we must pay to other wireless service providers that
provide service to Sprint PCS customers based in our territory. Non-Sprint PCS
roaming revenue also includes payments from wireless service providers, other
than Sprint PCS, when those providers' customers roam on our portion of the
Sprint PCS network. Our average monthly revenue per user for Sprint PCS
customers in our territory, including long distance and roaming revenue, was
$110.29 for the period from June 26, 1999 to September 30, 1999.
Product Sales. 100% of the revenue from the sale of handsets and
accessories are recorded, net of an allowance for returns, as product sales. The
amount recorded during this period totaled $813,052. Sprint PCS's handset return
policy allows customers to return their handsets for a full refund within 30
days of purchase. When handsets are returned to us, we may be able to reissue
the handsets to customers at little additional cost to us. However, when
handsets are returned to Sprint PCS for refurbishing, we receive a credit from
Sprint PCS, which is less than the amount we originally paid for the handset.
Cost of Services. Expenses totaling $818,678 during this period related to
providing wireless services to customers and are included in cost of services.
Among these costs are the cost of operations, fees related to data transfer via
T-1 and other transport lines, inter-connection fees, Sprint PCS roaming fees,
non-Sprint PCS roaming fees and other expenses related to operations. We pay
Sprint PCS roaming fees when Sprint PCS subscribers based in our territory use
the Sprint PCS network outside of our territory. Pursuant to our affiliation
agreements with Sprint PCS, Sprint PCS can change this per minute rate. We pay
non-Sprint PCS roaming fees to other wireless service providers when Sprint PCS
customers based in our territory use their network.
Cost of Products Sold. The cost of products sold totaling $794,963 during
this period includes the cost of accessories and the cost of handsets up to the
retail sales price. We expect the cost of handsets to exceed the retail sales
price because we subsidize the price of handsets for competitive reasons. We
recognize any excess of the cost of handsets over the retail sales price as an
advertising expense. For the nine months ended September 30, 1999, the handset
subsidy totaled $1,194,000 and there was no expense related to handset subsidy
in the period prior to the nine months ended September 30, 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaling $9,194,937 during the period include sales and
marketing expenses of $2,282,000, the 8% of collected revenue retained by Sprint
PCS of $54,000 and amounts retained by Sprint PCS for customer service of
$212,000, as well as billing, network monitoring, human resources and other
services. Sales and marketing expenses include advertising expenses, promotion
costs, sales commissions and expenses related to our distribution channels.
Advertising expenses include any excess of the cost of a handset over the retail
price. We have incurred significant selling, general and administrative expenses
related to the development of our system. Virtually all of these expenses are
related to the start-up of the business and were expensed according to American
Institute of Certified Public Accountants Statement of Position 98-5, "Reporting
on the Costs of Start-up Activities."
Equity Participation Compensation Expense. Equity participation
compensation expense totaled $6,822,037 for the period. This expense was
determined using the provisions of Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" for variable options and was based on
the estimated intrinsic value of the options at September 30, 1999. The
estimated intrinsic value represents the excess of the estimated fair value
equal to the initial public offering price over the exercise price of the
option.
25
<PAGE> 30
General and Administrative Expenses -- Related Parties. General and
administrative expenses -- related parties totaled $680,006 for the period and
was primarily comprised of information technology and other professional
consulting expenses incurred in connection with a contract between us and a
telecommunications engineering and consulting firm. Several key officers and
owners of this consulting firm have an equity ownership interest in us.
Depreciation and Amortization. Depreciation and amortization during the
period totaled $936,736. Depreciation is calculated using the straight line
method over the useful life of the asset. We begin to depreciate the assets for
each market only after we open that market.
Interest and Other Income. Interest and other income totaling $444,746
during this period generally have been generated from the investment of equity
and loan proceeds held in liquid accounts waiting to be deployed.
Interest Expense. Interest expense totaled $885,868 during this period and
primarily related to the Nortel financing. Interest on the Nortel financing may
be paid with loans obtained under the Tranche C Commitment of the Nortel
financing until, in most circumstances, February 2002. See "Description of Our
Indebtedness -- The Nortel Credit Facility -- Loans and Interest Options." Gains
or losses on hedging transactions related to interest rates will be netted
against interest expense.
INCOME TAXES
Our financial statements did not report any benefit for federal and state
income taxes since we had elected to be taxed as a partnership prior to our
reorganization. For the periods presented, the members of the limited liability
company recorded our tax losses on their own income tax returns. Subsequent to
the reorganization, we will account for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Had we applied the provisions of SFAS No. 109 for the period from
inception on July 16, 1998 through September 30, 1999, the deferred tax asset
generated, primarily from temporary differences related to the treatment of
start-up costs, unearned compensation and from net operating loss carry
forwards, would have been offset by a full valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations through capital
contributions from our owners and through debt financing provided by Nortel. As
of September 30, 1999, we had a $123.0 million senior credit facility with
Nortel, of which $59.7 million had been drawn. We have since signed a letter of
intent to increase the facility to $250.0 million to be effective as of the
closing of this offering. The terms of the facility do not require cash interest
payments until the earlier of:
- February 2001, only if we have not borrowed at least $100.0 million under
the Nortel financing by that time;
- February 2002; and
- the date the Tranche C Commitment is fully funded.
Principal payments are scheduled to begin on the earlier of:
- June 30, 2001, only if we have not borrowed at least $100.0 million under
the Nortel financing by February 2001; and
- December 31, 2002.
26
<PAGE> 31
Our financing with Nortel will be used to purchase equipment, pay interest
and cover approved working capital costs. In connection with the facility, we
are to issue springing warrants to Nortel that come into existence and become
exercisable on the second anniversary of the closing of the facility unless we
meet specified conditions prior to that date. If we complete our offering of
senior discount notes, the Nortel facility requires that we prepay at least
$75.0 million of indebtedness under the Nortel financing, which prepayment will
prevent the exercise of the warrants by Nortel. We cannot assure you that we
will choose to complete our notes offering and prepay any portion of the Nortel
financing. The warrants would be exercisable to purchase shares of our common
stock representing 2% of the total shares outstanding on a fully-diluted basis
as of the closing of the offering. The exercise price of the warrants would be
equal to the initial public offering price of the common stock sold in this
offering. We will amortize the fair value of these contingent warrants as debt
issuance costs over the term of the Nortel loans. For more information on the
financing facility, see "Description of Our Indebtedness -- The Nortel Credit
Facility."
Net cash used by operating activities was $127,954 for the inception period
ending December 31, 1998, and $9,338,888 for the nine months ending September
30, 1999. Cash used in operating activities for the periods were attributable to
operating losses and working capital needs.
Net cash used in investing activities was $1,342,969 for the inception
period ending December 31, 1998, and $18,784,600 for the nine month period
ending September 30, 1999. The expenditures were related primarily to the
purchase of office equipment, telephone equipment and network infrastructure
needed to begin construction of our portion of the Sprint PCS network.
Net cash provided by financing activities was $15,000,000 consisting of
capital contributions for the inception period ending December 31, 1998 and
$22,048,720 consisting primarily of capital contributions of $10,000,000 and
Nortel draws of $12,289,286 for the nine month period ending September 30, 1999.
As of September 30, 1999, the primary sources of liquidity for Alamosa were
$7.5 million in cash and $63.3 million of unused capacity under the $123.0
million Nortel credit facility.
We anticipate that the proceeds from this offering, when combined with the
committed level of debt financing from Nortel, will be adequate to fund required
capital expenditures, working capital requirements, operating losses and other
cash needs of our current business plan. We estimate that we will require
approximately $283 million to complete the current build-out plan and fund
working capital losses through the year 2001. The following table does not
reflect the consummation of our senior discount notes offering and sets forth
our estimates at January 1, 2000 of our sources and uses of funds necessary to
fund our capital expenditures through the completion of our network build-out
plan in 2002:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
SOURCES:
Cash on hand at January 1, 2000............................. $ 6.2
Gross proceeds of this offering of common stock............. 150.0
Proceeds from the Nortel financing -- cash proceeds......... 152.5
------
Total sources..................................... 308.7
======
USES:
Capital expenditures and microwave relocation............... 215.7
Working capital needs and cash operating gains
(losses)(1)............................................... 11.1
Debt service(2)............................................. 45.0
Fees and expenses of this offering.......................... 11.1
------
Total uses........................................ 282.9
------
Cash on hand at December 31, 2002................. 25.8
------
Total uses and cash on hand at December 31,
2002........................................ 308.7
======
</TABLE>
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<PAGE> 32
- ---------------
(1) We expect to incur losses in earnings before interest, taxes,
depreciation and amortization in excess of $52 million, but expect to
offset a portion of these losses in the period presented.
(2) Debt service payments are composed of:
<TABLE>
<S> <C>
Cash interest payment....................................... $29.4
Payment of equipment financing debt principal............... 13.7
Payment of capitalized interest equipment, debt principal
and origination fee....................................... 1.9
-----
$45.0
</TABLE>
The actual funds required to build-out our portion of the Sprint PCS
network and to fund operating losses and working capital needs may vary
materially from these estimates, and additional funds could be required. For
information see "Risk Factors -- Risks Particular to Alamosa's
Operations -- Failure to obtain additional capital, if needed to complete the
build-out of our portion of the Sprint PCS network, could cause delay or
abandonment of our development plans."
We include capital leases related to network equipment and build-out in
construction in progress until service has commenced in their respective
markets. Once that service has commenced, those capital leases are reclassified
to property and equipment. At December 31, 1998, capital leases totaled $728,219
and included long-term capital lease obligations of $708,074. At September 30,
1999 the capital leases totaled $853,965 and included long-term capital lease
obligations of $832,684. See "Description of Our Indebtedness -- The Nortel
Credit Facility -- Loans and Interest Options." Amortization in the amount of
$20,661 was recorded under these leases through September 30, 1999.
IMPACT OF YEAR 2000 ISSUE ON THE OPERATIONS AND FINANCIAL CONDITION OF ALAMOSA
The year 2000 issue arises as the result of computer programs having been
written, and systems having been designed, using two digits rather than four to
define the applicable year. Consequently, that software has the potential to
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in normal business activities.
We began acquiring items that comprise our internal information technology
systems in late 1998 when we commenced operations. As we purchased those
components, we determined their year 2000 readiness. As a result, our direct
costs with respect to year 2000 compliance have not been significant and we do
not expect any significant costs in the future. Our non-information technology
systems, particularly our network equipment, have been acquired from Nortel and
are susceptible to year 2000 issues. Nortel has represented to us that such
systems are year 2000 ready.
To determine the state of readiness of our internal systems, we performed
steps that included the following:
- the compilation of an inventory of core critical systems and
applications, facilities and processes;
- the review of core critical systems and applications;
- the testing and validation of core critical systems and applications;
- the development of contingency and continuity plans for all core critical
systems and applications independent of Sprint PCS.
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<PAGE> 33
We depend on several third-party vendors and providers to operate our
business, particularly Sprint PCS and local exchange carriers. Sprint PCS
provides us with critical back office services as well as access to its network.
We have contacted Sprint PCS and other third party vendors and providers and
believe they are year 2000 compliant.
While we believe our systems are year 2000 compliant, there is the risk
they may not be compliant. We believe our greatest risk is the failure of the
systems of our third-party vendors or providers. However, should any failure
occur that affects us, we believe it would result in only a temporary disruption
of our service. Should a disruption occur, there could be a material loss of
revenue; however, we do not believe such losses, if any, will be significant.
We have not experienced any material disruptions of our systems or
operations as a result of the year 2000 issue, nor are we aware of any
disruptions in the systems or operations of Sprint PCS or our third-party
vendors or providers that would have a material effect on us. However, it is
still possible that future problems could arise with respect to the year 2000
issue.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not engage in commodity futures trading activities and do not enter
into derivative financial instrument transactions for trading or other
speculative purposes. We also do not engage in transactions in foreign
currencies that could expose us to market risk.
We are subject to some interest rate risk on our financing from Nortel and
any future floating rate financing.
The following table presents the estimated future outstanding long-term
debt at the end of each year and future required annual principal payments for
each year then ended associated with the senior discount notes, capital leases
and the Nortel financing based on our projected level of long-term indebtedness:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
---------------------------------------
1999 2000 2001 2002 2003 2004 THEREAFTER
---- ---- ---- ---- ---- ---- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Instruments:
Senior discount notes.................................. --
Fixed interest rate.................................. --
Principal payments................................... -- -- -- -- -- --
Capital Leases -- Annual Minimum Lease Payments(1)..... $.05 $.11 $.11 $.11 $.11 $.11 $ 1.09
Average Interest Rate................................ 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Variable Rate Instruments:
Nortel Senior Debt(2).................................. $ 72 $ 64 $158 $158 $114 $ 38 --
Average Effective Interest Rate...................... 9.3% 9.3% 9.3% 9.3% 9.3% 9.3% --
Principal payments................................... -- -- -- $ 17 $ 38 $195 --
</TABLE>
- ---------------
(1) These amounts represent the estimated minimum annual payments due under our
estimated capital lease obligations for the periods presented.
(2) The amounts presented for periods subsequent to December 31, 1999 represent
estimated year-end balances under the Nortel facility based on a projection
of the funds borrowed under that facility pursuant to our current plan of
network build-out.
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<PAGE> 34
(3) Interest rate on the Nortel financing equals, at our option, either the
London Interbank Offered Rate (LIBOR) + 3.75%, or the prime or base rate of
Citibank, N.A. plus 2.75%. LIBOR is assumed to equal 5.5% for all periods
presented.
Our primary market risk exposure relates to:
- the interest rate risk on long-term and short-term borrowings;
- our ability to refinance our senior discount notes at maturity at market
rates; and
- the impact of interest rate movements on our ability to meet interest
expense requirements and meet financial covenants.
The carrying value of the financial instruments approximates fair value.
As a condition to the Nortel financing, we must maintain one or more
interest rate protection agreements in an amount equal to 50% of the total debt
under the financing. While we cannot predict our ability to refinance existing
debt or the impact that interest rate movements will have on our existing debt,
we continue to evaluate our financial position on an ongoing basis.
INFLATION
Management believes that inflation has not had, and is not likely to have,
a material adverse effect on our results of operations.
EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We do not believe that any recently issued accounting pronouncements will
have any material impact on our financial position, results of operations or
cash flows.
30
<PAGE> 35
BUSINESS
References in this prospectus to Alamosa as a provider of wireless personal
communications services or similar phrases generally refer to our building,
owning and managing our portion of the Sprint PCS network pursuant to our
affiliation agreements with Sprint PCS. Sprint PCS holds the spectrum licenses
and controls the network through its agreements with us.
All references contained in this prospectus to resident population and
residents are based on projections of year-end 1999 population counts calculated
by applying the annual growth rate from 1990 to 1998 to estimates of 1998
population counts compiled by the U.S. Census Bureau. Unless otherwise
indicated, growth rate statistics are based on U.S. Census Bureau data for
growth during the period from 1990 to 1998.
OVERVIEW
Alamosa is a provider of wireless personal communication services in the
southwestern and midwestern United States. We are part of the Sprint PCS
network. Sprint PCS, directly and through affiliates such as us, provides
wireless services in more than 4,000 cities and communities across the country.
We have the exclusive right to provide digital wireless personal communications
services under the Sprint and Sprint PCS brand names in our territory. We have
recently amended our affiliation agreements with Sprint PCS to expand our
territory so that it will include approximately 8.4 million residents. These
residents are primarily located in smaller cities and in markets with above
average growth rates in Texas, New Mexico, Arizona, Colorado and Wisconsin.
We believe that our strategic relationship with Sprint PCS provides
significant competitive advantages by allowing us to establish high quality,
branded wireless services more quickly, at a lower cost and with lower initial
capital requirements than would be possible without our affiliation with Sprint
PCS.
Our territory offers several competitive advantages. Our territory is a
high growth area. The overall population growth rate in our territory for the
period from 1990 to 1998 was approximately 1.5% per year, approximately 42%
above the national average. We expect to face fewer competitors in our territory
than is generally the case for wireless service providers operating in more
urban markets. We expect to have significant Sprint PCS roaming revenue because
our territory adjoins several major Sprint PCS markets and contains several
vacation destinations and border markets.
Since our inception in July 1998, we have launched Sprint PCS service in
eleven markets in which our systems cover approximately 2.7 million residents
out of approximately 3.9 million total residents. The number of residents
covered by our systems does not represent the number of Sprint PCS subscribers
that we expect to be based in our territory. As of December 31, 1999,
approximately 31,850 Sprint PCS subscribers were based in our territory. We
anticipate that the proceeds of this offering, when combined with previously
funded equity and the committed level of debt financing from Nortel, will be
adequate to fund required capital expenditures, working capital requirements,
operating losses and other cash needs of our business.
WIRELESS INDUSTRY GROWTH
Wireless communications systems use a variety of radio frequencies to
transmit voice and data. Broadly defined, the wireless communications industry
includes one-way radio applications, such as paging or beeper services, and
two-way radio applications, such as wireless personal communications services,
cellular telephone services and enhanced specialized mobile radio service.
Since the introduction of commercial cellular service in 1983, the wireless
communications industry has experienced dramatic growth. The number of wireless
subscribers for cellular, wireless personal communications services and enhanced
specialized mobile radio service has increased from an estimated
31
<PAGE> 36
340,213 in June of 1985 to an estimated 76.3 million as of June, 1999, according
to the Cellular Telecommunications Industry Association, an international
association for the wireless industry. The following chart sets forth statistics
for the domestic wireless telephone industry as a whole, as published by the
Cellular Telecommunications Industry Association.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
WIRELESS INDUSTRY STATISTICS(1)
Total service revenues (in billions)...... $ 12.6 $ 16.5 $ 21.5 $ 25.6 $ 29.6 $ 37.2
Wireless subscribers at end of period (in
millions)............................... 19.3 28.2 38.2 48.7 60.8 76.3
Subscriber growth......................... 47.6% 46.0% 35.7% 27.5% 24.9% 25.4%
Average local monthly bill(2)............. $58.65 $52.45 $48.84 $43.86 $39.88 $40.24
</TABLE>
- ---------------
(1) Reflects domestic commercial cellular, enhanced specialized mobile radio
service and wireless personal communications services providers.
(2) Does not include revenue from roaming and long distance.
Paul Kagan Associates, Inc., an independent media and telecommunications
research firm, estimates in its publication, Kagan's Wireless Telecom Financial
Databook - 1998, that the number of wireless users will increase to
approximately 131 million by the end of 2002 and 160 million by the end of 2005.
This growth is expected to be driven largely by a substantial projected increase
in wireless personal communications services users, who are forecast to account
for approximately 29% of total wireless users in 2002 and 36% in 2005,
representing a significant increase from approximately 8% as of the end of 1998.
Paul Kagan Associates, Inc. projects that total wireless industry penetration,
defined as the number of wireless subscribers nationwide divided by total United
States population, will grow from an estimated 26% in 1998 to 54% in 2005.
We believe that a significant portion of the predicted growth in the
consumer market for wireless telecommunications will result from:
- anticipated declines in costs of service;
- increased versatility; and
- increased awareness of the productivity, convenience and privacy benefits
associated with the services offered by wireless personal communications
services providers.
We also believe that the rapid growth in the use of notebook computers and
personal digital assistants, combined with emerging software applications for
delivery of electronic mail, fax and database searching, will contribute to the
growing demand for wireless services.
SPRINT PCS
Sprint is a diversified telecommunications service provider whose principal
activities include:
- long distance service;
- local service;
- wireless telephone products and services;
- product distribution and directory publishing activities; and
- other telecommunications activities, investments and alliances.
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<PAGE> 37
Sprint PCS is a wholly-owned operating unit of Sprint and operates the only
100% digital wireless personal communications services network in the United
States with licenses to provide service nationwide using a single technology.
Sprint PCS has licenses to provide wireless service to an area containing over
270 million residents located throughout the United States, including Puerto
Rico and the U.S. Virgin Islands. The Sprint PCS network uses code division
multiple access technology nationwide.
Sprint PCS launched commercial wireless personal communications services in
the United States in November 1995. Since then, Sprint PCS has experienced rapid
customer growth and has reported providing service to approximately 4.7 million
customers with average revenue per subscriber of $54 as of September 30, 1999.
In the fourth quarter of 1998, Sprint PCS added approximately 836,000 net
wireless subscribers. Sprint PCS added approximately 2.1 million net wireless
subscribers in the first nine months of 1999. As of September 30, 1999, Sprint
PCS, directly and through affiliates such as us, operated wireless personal
communications services systems in more than 4,000 cities and communities across
the United States. The following table, showing the quarterly end-of-period
subscriber data for Sprint PCS, illustrates Sprint PCS's subscriber growth from
the beginning of 1997 to the end of the second quarter of 1999.
<TABLE>
<CAPTION>
1997 1998 1999
--------------------- ----------------------------- ---------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
--- --- --- --- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total subscribers
(in thousands)....... 192 347 570 887 1,114 1,365 1,751 2,587 3,350 3,967 4,687
</TABLE>
Statements in this prospectus regarding Sprint or Sprint PCS are derived
from information contained in our affiliation agreements with Sprint and Sprint
PCS and periodic reports and other documents filed with the Securities and
Exchange Commission by, or press releases issued by, Sprint and Sprint PCS.
COMPETITIVE STRENGTHS
STRATEGIC RELATIONSHIP WITH SPRINT PCS
We are one of the largest affiliates of Sprint PCS based on the resident
population in our territory and our territory adjoins several major Sprint PCS
markets. The build-out of our territory will significantly extend Sprint PCS's
coverage in the southwestern and midwestern United States, which we believe is
important to Sprint PCS's national strategy. We believe that our affiliation
with Sprint PCS allows us to establish high quality, branded wireless services
more quickly, at a lower cost and with lower initial capital requirements than
would otherwise be possible. Specifically, we benefit from:
Immediate Brand Recognition. We market products and services directly under
the Sprint and Sprint PCS brand names. We immediately benefit from the
recognizable Sprint and Sprint PCS brand names and national advertising as we
open markets. We offer pricing plans, promotional campaigns and handset and
accessory promotions of Sprint PCS. We expect that customers will choose Sprint
PCS services in large part based on the Sprint and Sprint PCS brand names and
national advertising. Furthermore, because of the Sprint and Sprint PCS brand
names, we are able to reduce the advertising costs that would be required to
establish our own brand in the wireless services market.
Existing Distribution Channels. We benefit from relationships with major
national retailers who distribute Sprint PCS products and services under
existing Sprint PCS contracts. These national retailers have approximately 470
retail outlets in our territory. Furthermore, we will benefit from sales made by
Sprint PCS to customers in our territory through its national telemarketing
sales force, national account sales team and Internet sales capability. These
existing distribution channels provide immediate access to customers as our
services become available in their area. For more information on our
distribution plan, see "-- Sales and Distribution."
Sprint PCS's National Network. We believe that our ability to offer access
to Sprint PCS's wireless network, with service in 280 major metropolitan areas
across the country, represents a competitive advantage over regional offerings.
We also expect to derive additional revenue from Sprint PCS when its customers
based outside of our territory roam on our portion of the Sprint PCS network.
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<PAGE> 38
High Capacity Network. Sprint PCS built its network around code division
multiple access digital technology, which we believe provides advantages in
capacity, voice-quality, security and handset battery life. For more information
on the benefits of this technology, see "-- Technology -- Code Division Multiple
Access Technology."
Sprint PCS's Licensed Spectrum. Sprint PCS has invested approximately $100
million to purchase the wireless personal communications services licenses in
our territory and to pay costs to remove sources of microwave signals that
interfere with the licensed spectrum, a process generally referred to as
microwave clearing. Our early stage financing requirements have been
significantly reduced as a result of this investment by Sprint PCS.
Better Equipment Availability and Pricing. We expect to be able to acquire
handsets and network equipment more quickly and at a lower cost than we would
without our affiliation with Sprint PCS. For example, Sprint PCS will use
commercially reasonable efforts to obtain for us the same discounted
volume-based pricing on wireless-related products and warranties as Sprint PCS
receives from its vendors.
Established Back Office Support Services. We have contracted with Sprint
PCS to provide critical back office services, including customer activation,
handset logistics, billing, customer care and network monitoring services.
Because we do not have to establish and operate our own systems, we are able to
accelerate our market launches and capitalize upon Sprint PCS's economies of
scale.
Access to the Sprint PCS Wireless Web. We support the recently announced
Sprint PCS Wireless Web service in our portion of the Sprint PCS network. For
more information on the Sprint PCS Wireless Web, see "-- Products and
Services -- Access to the Sprint PCS Wireless Web."
ATTRACTIVE TERRITORY
We believe that our territory is attractive for several reasons, including:
Favorable Demographics. The overall population growth rate in our territory
was approximately 1.5% per year from 1990 to 1998, approximately 42% above the
national average. We serve nine of the 50 fastest growing markets in the United
States, including all of Laredo and a portion of Las Vegas, the two fastest
growing markets. Furthermore, the cities in Mexico directly across from our
border markets have over one million residents and the northbound border
crossings for these markets are approximately 165,000 persons per day. We expect
that some of these people who enter our territory will use the Sprint PCS
network.
Fewer Competitors. We expect to face fewer competitors in our markets than
is generally the case for wireless service providers operating in more urban
markets. As of September 30, 1999, three or fewer wireless service providers,
other than Alamosa, operated in markets that comprise over 80% of the residents
in our territory. By comparison, less than 10% of the resident population in the
50 most populated markets in the United States are served by four or fewer
wireless service providers. In addition, no single competitor or affiliated
group of competitors has launched service that reaches more than half of the
residents in our territory. We believe that our most extensive competition comes
from Nextel Communications, Inc., which has launched service to less than 40% of
the residents in our territory, followed by VoiceStream Wireless Corporation,
SBC Communications Inc. and United States Cellular Corporation, each of which
has launched service to less than 30% of the residents in our territory. AT&T
Wireless Services, Inc. has launched service to less than 15% of the residents
in our territory. We anticipate that the Sprint PCS brand and the bundled long
distance offers of the "Free and Clear" plans will be effective in this
competitive environment. Sprint PCS's "Free and Clear" calling plans includes
free long distance calling from anywhere on its national network to anywhere in
the United States.
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<PAGE> 39
Opportunity for Sprint PCS Roaming Revenue. We receive Sprint PCS roaming
revenue from Sprint PCS when its subscribers based outside our territory roam on
our portion of the Sprint PCS network. For a more detailed description of Sprint
PCS roaming, see "-- Roaming." We anticipate that we will have significant
Sprint PCS roaming revenue for several reasons, including the following:
- Our territory adjoins several major Sprint PCS markets that are already
operational, including Dallas/Ft. Worth, Phoenix, Minneapolis, Las Vegas,
Milwaukee, San Antonio and Colorado Springs.
These metropolitan statistical areas contain approximately 15.6 million
residents and the growth rates in these markets was approximately 21.0%
from 1990 to 1998.
- We plan to build-out numerous interstate corridors in our territory,
including:
- I-17 (Phoenix to Flagstaff);
- I-25 (El Paso to Albuquerque/Santa Fe and Pueblo to Colorado
Springs);
- I-27 (Lubbock to Amarillo);
- I-35 (San Antonio to Laredo);
- I-20 (Abilene to Dallas);
- I-43 (Green Bay to Milwaukee);
- I-94 (Eau Claire to Minneapolis);
- I-90 (LaCrosse to Madison); and
- I-39 (Madison to Wausau).
While we believe that the build-out of these interstate corridors will
generate revenue for us, the cost of build-out per resident will be
higher than other areas due to the lower resident population counts along
those interstate corridors.
- Our territory contains popular vacation and tourist destinations,
including major ski resorts in Colorado and New Mexico such as Taos and
Telluride.
- Our territory contains several markets near the Mexico border that we
believe will benefit from high Sprint PCS roaming revenues generated from
U.S. business travel to factories along the border and other border
traffic. From November 1998 to October 1999, Laredo had border crossings
of approximately:
- 17 million cars;
- two million trucks, the highest number of truck crossings along the
U.S.-Mexico border; and
- 8 million pedestrians.
In the same period, El Paso had border crossings of approximately:
- 14 million cars; and
- 12 million pedestrians.
Source: Texas A&M International University, Texas Center for Border
Economic and Enterprise Development, as published in Border Business
Indicators, December 1999, Volume 23, Number 12.
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<PAGE> 40
ADEQUATE FUNDING TO COMPLETE OUR NETWORK
We entered into our affiliation agreements with Sprint PCS in July 1998. We
launched Sprint PCS service in Laredo in June 1999, and have since commenced
service in ten additional markets: Albuquerque, Santa Fe, El Paso, Las Cruces,
Lubbock, Amarillo, Midland, Odessa, Abilene and San Angelo. Our systems cover
approximately 2.7 million residents out of approximately 3.9 million total
residents in these markets. We expect to cover a total of approximately 4.2
million residents by the end of 2000, and 5.5 million residents by the end of
2001, at which point we expect to have completed our build-out obligations to
Sprint PCS and expect to have covered approximately 65% of the resident
population in our territory. The number of residents covered by our systems does
not represent the number of Sprint PCS subscribers that we expect to be based in
our territory. As of December 31, 1999, approximately 31,850 Sprint PCS
subscribers were based in our territory.
We anticipate that the proceeds of this offering, when combined with
previously funded equity and the committed level of debt financing from Nortel,
will be adequate to fund required capital expenditures, working capital
requirements, operating losses and other cash needs of our business. Further, we
believe that this level of financing is adequate to achieve the objective in our
business plan of covering approximately 65% of the resident population in our
territory by the end of 2001 and to exceed the build-out requirements contained
in our affiliation agreements with Sprint PCS. We anticipate that the proceeds
from our proposed offering of senior discount notes will not be needed to fund
the required capital expenditures, working capital requirements, operating
losses and other cash needs of our current business plan. For more information,
see "Risk Factors -- Risks Particular to Alamosa's Operations -- We have a very
limited operating history and may not achieve or sustain operating profitability
or positive cash flows, which would likely result in a drop in our stock price"
and "-- Failure to obtain additional capital, if needed to complete the
build-out of our portion of the Sprint PCS network, could cause delay or
abandonment of our development plans."
BUSINESS STRATEGY
We intend to become a leading provider of wireless personal communications
services in our territory. We believe that the following elements of our
business strategy will enable us to rapidly launch our portion of the Sprint PCS
network, distinguish our wireless service offerings from those of our
competitors and compete successfully in the wireless communications marketplace.
CAPITALIZE ON OUR AFFILIATION WITH SPRINT PCS
In all of our markets, we plan to capitalize upon the extensive benefits of
our Sprint PCS affiliation, in particular the Sprint and Sprint PCS brands and
established distribution system. We also plan to emphasize the roaming and
bundled long distance aspects of the "Free and Clear" plans, particularly in
those markets where competitors are not offering one rate plans for service in
areas across the country.
ACCELERATE MARKET LAUNCH THROUGH EXPERTISE OF THIRD PARTIES
We have entered into outsourcing or other relationships to benefit from
specialized expertise or economies of scale of third parties and to build-out
our portion of the Sprint PCS network more quickly and with lower initial
capital and staffing requirements. Specifically, those relationships include:
- The radio frequency design, project management, and networking
interconnection is being performed by CHR Solutions, Inc., a national
engineering consulting firm formerly known as Hicks & Ragland Engineering
Co., Inc. This relationship allows us to quickly plan and begin network
operations without the initial need to hire additional specialized
technical personnel.
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<PAGE> 41
- We entered into a "build-to-suit" contract with Specialty Capital
Services, Inc., now a subsidiary of American Tower Corporation. Specialty
is responsible for:
- site acquisition;
- zoning;
- tower construction; and
- identifying collocation opportunities.
This arrangement allows us to focus on the development of a distribution
network rather than the time consuming task of site acquisition and zoning.
- We entered into a supply and installation contract with Nortel for
network infrastructure. Nortel is an international equipment supplier
well-known for its leadership in code division multiple access technology
networks. In addition to assuming the responsibility for the integration
of system operations, Nortel provides us with resources for product and
service development.
- We have contracted with Sprint PCS to provide back office services, such
as:
- customer activation;
- handset logistics;
- billing;
- customer care; and
- network monitoring services.
Because Sprint PCS provides these services, we can be sure that these
services are compatible with, and similar to, the rest of Sprint PCS's
infrastructure and services and that we are in compliance with Sprint PCS's
customer service standards.
For more information, see "-- Network Operations" and "-- Competitive
Strengths -- Strategic Relationship with Sprint PCS -- Established Back Office
Support Services."
EXECUTE OPTIMAL BUILD-OUT PLAN
We have targeted the high population density areas within our territory for
network build-out as well as areas expected to generate significant Sprint PCS
roaming revenue such as major interstates and the border crossings. We are
building an all digital wireless personal communications services network. Our
radio frequency design is optimized to provide in-building coverage with high
capacity traffic. We believe that our cell density, together with the use of
code division multiple access technology, will allow our system to handle more
customers with fewer dropped calls and better clarity than our competitors.
IMPLEMENT EFFECTIVE OPERATING STRUCTURE
Our organization and management structure is based on a market-focused
model. Each market area, averaging 1.5 million residents, will be supported by a
small corporate staff that provides services including:
- network technical support;
- accounting;
- human resources;
- roaming administration;
- marketing; and
- Sprint liaison.
The general manager in each market has responsibility for the profits and
losses for his or her region. We believe that by placing experienced managers in
these markets with the authority to tailor our marketing programs to local
conditions, we can effectively market our products across a wide geographic
area.
EXPLORE STRATEGIC OPPORTUNITIES TO EXPAND AND FURTHER BUILD-OUT OUR
TERRITORY IN THE FUTURE
Upon the successful build-out of our current territory, we plan to explore
strategic expansion of our territory through additional affiliations and further
build-out of our existing territory.
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<PAGE> 42
MARKETS AND NETWORK BUILD-OUT PLAN
The following table lists the location, actual or projected launch date for
network coverage, frequency, megahertz of spectrum, estimated total residents,
estimated covered residents and population growth rates, for each of the markets
that comprise our territory under our affiliation agreements with Sprint PCS.
The number of estimated covered residents does not represent the number of
Sprint PCS subscribers that we expect to be based in our territory. As of
December 31, 1999, approximately 31,850 Sprint PCS subscribers were based in our
territory.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED POPULATION
BTA LAUNCH MHZ OF TOTAL COVERED GROWTH
DESCRIPTION NO.(1) DATE(2) FREQUENCY SPECTRUM RESIDENTS(3) RESIDENTS(4) RATE(5)
- ----------- ------ ------------ --------- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Laredo, TX................ 242 June 1999 A 30 223,000 185,000 4.0%
El Paso, TX............... 128 July 1999 D/E 20 787,000 652,000 2.0%
Las Cruces, NM............ 244 Aug 1999 D 10 251,000 209,000 2.5%
Amarillo, TX.............. 013 Aug 1999 B 30 405,000 255,000 0.7%
Lubbock, TX............... 264 Aug 1999 B 30 400,000 251,000 0.2%
Midland, TX............... 296 Aug 1999 B 30 127,000 80,000 1.4%
Odessa, TX................ 327 Aug 1999 B 30 221,000 135,000 0.3%
Albuquerque, NM........... 008 Oct 1999 D 10 812,000 544,000 1.7%
Santa Fe, NM.............. 407 Oct 1999 D 10 213,000 142,000 2.1%
San Angelo, TX............ 400 Nov 1999 B 30 164,000 110,000 0.5%
Abilene, TX............... 003 Nov 1999 B 30 258,000 172,000 0.2%
--------- ---------
SUBTOTAL........ 3,861,000 2,735,000
Del Rio/Eagle Pass, TX.... 121 2nd Qtr 2000 A 30 121,000 79,000 1.9%
--------- ---------
SUBTOTAL........ 3,982,000 2,814,000
Flagstaff, AZ............. 144 3rd Qtr 2000 B 30 118,000 77,000 2.1%
Prescott, AZ.............. 362 3rd Qtr 2000 B 30 157,000 103,000 4.0%
Grand Junction, CO........ 168 3rd Qtr 2000 A 30 242,000 145,000 2.7%
Pueblo, CO................ 366 3rd Qtr 2000 A 30 304,000 184,000 1.4%
--------- ---------
SUBTOTAL........ 4,803,000 3,323,000
Appleton/Oshkosh, WI...... 018 4th Qtr 2000 A 30 443,000 303,000 1.1%
Fond du Lac, WI........... 148 4th Qtr 2000 A 30 96,000 65,000 0.6%
Green Bay, WI............. 173 4th Qtr 2000 A 30 345,000 235,000 1.1%
Manitowoc, WI............. 276 4th Qtr 2000 A 30 83,000 56,000 0.3%
Sheboygan, WI............. 417 4th Qtr 2000 A 30 111,000 76,000 0.7%
Milwaukee, WI(6).......... 297 4th Qtr 2000 A 30 85,000 59,000 1.5%
Colorado Springs, CO(6)... 089 4th Qtr 2000 A 30 17,000 17,000 0.1%
--------- ---------
SUBTOTAL........ 5,983,000 4,134,000
Eau Claire, WI............ 123 2nd Qtr 2001 A 30 192,000 120,000 0.6%
El Centro/Calexico, CA.... 124 2nd Qtr 2001 A 30 151,000 101,000 3.4%
La Crosse, WI/Winona,
MN...................... 234 2nd Qtr 2001 A 30 312,000 153,000 0.6%
Las Vegas, NV(6).......... 245 2nd Qtr 2001 A 30 139,000 83,000 4.1%
Madison, WI(6)............ 272 2nd Qtr 2001 A 30 147,000 106,000 1.5%
Minneapolis/St. Paul,
MN(6)................... 298 2nd Qtr 2001 A 30 84,000 52,000 1.1%
</TABLE>
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<PAGE> 43
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED POPULATION
BTA LAUNCH MHZ OF TOTAL COVERED GROWTH
DESCRIPTION NO.(1) DATE(2) FREQUENCY SPECTRUM RESIDENTS(3) RESIDENTS(4) RATE(5)
- ----------- ------ ------------ --------- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Phoenix, AZ(6)............ 347 2nd Qtr 2001 B 30 7,000 7,000 0.1%
Sierra Vista/Douglas,
AZ...................... 420 2nd Qtr 2001 B 30 115,000 92,000 1.7%
Wausau/Rhinelander, WI.... 466 2nd Qtr 2001 A 30 244,000 102,000 1.1%
Yuma, AZ.................. 486 2nd Qtr 2001 B 30 137,000 117,000 2.6%
Stevens Point/Marshfield/
Wisconsin Rapids, WI.... 432 2nd Qtr 2001 A 30 214,000 120,000 0.6%
Big Spring, TX............ 040 2nd Qtr 2001 B 30 34,000 28,000 -0.1%
Clovis, NM................ 087 2nd Qtr 2001 B 30 77,000 55,000 0.9%
Hobbs, NM................. 191 2nd Qtr 2001 B 30 56,000 42,000 0.1%
Farmington, NM/ Durango,
CO...................... 139 2nd Qtr 2001 D 10 200,000 82,000 2.2%
Tucson, AZ(6)............. 447 2nd Qtr 2001 B 30 5,000 5,000 0.0%
San Diego, CA(6).......... 402 2nd Qtr 2001 A 30 5,000 5,000 0.0%
--------- ---------
SUBTOTAL........ 8,102,000 5,404,000
Roswell, NM............... 386 3rd Qtr 2001 D 10 81,000 26,000 1.5%
Carlsbad, NM.............. 068 3rd Qtr 2001 D 10 55,000 18,000 1.2%
Gallup, NM................ 162 3rd Qtr 2001 D 10 139,000 46,000 1.3%
--------- --------- ---------
TOTAL........... 8,377,000 5,494,000 1.5%
</TABLE>
- ---------------
(1) BTA No. refers to the basic trading area number assigned to that market by
the Federal Communications Commission for the purposes of issuing licenses
for wireless services.
(2) These projected launch dates may change based on a number of factors,
including shifts in populations or network focus, changes or advances in
technology, acquisition of other markets and delays in market build-out due
to reasons identified in "Risk Factors -- Risks Particular to Alamosa's
Operations."
(3) Estimated total residents is based on projections of year-end 1999
population counts calculated by applying the annual growth rate from 1990 to
1998 to estimates of 1998 population counts compiled by the U.S. Census
Bureau.
(4) Estimated covered residents are based on our actual or projected network
coverage in markets at the launch date using current projections of year-end
1999 population counts calculated by applying the annual growth rate from
1990 to 1998 to estimates of 1998 population counts compiled by the U.S.
Census Bureau.
(5) Population growth rate represents the average annual growth rate during the
period from 1990 to 1998, based on U.S. Census Bureau data.
(6) Total residents for these markets reflect only those residents contained in
our territory, not the total residents in the entire basic trading area.
Pursuant to our affiliation agreements with Sprint PCS, we have agreed to
cover a minimum percentage of the resident population in our territory within
specified time periods. We plan to build-out our territory more rapidly than
those network build-out requirements. For more information on the network
build-out requirements, see "Our Affiliation Agreements with Sprint PCS -- The
Management Agreement -- Network Build-Out." We believe that our build-out plan
is achievable based on our progress to date, the proven digital wireless
personal communications services technology we will use to build our portion of
the Sprint PCS network and the established standards of Sprint PCS. However, our
build-out plan may change for a number of reasons, including those described in
footnote (1) to the table above.
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<PAGE> 44
NETWORK OPERATIONS
GENERAL
The effective operation of our portion of the Sprint PCS network requires:
- public switched and long distance interconnection;
- the implementation of roaming arrangements; and
- the development of network monitoring systems.
Our network connects to the public switched telephone network to facilitate
the origination and termination of traffic between our network and both local
exchange and long distance carriers. Sprint provides preferred rates for long
distance services. Through our arrangements with Sprint PCS and Sprint PCS's
arrangements with other wireless service providers, Sprint PCS subscribers based
in our territory have roaming capabilities on other networks. We have a network
monitoring system in our Lubbock switching center where we monitor our portion
of the Sprint PCS network during normal business hours. For after hours
monitoring, Sprint PCS's Network Operation Center provides 24 hour, seven day a
week monitoring of our portion of the Sprint PCS network and notification to our
designated personnel. This network monitoring process assists our staff in
improving our network reliability without having to staff 24 hours a day.
As of December 31, 1999, our portion of the Sprint PCS network included 221
base stations and four switching centers. As of December 31, 2000, we anticipate
our portion of the Sprint PCS network will include 547 base stations and seven
switching centers.
NORTEL EQUIPMENT AGREEMENT
On December 21, 1998, we entered into a three year agreement with Nortel,
which will be amended effective as of the closing of the Nortel financing, for
our network equipment and infrastructure, including switches, base stations and
controllers. Pursuant to the agreement, Nortel will also provide installation
and optimization services, such as network engineering and radio frequency
engineering, for the equipment and grant us a nonexclusive license to use all
the software associated with the Nortel equipment. During the term of the
agreement we have committed to purchase a specified amount of equipment and
services from Nortel. Nortel finances these purchases pursuant to the Nortel
credit facility described in "Description of Our Indebtedness -- The Nortel
Credit Facility." As of December 31, 1999, we have remaining commitments of
$117.6 million to purchase equipment and infrastructure under the amended
agreement. We submit purchase orders to Nortel for the equipment and services as
needed. Under the agreement, we receive a discount on the network equipment and
services because of our affiliation with Sprint PCS, but we must pay a premium
on any equipment and services financed by Nortel. We are not obligated to pay
this premium once we purchase an additional $32.6 million in equipment and
infrastructure under this agreement. If our affiliation with Sprint PCS ends,
Nortel has the right to either terminate the agreement or, with our consent,
modify the agreement to establish new prices, terms and conditions.
TOWER AGREEMENT WITH SPECIALTY
In August 1998, we entered into a nonexclusive master site development and
lease agreement for tower sites with Specialty, now a subsidiary of American
Tower Corporation. Pursuant to the agreement, Specialty arranges for collocation
of our equipment, or constructs new facilities, in areas we identify for
build-out. Subject to our approval, Speciality provides site acquisition,
leasing and construction services and secures zoning, permitting and surveying
approvals and licenses for each base station location. The initial term of the
master agreement expires in August 2003, with automatic renewal for three
additional terms of five years each. We lease all individual tower sites that
Specialty provides for an initial term of five years, with automatic renewals at
our option for three additional terms of five years each. We pay rental payments
to Specialty monthly, in the amounts indicated on each individual leased site
schedule, subject to an annual adjustment based on the Consumer Price Index. In
any situation where Specialty's rights in a site are derived from a lease with a
third party, the terms of our agreement with Specialty, including the lease
term, are subordinate to the terms of that lease.
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<PAGE> 45
AGREEMENTS WITH CHR SOLUTIONS
We have entered into a number of agreements with CHR Solutions to perform
aspects of our network build-out. CHR Solutions resulted from a merger between
Hicks & Ragland Engineering Co., Inc., and Cathey, Hutton & Associates, Inc.
effective as of November 1, 1999. Those agreements include the following:
Engineering Service Contract. Pursuant to an engineering service contract
dated July 27, 1998, as amended, CHR Solutions performs design and construction
inspection services in connection with the deployment of switching centers and
base stations. The term of the contract covers three periods through August
2001, though either party may terminate the agreement for cause before August
2001. We pay CHR Solutions hourly rates for the employees who work on the
project as well as the employees' associated expenses. We also pay CHR Solutions
for the costs of test equipment and computer usage. The hourly rates and the
test equipment and computer usage costs are reviewed and modified by mutual
agreement annually until completion of the services or termination of the
agreement. A guaranteed maximum fee amount has been set for each period of the
contract, and those fees aggregate to approximately $7.0 million, excluding
taxes. If the total billing for the project is less than the guaranteed maximum
fee amount for the agreement, then we will pay an incentive bonus to CHR
Solutions equal to 50% of the difference.
Data Communications Services Contract. We entered into a data
communications services contract with CHR Solutions as of April 9, 1999, for the
design and implementation of network interconnection systems for our local area
networks and wide area network. Similar to the engineering service contract, we
pay CHR Solutions hourly rates and test equipment and computer usage costs,
subject to a guaranteed maximum fee amount for the project of $262,040,
excluding taxes. The hourly rates and the test equipment and computer usage
costs are reviewed and modified by mutual agreement annually until completion of
the services or termination of the agreement. If the total billing for the
project is less than the guaranteed maximum fee amount, then we will pay an
incentive bonus to CHR Solutions equal to 50% of the difference. We may also
require additional services during the course of the contract and have been
guaranteed a fee not to exceed $50,000 for any of those services. The agreement
lasts until the project is completed, unless either CHR Solutions or we
terminate it earlier for cause.
Marketing and Operations Consulting Services Contract. Pursuant to a
special service contract, from September 20, 1998 through January 15, 1999, CHR
Solutions provided marketing and operations consulting services relating to the
setup and operation of our wireless personal communications services system.
Wisconsin Marketing and Operations Consulting Services Contract. As of
October 8, 1999, we entered into a similar marketing and operations consulting
services contract with CHR Solutions relating to the setup and operation of the
wireless personal communications services system in selected areas in Wisconsin.
We pay CHR Solutions hourly rates for the employees who work on the project as
well as the employees' associated expenses. We also pay CHR Solutions for the
costs of computer usage. The hourly rates and computer usage costs are reviewed
and modified by mutual agreement annually until completion of the services or
termination of the agreement. The maximum fee for the services is not to exceed
$100,000, excluding taxes. The agreement lasts until the project is completed,
unless either party terminates it earlier.
Business Planning and Consulting Services Contracts. Pursuant to a special
service contract dated as of October 8, 1999, CHR Solutions provides us with
business planning and consulting services and a feasibility study for selected
areas of Wisconsin for a fixed fee of $81,000. The agreement lasts until the
project is completed, unless either party terminates it earlier.
We have entered into an additional special service contract with CHR
Solutions dated as of October 8, 1999. Pursuant to this contract, CHR Solutions
provides us with business planning and consulting services and a feasibility
study for additional selected areas in our territory. We pay CHR Solutions
hourly rates for the employees who work on the project as well as the employees'
associated
41
<PAGE> 46
expenses. We also pay CHR Solutions for the costs of computer usage. The hourly
rates and computer usage costs are reviewed and modified by mutual agreement
annually until completion of the services or termination of the agreement. The
estimated probable cost of the services is $200,000, excluding taxes. The
agreement lasts until the project is completed, unless either party terminates
it earlier.
Radio Frequency "Drive Testing" Contract. Pursuant to a special service
contract dated as of October 8, 1999, CHR Solutions provides us with "drive
testing" to predict the radio frequency propagation characteristics of given
areas. We pay CHR Solutions hourly rates for the employees who work on the
project as well as the employees' associated expenses. We also pay CHR Solutions
for the costs of computer usage. The hourly rates and computer usage costs are
reviewed and modified by mutual agreement annually until completion of the
services or termination of the agreement. The estimated probable cost of the
services is $62,085, excluding taxes. The agreement lasts until the project is
completed, unless either party terminates it earlier.
PRODUCTS AND SERVICES
We offer established products and services throughout our territory under
the Sprint and Sprint PCS brand names. Our products and services are designed to
mirror the service offerings of Sprint PCS and to integrate with the Sprint PCS
network. The Sprint PCS service packages we currently offer include the
following:
100% DIGITAL WIRELESS NETWORK WITH SERVICE ACROSS THE COUNTRY
We are part of the largest 100% digital wireless personal communications
services network in the country. Sprint PCS customers based in our territory may
access Sprint PCS services throughout the Sprint PCS network, which includes
more than 4,000 cities and communities across the United States.
Dual-band/dual-mode handsets allow roaming on wireless networks where Sprint PCS
has roaming agreements.
ACCESS TO THE SPRINT PCS WIRELESS WEB
We support the recently announced Sprint PCS Wireless Web offer in our
portion of the Sprint PCS network. The Sprint PCS Wireless Web allows customers
with data capable handsets to connect their portable computers or personal
digital assistants to the Internet. Sprint PCS customers with data capable
handsets also have the ability to receive periodic information updates such as
stock prices, sports scores and weather reports. Sprint PCS customers with
web-browser enabled handsets have the ability to connect to and browse specially
designed text-based Internet sites on an interactive basis. Sprint PCS has
agreements with Internet providers including Yahoo!, Bloomberg.com, CNN
Interactive, Amazon.com, AmeriTrade.com, MapQuest.com and Weather.com to provide
services for the Sprint PCS Wireless Web. Sprint PCS offers various pricing
options including a fixed number of updates or a bundle of data minutes as
add-ons to existing Sprint PCS "Free and Clear" plans or a bundle of minutes for
a set price that can be used for either data or voice.
PRICING AND FEATURES
Sprint PCS's consumer pricing plans are typically structured with:
- monthly recurring charges;
- large local calling areas;
- bundles of minutes; and
- service features such as voicemail, caller ID, call waiting, call
forwarding and three-way calling.
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<PAGE> 47
The increased capacity of code division multiple access technology allows
us to market high usage customer plans at per minute rates lower than analog
cellular and certain digital providers. All of Sprint PCS's current national
plans:
- include minutes on any portion of the Sprint PCS network with no roaming
charges for the customer;
- offer advanced features and generally require no long-term contracts;
- offer a selection of handsets to meet the needs of individual consumers
and businesses;
- provide a limited-time money back guarantee on Sprint PCS handsets; and
- provide the first incoming minute free.
In addition, Sprint PCS's "Free and Clear" calling plans include free long
distance calling from anywhere on its national network to anywhere in the United
States.
ADVANCED HANDSETS
We offer a selection of single and dual-band handsets with various advanced
features and technology, such as Internet readiness described in "-- Access to
the Sprint PCS Wireless Web" above. All handsets are sold under the Sprint and
Sprint PCS brand names and are equipped with preprogrammed features such as:
- caller ID;
- call waiting;
- phone books;
- speed dial; and
- last number redial.
Code division multiple access single-band/single-mode handsets, weighing
approximately five to seven ounces, offer up to five days of standby time and
approximately four hours of talk time. We also offer dual-band/dual-mode
handsets that allow customers to make and receive calls on both wireless
personal communications services and cellular frequency bands with the
applicable digital or analog technology. These handsets allow roaming on
cellular networks where Sprint PCS digital service is not available.
PRIVACY AND SECURITY
Sprint PCS provides voice transmissions encoded into a digital format with
a significantly lower risk of cloning and eavesdropping than on analog-based
systems. Sprint PCS customers using dual-band/dual-mode handsets in analog mode
do not have the benefit of digital security.
SIMPLE ACTIVATION
Customers can purchase a Sprint PCS handset at a retail location and
activate their service and program the handset by calling Sprint PCS customer
care.
CUSTOMER CARE
Sprint PCS provides customer care services to customers based in our
territory under our services agreement. Sprint PCS offers customer care 24 hours
a day, seven days a week. Customers can call the Sprint PCS toll-free customer
care number from anywhere in the country. All Sprint PCS handsets are
preprogrammed with a speed dial feature that allows customers to easily reach
customer care at any time.
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<PAGE> 48
OTHER SERVICES
In addition to these services, we may also offer wireless local loop
services in our territory, but only where Sprint is not a local exchange
carrier. Wireless local loop is a wireless substitute for the landline-based
telephones in homes and businesses. We also believe that new features and
services will be developed on the Sprint PCS network to take advantage of code
division multiple access technology. Sprint PCS conducts ongoing research and
development to produce innovative services that are intended to give Sprint PCS
a competitive advantage. We may incur additional expenses in modifying our
technology to provide these additional features and services.
ROAMING
SPRINT PCS ROAMING
Sprint PCS roaming includes both inbound Sprint PCS roaming, when a Sprint
PCS subscriber based outside of our territory uses our portion of the Sprint PCS
network, and outbound Sprint PCS roaming, when a Sprint PCS subscriber based in
our territory uses the Sprint PCS network outside of our territory. Sprint PCS
pays us a per minute fee for inbound Sprint PCS roaming. Similarly, we pay a per
minute fee to Sprint PCS for outbound Sprint PCS roaming. Pursuant to our
affiliation agreements with Sprint PCS, Sprint PCS has the discretion to change
the per minute rate for Sprint PCS roaming fees. Because we serve smaller
markets adjacent to larger metropolitan areas, we believe inbound Sprint PCS
roaming will exceed outbound Sprint PCS roaming. See "Risk Factors -- Risks
Particular to Alamosa's Operations -- If we receive less revenues or incur more
fees than we anticipate for Sprint PCS roaming, we may not be able to operate
our business profitably."
NON-SPRINT PCS ROAMING
Non-Sprint PCS roaming includes both inbound non-Sprint PCS roaming, when a
non-Sprint PCS subscriber uses our portion of the Sprint PCS network, and
outbound non-Sprint PCS roaming, when a Sprint PCS subscriber based in our
territory uses a non-Sprint PCS network. Pursuant to roaming agreements between
Sprint PCS and other wireless service providers, when another wireless service
provider's subscriber uses our portion of the Sprint PCS network, we earn
inbound non-Sprint PCS roaming revenue. These wireless service providers must
pay fees for their subscribers' use of our portion of the Sprint PCS network,
and as part of our collected revenues, we are entitled to 92% of these fees.
Currently, pursuant to our services agreement with Sprint PCS, Sprint PCS bills
these wireless service providers for these fees. When another wireless service
provider provides service to one of the Sprint PCS subscribers based in our
territory, we pay outbound non-Sprint PCS roaming fees directly to that
provider. Sprint PCS, pursuant to our current services agreement with Sprint
PCS, then bills the Sprint PCS subscriber for use of that provider's network at
rates specified in his or her contract and pays us 100% of this outbound
non-Sprint PCS roaming revenue collected from that subscriber on a monthly
basis. As a result, we retain the collection risk for outbound non-Sprint PCS
roaming fees incurred by the subscribers based in our territory.
MARKETING STRATEGY
Our marketing strategy is to complement Sprint PCS's national marketing
strategies with techniques tailored to each of the specific markets in our
territory.
USE SPRINT PCS'S BRAND EQUITY
We feature exclusively and prominently the nationally recognized Sprint and
Sprint PCS brand names in our marketing and sales effort. From the customers'
point of view, they use our portion of the Sprint PCS network and the rest of
the Sprint PCS network as a unified national network.
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<PAGE> 49
ADVERTISING AND PROMOTIONS
Sprint PCS promotes its products through the use of national as well as
regional television, radio, print, outdoor and other advertising campaigns. We
benefit from the national advertising at minimal costs to us. In addition to
Sprint PCS's national advertising campaigns, we advertise and promote Sprint PCS
products and services on a local level in our markets at our cost. We have the
right to use any promotion or advertising materials developed by Sprint PCS and
only have to pay the incremental cost of using those materials, such as the cost
of local radio and television advertisement placements, advertisement production
and material costs and incremental printing costs. We also benefit from any
advertising or promotion of Sprint PCS products and services by third party
retailers in our territory, such as RadioShack, Circuit City and Best Buy. We
must pay the cost of specialized Sprint PCS print advertising by third party
retailers. Sprint PCS also runs numerous promotional campaigns which provide
customers with benefits such as additional features at the same rate or free
minutes of use for limited time periods. We offer these promotional campaigns to
potential customers in our territory.
SPONSORSHIPS
Sprint PCS is a sponsor of numerous national, regional and local events.
These sponsorships provide Sprint PCS with brand name and product recognition in
high profile events and provide a forum for sales and promotions. Additionally,
we have been a sponsor for events and activities in our territory such as:
- the Albuquerque Balloon Fest;
- the Western Professional Hockey League;
- minor league baseball teams;
- local school programs;
- March of Dimes; and
- other charity events.
BUNDLING OF SERVICES
We expect to take advantage of the complete array of communications
services offered by Sprint PCS and Sprint, which may include bundling wireless
personal communications services with other Sprint products, such as long
distance and Internet access.
SALES FORCE WITH LOCAL PRESENCE
We have established local sales forces to execute our marketing strategy
through direct business-to-business contacts, our company-owned retail stores,
local distributors and other channels. In addition, we have targeted
maquiladoras, which are factories with locations on both sides of the border,
and the numerous college campuses in our territory. Our market teams also
participate in local clubs and civic organizations such as the Chamber of
Commerce, Rotary and Kiwanis.
SALES AND DISTRIBUTION
Our sales and distribution plan is designed to exploit Sprint PCS's
multiple channel sales and distribution plan and to enhance it through the
development of local distribution channels. Key elements of our sales and
distribution plan consist of the following:
SPRINT PCS RETAIL STORES
As of December 31, 1999, we owned and operated 13 Sprint PCS stores and two
kiosks at military base locations. These stores provide us with a local presence
and visibility in the markets within our territory. Following the Sprint PCS
model, these stores are designed to facilitate retail sales, activation, bill
collection and customer service, although we currently do not have direct
electronic access to Sprint PCS
45
<PAGE> 50
customer care at these stores. We plan to add 17 new stores by year-end 2000 and
another five new stores by year-end 2001.
SPRINT STORE WITHIN A RADIOSHACK STORE
Sprint has an exclusive arrangement with RadioShack to install a "store
within a store," making Sprint PCS the exclusive brand of wireless personal
communications services and products sold through RadioShack stores. As of
December 31, 1999, RadioShack had approximately 225 stores in our territory.
OTHER NATIONAL THIRD PARTY RETAIL STORES
In addition to RadioShack, we benefit from the distribution agreements
established by Sprint PCS with other national and regional retailers which
currently include:
- Best Buy;
- Circuit City;
- Office Depot;
- Office Max;
- Staples;
- Heilig Meyer;
- Target;
- K-Mart;
- Dillards;
- Montgomery Ward;
- Foley's;
- Ritz Camera; and
- selected May Company department stores.
As of December 31, 1999, these retailers had approximately 240 stores in our
territory.
NATIONAL ACCOUNTS AND DIRECT SELLING
We participate in Sprint PCS's national accounts program. Sprint PCS has a
national accounts team, which focuses on the corporate headquarters of large
companies. Once a representative reaches an agreement with the corporate
headquarters, we service the offices of that corporation located in our
territory. Our direct sales force targets the employees of these corporations in
our territory and contacts other local business clients.
TELEMARKETING
Sprint PCS provides telemarketing sales when customers call from our
territory. As the exclusive provider of Sprint PCS products and services in our
market, we will benefit from the national Sprint PCS 1-800-480-4PCS number
campaigns that generate call-in leads. These leads are then handled by Sprint
PCS's inbound telemarketing group.
ELECTRONIC COMMERCE
Sprint PCS maintains an Internet site, www.sprintpcs.com, which contains
information on Sprint PCS products and services. A visitor to Sprint PCS's
Internet site can order and pay for a handset and select a rate plan. Sprint PCS
customers visiting the site can review the status of their account, including
the number of minutes used in the current billing cycle. We will recognize the
revenues generated by Sprint PCS customers in our territory who purchase
products and services over the Sprint PCS Internet site.
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<PAGE> 51
TECHNOLOGY
GENERAL
In the commercial wireless communication industry there are two principal
services licensed by the Federal Communications Commission for transmitting
two-way, real time voice and data signals: "cellular" and wireless "personal
communications services." In addition, enhanced specialized mobile radio
service, a new but not yet widely used technology, also allows for
interconnected two-way real time voice and data services. The Federal
Communications Commission licenses these applications, each of which operates in
a distinct radio frequency block. Cellular, which uses the 800 MHz frequency
block, was the original form of widely-used commercial wireless voice
communications. Cellular systems are predominantly analog-based, but over the
last several years cellular operators have started to use digital service in the
800 MHz frequency block. Digital services have been deployed, as a complement to
the analog based services, in most of the major metropolitan markets.
In 1993, the Federal Communications Commission allocated the 1900 MHz
frequency block of the radio spectrum for wireless personal communications
services. Wireless personal communications services differ from traditional
analog cellular telephone service principally in that wireless personal
communications services systems operate at a higher frequency and employ
advanced digital technology. Analog-based systems send signals in which the
transmitted signal resembles the input signal, the caller's voice. Digital
systems convert voice or data signals into a stream of digits that permit a
single radio channel to carry multiple simultaneous transmissions. Digital
systems also achieve greater frequency reuse than analog systems resulting in
greater capacity than analog systems. This enhanced capacity, along with
enhancements in digital protocols, allows digital-based wireless technologies,
whether using wireless personal communications services or cellular frequencies,
to offer new and enhanced services, including greater call privacy and more
robust data transmission, such as facsimile, electronic mail and connecting
notebook computers with computer/data networks.
Wireless communications systems, whether wireless personal communications
services or cellular, are divided into multiple geographic coverage areas, known
as "cells." In both wireless personal communications services and cellular
systems, each cell contains a transmitter, a receiver and signaling equipment,
known as the "base station." The base station is connected by microwave or
landline telephone lines to a switch that uses computers to control the
operation of the cellular or wireless personal communications services system.
The system:
- controls the transfer of calls from cell to cell as a subscriber's
handset travels;
- coordinates calls to and from handsets;
- allocates calls among the cells within the system; and
- connects calls to the local landline telephone system or to a long
distance carrier.
Wireless communications providers establish interconnection agreements with
local exchange carriers and interexchange carriers, thereby integrating their
system with the existing landline communications system. Because the signal
strength of a transmission between a handset and a base station declines as the
handset moves away from the base station, the switching office and the base
station monitor the signal strength of calls in progress. When the signal
strength of a call declines to a predetermined level, the switching office may
"hand off" the call to another base station where the signal strength is
stronger.
Wireless digital signal transmission is accomplished through the use of
various forms of frequency management technology or "air interface protocols."
The Federal Communications Commission has not mandated a universal air interface
protocol for wireless personal communications services systems. Wireless
personal communications systems operate under one of three principal air
interface protocols, code division multiple access, time division multiple
access, commonly referred to as TDMA, or global system for mobile
communications, commonly referred to as GSM. Time division multiple access and
global system for mobile communications are both time division multiple access
systems but are incompatible with each other. The code division multiple access
system is incompatible with both global system for mobile
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communications and time division multiple access systems. Accordingly, a
subscriber of a system that utilizes code division multiple access technology is
unable to use a code division multiple access handset when traveling in an area
not served by code division multiple access-based wireless personal
communications services operators, unless the customer carries a
dual-band/dual-mode handset that permits the customer to use the analog cellular
system in that area. The same issue would apply to users of time division
multiple access or global system for mobile communications systems. All of the
wireless personal communications services operators now have dual-mode or
tri-mode handsets available to their customers. Because digital networks do not
cover all areas in the country, these handsets will remain necessary for
segments of the subscriber base.
CODE DIVISION MULTIPLE ACCESS TECHNOLOGY
Sprint PCS's network and its affiliates' networks all use digital code
division multiple access technology. We believe that code division multiple
access provides important system performance benefits such as:
Greater capacity. We believe, based on studies by code division multiple
access manufacturers, that code division multiple access systems can provide
system capacity that is approximately seven to ten times greater than that of
current analog technology and approximately three times greater than time
division multiple access and global system for mobile communications systems.
Privacy and security. One of the benefits of code division multiple access
technology is that it combines a constantly changing coding scheme with a low
power signal to enhance call security and privacy.
Soft hand-off. Code division multiple access systems transfer calls
throughout the code division multiple access network using a technique referred
to as a soft hand-off, which connects a mobile customer's call with a new base
station while maintaining a connection with the base station currently in use.
Code division multiple access networks monitor the quality of the transmission
received by multiple base stations simultaneously to select a better
transmission path and to ensure that the network does not disconnect the call in
one cell unless replaced by a stronger signal from another base station. Analog,
time division multiple access and global system for mobile communications
networks use a "hard hand-off" and disconnect the call from the current base
station as it connects with a new one without any simultaneous connection to
both base stations.
Simplified frequency planning. Frequency planning is the process used to
analyze and test alternative patterns of frequency used within a wireless
network to minimize interference and maximize capacity. Unlike time division
multiple access and global system for mobile communications based systems, code
division multiple access based systems can reuse the same subset of allocated
frequencies in every cell, substantially reducing the need for costly frequency
reuse patterning and constant frequency plan management.
Longer battery life. Due to their greater efficiency in power consumption,
code division multiple access handsets can provide longer standby time and more
talk time availability when used in the digital mode than handsets using
alternative digital or analog technologies.
While code division multiple access has the inherent benefits discussed
above, time division multiple access networks are generally less expensive when
overlaying existing analog systems since the time division multiple access
spectrum usage is more compatible with analog spectrum planning. In addition,
global system for mobile communications technology, unlike code division
multiple access, allows multi-vendor equipment to be used in the same network.
This, along with the fact that the global system for mobile communications
technology is currently more widely used throughout the world than code division
multiple access, provides economies of scale for handset and equipment
purchases. A standards process is also underway which will allow wireless
handsets to support analog, time division multiple access and global system for
mobile communications technologies in a single unit. Currently, there are no
plans to
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have code division multiple access handsets that support either the time
division multiple access or global system for mobile communications
technologies.
COMPETITION
Competition in the wireless communications services industry is intense. We
compete with a number of wireless service providers in our markets. We believe
that our primary competition is with national wireless providers such as:
- Nextel Communications, Inc.;
- AT&T Wireless Services, Inc.;
- the company that will result from the pending merger between Bell
Atlantic Corp. and GTE Corp.; and
- Bell Atlantic Corp.-GTE Corp.'s recently announced partnership with
Vodafone AirTouch Plc.
We also compete with regional wireless providers. The principal regional
wireless competitors are:
- the company that will result from the pending merger between SBC
Communications Inc. and Ameritech Corporation;
- VoiceStream Wireless Corporation; and
- United States Cellular Corporation.
Furthermore, a number of wireless service providers compete with us on a
local basis, such as:
- Airadigm Communications;
- Poka Lambro PCS, Inc.; and
- Amarillo CellTelCo.
We also face competition from resellers, which provide wireless services to
customers but do not hold Federal Communications Commission licenses or own
facilities. Instead, the resellers buy blocks of wireless telephone numbers and
capacity from a licensed carrier and resell services through their own
distribution network to the public. The Federal Communications Commission
currently requires all cellular and wireless personal communications services
licensees to permit resale of carrier services to a reseller.
In addition, we compete with existing communications technologies such as
paging, enhanced specialized mobile radio service dispatch and conventional
landline telephone companies in our markets. Potential users of wireless
personal communications services systems may find their communications needs
satisfied by other current and developing technologies. One or two-way paging or
beeper services that feature voice messaging and data display as well as
tone-only service may be adequate for potential customers who do not need to
speak to the caller.
In the future, we expect to face increased competition from entities
providing similar services using other communications technologies, including
satellite-based telecommunications and wireless cable systems. While some of
these technologies and services are currently operational, others are being
developed or may be developed in the future.
Many of our competitors have access to more licensed spectrum than the 10
MHz licensed to Sprint PCS in New Mexico and Durango and the 20 MHz licensed to
Sprint PCS in El Paso. Among other things, increased spectrum allows for higher
call volume and fewer dropped calls. Cellular service providers have licenses
covering 25 MHz of spectrum, and three competing wireless personal
communications services providers have licenses to use 30 MHz in New Mexico.
Except for New Mexico (10 MHz), Durango (10 MHz) and El Paso (20 MHz), Sprint
PCS has licenses to use 30 MHz of spectrum throughout our territory.
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Many of our competitors have significantly greater financial and technical
resources and subscriber bases than we do. AT&T Wireless has over 11 million
subscribers and the recent partnership of Bell Atlantic-GTE and Vodafone
AirTouch has over 19 million combined subscribers. Some of our competitors also
have established infrastructures, marketing programs and brand names. In
addition, some of our competitors may be able to offer regional coverage in
areas not served by the Sprint PCS network, or, because of their calling volumes
or relationships with other wireless providers, may be able to offer regional
roaming rates that are lower than those we offer. Wireless personal
communications services operators will likely compete with us in providing some
or all of the services available through the Sprint PCS network and may provide
services that we do not. Additionally, we expect that existing cellular
providers will continue to upgrade their systems to provide digital wireless
communication services competitive with Sprint PCS. Recently, there has been a
trend in the wireless communications industry towards consolidation of wireless
service providers through joint ventures, mergers and acquisitions. We expect
this consolidation to lead to larger competitors over time. These larger
competitors may have substantial resources or may be able to offer a variety of
services to a large customer base.
Over the past several years the Federal Communications Commission has
auctioned and will continue to auction large amounts of wireless spectrum that
could be used to compete with Sprint PCS services. Based upon increased
competition, we anticipate that market prices for two-way wireless services
generally will decline in the future. We will compete to attract and retain
customers principally on the basis of:
- the strength of the Sprint and Sprint PCS brand names, services and
features;
- the size of our territory;
- the location of our markets;
- our network coverage and reliability;
- customer care; and
- pricing.
Our ability to compete successfully will also depend, in part, on our ability to
anticipate and respond to various competitive factors affecting the industry,
including:
- new services and technologies that may be introduced;
- changes in consumer preferences;
- demographic trends;
- economic conditions; and
- discount pricing strategies by competitors.
INTELLECTUAL PROPERTY
The Sprint diamond design logo is a service mark registered with the United
States Patent and Trademark Office. The service mark is owned by Sprint. We use
the Sprint and Sprint PCS brand names, the Sprint diamond design logo and other
service marks of Sprint in connection with marketing and providing wireless
services within our territory. Under the terms of the trademark and service mark
license agreements with Sprint and Sprint PCS, we do not pay a royalty fee for
the use of the Sprint and Sprint PCS brand names and Sprint service marks.
Except in certain instances and other than in connection with the national
distribution agreements, Sprint PCS has agreed not to grant to any other person
a right or license to use the licensed marks in our territory. In all other
instances, Sprint PCS reserves the right to use the licensed marks in providing
its services within or without our territory.
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The trademark license agreements contain numerous restrictions with respect
to the use and modification of any of the licensed marks. See "Our Affiliation
Agreements with Sprint PCS -- The Trademark and Service Mark License Agreements"
for more information on this topic.
EMPLOYEES
As of December 31, 1999, we employed 181 full-time employees. None of our
employees are represented by a labor union. We believe that our relations with
our employees are good.
PROPERTIES
Our headquarters are located in Lubbock, Texas and we lease space in a
number of locations, primarily for our Sprint PCS stores, base stations and
switching centers. As of December 31, 1999, we leased space on 249 towers and
owned one tower. We collocate with other wireless service providers on
approximately 37% of our towers. As of December 31, 1999, our material leased
properties were as listed below:
<TABLE>
<CAPTION>
PURPOSE LOCATION SQUARE FEET LEASE TERM
- ------- -------- ----------- ----------
<S> <C> <C> <C>
Switching Center Albuquerque, New Mexico 3,120 Five years beginning on
January 1, 1999 and ending on
December 31, 2004 with two
five-year renewal options
Retail Store and Switching Laredo, Texas 5,000 Five years beginning on
Center February 1, 1999 and ending
on January 31, 2004 with two
five-year renewal options
Retail Store and Regional Lubbock, Texas 8,000 15 years beginning on July 1,
Office Space 1999
Retail Store, Switching El Paso, Texas 11,970 Ten years and two months
Center and Office Space beginning on February 1, 1999
and ending on March 31, 2009
Retail Store and Office Space Albuquerque, New Mexico 9,000 Seven years beginning on July
1, 1999 and ending on June
30, 2006
Retail Store, Switching Lubbock, Texas 11,011 Ten years beginning on June
Center and Corporate Office 1, 1999
Space
Retail Store and Office Space Abilene, Texas 3,200 Five years and five months
beginning on October 15, 1999
and ending on March 14, 2005
with one five year renewal
option
Retail Store and Office Space Amarillo, Texas 6,840 Five years beginning on June
1, 1999 and ending on May 31,
2004 with one five year
renewal option
Retail Store and Office Space Las Cruces, New Mexico 1,020 Five years beginning on June
1, 1999 and ending on May 31,
2004 with one five year
renewal option
</TABLE>
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<TABLE>
<CAPTION>
PURPOSE LOCATION SQUARE FEET LEASE TERM
- ------- -------- ----------- ----------
<S> <C> <C> <C>
Retail Store and Office Space Midland, Texas 3,628 Five years beginning on May
1, 1999 and ending on April
30, 2004 with one five year
renewal option
Retail Store and Office Space Odessa, Texas 3,000 Five years beginning on June
1, 1999 and ending on May 31,
2004 with one five year
renewal option
Retail Store and Office Space San Angelo, Texas 3,782 Five years beginning on
October 1, 1999 and ending on
September 30, 2004
Retail Store and Office Space Santa Fe, New Mexico 2,415 Five years beginning on
August 1, 1999 and ending on
July 31, 2004 with one five
year renewal option
Retail Store and Office Space El Paso, Texas 2,584 Five years beginning on
October 1, 1999 and ending on
September 30, 2004 with one
five year renewal option
Retail Store and Office Space El Paso, Texas 2,438 Five years beginning on
completion of Lessor's Work
in January 2000 and ending in
January 2005
Retail Store and Office Space Eagle Pass, Texas 1,250 Five years beginning on
January 1, 2000 and ending on
December 31, 2004 with one
five year renewal option
</TABLE>
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings that we believe would,
if adversely determined, individually or in the aggregate, have a material
adverse effect on our financial condition or results of operations.
ENVIRONMENTAL COMPLIANCE
Our environmental compliance expenditures primarily result from the
operation of standby power generators for our telecommunications equipment and
compliance with various environmental rules during network build-out and
operations. The expenditures arise in connection with standards compliance or
permits which are usually related to generators, batteries or fuel storage. Our
environmental compliance expenditures have not been material to our financial
statements or to our operations and are not expected to be material in the
future.
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OUR AFFILIATION AGREEMENTS WITH SPRINT PCS
Our four major agreements with Sprint and Sprint PCS, are:
- the management agreement;
- the services agreement; and
- two trademark and service mark license agreements with different Sprint
entities.
We entered into one set of these four major agreements with Sprint and
Sprint PCS for our territory in the southwestern part of the United States and
we entered into another set of these four major agreements for our territory in
Wisconsin. The following is a description of the material terms and provisions
of our affiliation agreements with Sprint PCS and the consent and agreement with
Nortel modifying the Sprint PCS management agreement. Unless otherwise indicated
below, the description of our affiliation agreements applies to the affiliation
agreements for both of our territories. We have filed the text of our
affiliation agreements with Sprint PCS and the consent and agreement as exhibits
to the registration statement of which this prospectus is a part.
Under our affiliation agreements with Sprint PCS, we have the exclusive
right to provide wireless services under the Sprint and Sprint PCS brand names
in our territory. We have recently amended our affiliation agreements with
Sprint PCS to include additional markets in our territory. Sprint PCS holds the
spectrum licenses and controls the network through its agreements with us. Our
affiliation agreements with Sprint PCS require us to interface with the Sprint
PCS wireless network by building our portion of the Sprint PCS network to
operate on the 10, 20 or 30 MHz of wireless personal communications services
frequencies licensed to Sprint PCS in the 1900 MHz range. The management
agreement has an initial term of 20 years with three 10-year renewal options,
which would lengthen the contract to a total term of 50 years. The three 10-year
renewal terms automatically occur unless we or Sprint PCS provide the other with
two years prior written notice to terminate the agreements or unless we are in
material default of our obligations under the agreements.
In addition, we have entered into a consent and agreement with Sprint PCS
and Nortel that modifies the management agreement for the benefit of Nortel and
the holders of any refinancing of the Nortel indebtedness. Also, Sprint PCS has
agreed to propose modifications to the management agreement, and perhaps the
other affiliation agreements, to enhance our ability to obtain financing for our
territory.
THE MANAGEMENT AGREEMENT
Under our management agreement with Sprint PCS, we have agreed to:
- own, construct and manage a wireless personal communications services
network in our territory in compliance with Federal Communications
Commission license requirements and other technical requirements
contained in the management agreement;
- distribute Sprint PCS products and services;
- use Sprint PCS's and our own distribution channels in our territory;
- conduct advertising and promotion activities in our territory; and
- manage that portion of Sprint PCS's customer base assigned to our
territory.
Sprint PCS will supervise our wireless personal communications services
network operations and has the right to unconditional access to our portion of
the Sprint PCS network, including the right to test and monitor any of our
facilities and equipment.
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EXCLUSIVITY
We are designated as the only person or entity that can manage or operate a
wireless personal communications services network for Sprint PCS in our
territory. Sprint PCS is prohibited from owning, operating, building or managing
another wireless communications network in our territory while our management
agreement is in place and no event has occurred that would permit the agreement
to terminate. Sprint PCS is permitted to make national sales to companies in our
territory and, as required by the Federal Communications Commission, to permit
resale of the Sprint PCS products and services in our territory. The management
agreement prohibits us from interfering with others who resell Sprint PCS
products and services in our territory. If Sprint PCS decides to expand the
geographic size of our build-out, Sprint PCS must provide us with written notice
of the proposed expansion. We have 90 days to determine whether we will
build-out the proposed area.
NETWORK BUILD-OUT
The management agreement specifies the terms of the Sprint PCS affiliation,
including the required network build-out plan. We have agreed to cover a
specified percentage of the population within each of the markets which make up
our territory by specified dates. Our current build-out plan will satisfy the
network build-out requirements set forth in the management agreement. If
technically feasible and commercially reasonable, we have agreed to provide for
a seamless handoff of a call initiated in our territory to a neighboring Sprint
PCS network. The management agreement requires us to reimburse Sprint PCS
one-half of the microwave clearing costs for our territory.
PRODUCTS AND SERVICES
The management agreement identifies the products and services that we can
offer in our territory. These services include, but are not limited to, Sprint
PCS consumer and business products and services available as of the date of the
agreement, or as modified by Sprint PCS. We are allowed to sell wireless
products and services that are not Sprint PCS products and services if those
additional products and services do not cause distribution channel conflicts or,
in Sprint PCS's sole determination, consumer confusion with Sprint PCS's
products and services. We also cannot sell non-Sprint PCS products and services
if it would hamper our build-out of the network. Under the Wisconsin management
agreement, if Sprint PCS begins to offer nationally a product or service that we
already offer, then that product or service will be considered to be a Sprint
PCS product or service.
We may also sell services such as specified types of long distance service,
Internet access, handsets, and prepaid phone cards with Sprint, Sprint PCS and
other Sprint PCS affiliates. If we decide to use third parties to provide these
services, we must give Sprint PCS an opportunity to provide the services on the
same terms and conditions. We cannot offer wireless local loop services
specifically designed for the competitive local exchange market in areas where
Sprint owns the local exchange carrier unless we name the Sprint-owned local
exchange carrier as the exclusive distributor or Sprint PCS approves the terms
and conditions. Sprint does not own the local exchange carrier in a majority of
the markets in our territory.
NATIONAL SALES PROGRAMS
We must participate in the Sprint PCS sales programs for national sales to
customers, and will pay the expenses and receive the compensation from Sprint
PCS sales to national accounts located in our territory. We must use Sprint's
long distance service, which we can buy at the best prices offered to comparably
situated Sprint customers.
SERVICE PRICING, ROAMING AND FEES
We must offer Sprint PCS subscriber pricing plans designated for regional
or national offerings, including Sprint PCS's "Free and Clear" plans. We are
permitted to establish our own local price plans for Sprint PCS's products and
services offered only in our territory, subject to Sprint PCS's approval. We are
entitled to receive a weekly fee from Sprint PCS equal to 92% of "collected
revenues" for all obligations
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under the management agreement, adjusted by the cost of customer services
provided by Sprint PCS. "Collected revenues" include revenue from Sprint PCS
subscribers based in our territory and inbound non-Sprint PCS roaming. Sprint
PCS will retain 8% of the collected revenues. Outbound non-Sprint PCS roaming
revenue, inbound and outbound Sprint PCS roaming fees, proceeds from the sales
of handsets and accessories, proceeds from sales not in the ordinary course of
business, amounts collected with respect to taxes and, for our Wisconsin
territory only, proceeds from sales of our products and services, are not
considered collected revenues. Except in the case of taxes, we will retain 100%
of these revenues. Many Sprint PCS subscribers purchase bundled pricing plans
that allow Sprint PCS roaming anywhere on the Sprint PCS network without
incremental Sprint PCS roaming charges. However, we will earn Sprint PCS roaming
revenue for every minute that a Sprint PCS subscriber from outside our territory
enters our territory and uses our services. We will earn revenue from Sprint PCS
based on a per minute rate established by Sprint PCS when Sprint PCS's or its
affiliates' subscribers roam on our portion of the Sprint PCS network.
Similarly, we will pay the same rate for every minute Sprint PCS subscribers who
are based in our territory use the Sprint PCS network outside our territory. The
analog roaming rate onto a non-Sprint PCS provider's network is set under Sprint
PCS's third party roaming agreements.
VENDOR PURCHASE AGREEMENTS
We may participate in discounted volume-based pricing on wireless-related
products and warranties Sprint PCS receives from its vendors. Sprint PCS will
use commercially reasonable efforts to obtain for us the same prices as Sprint
PCS receives from its vendors.
ADVERTISING AND PROMOTIONS
Sprint PCS uses national as well as regional television, radio, print,
outdoor and other advertising campaigns to promote its products. We benefit from
the national advertising at no additional cost to us. In addition to Sprint
PCS's national advertising campaigns, we advertise and promote Sprint PCS
products and services on a local level in our markets at our cost. We have the
right to use any promotion or advertising materials developed by Sprint PCS and
only have to pay the incremental cost of using those materials, such as the cost
of local radio and television advertisement placements and incremental printing
costs. Sprint PCS also runs numerous promotional campaigns which provide
customers with benefits such as additional features at the same rate or free
minutes of use for limited time periods. We offer these promotional campaigns to
potential customers in our territory.
PROGRAM REQUIREMENTS
We must comply with Sprint PCS's program requirements for technical
standards, customer service standards, roaming coverage and national and
regional distribution and national accounts programs. Sprint PCS will use
commercial reasonableness to adjust the program requirements for cities located
within our territory that have a population of less than 100,000. Sprint PCS can
adjust the program requirements at any time. We have the right to appeal to
management of Sprint PCS if adjustments to program requirements will:
- cause us to incur a cost exceeding 5% of the sum of our stockholders'
equity plus our outstanding long term debt; or
- cause our operating expenses on a per-unit basis using a ten year time
frame to increase by more than 10% on a net present value basis.
If Sprint PCS denies our appeal and we fail to comply with the program
adjustment, Sprint PCS has the termination rights described below.
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NON-COMPETITION
We may not offer Sprint PCS products and services outside our territory
without the prior written approval of Sprint PCS. Within our territory we may
offer, market or promote telecommunications products and services only under the
Sprint PCS brands, our own brand, brands of related parties of ours or other
products and services approved under the management agreement, except that no
brand of a significant competitor of Sprint PCS or its related parties may be
used for those products and services. To the extent we have or obtain licenses
to provide wireless personal communications services outside our territory, we
may not use the spectrum to offer Sprint PCS products and services without prior
written consent from Sprint PCS.
INABILITY TO USE NON-SPRINT PCS BRAND
We may not market, promote, advertise, distribute, lease or sell any of the
Sprint PCS products and services on a non-branded, "private label" basis or
under any brand, trademark or trade name other than the Sprint PCS brand, except
for sales to resellers or as otherwise permitted under the trademark and service
mark license agreements.
TRANSFER OF SPRINT PCS NETWORK
Sprint PCS can sell, transfer or assign its wireless personal
communications services network to a third party if the third party agrees to be
bound by the terms of the management agreement and the services agreement.
CHANGE IN CONTROL
Sprint PCS must approve a change in control of Alamosa, but this consent
cannot be unreasonably withheld.
RIGHTS OF FIRST REFUSAL
Sprint PCS has rights of first refusal, without further stockholder
approval, to buy our assets upon a proposed sale of all or substantially all of
our assets used in the operation of our portion of the Sprint PCS network.
TERMINATION OF MANAGEMENT AGREEMENT
The management agreement can be terminated as a result of the following
events:
- termination of Sprint PCS's spectrum licenses;
- an uncured breach under the management agreement;
- bankruptcy of a party to the management agreement;
- the management agreement not complying with any applicable law in any
material respect; or
- the termination of either of the trademark and service mark license
agreements.
The termination or non-renewal of the management agreement triggers some of
our rights and those of Sprint PCS. The right of either party to require the
other to purchase or sell the operating assets is discussed below.
If we have the right to terminate the management agreement because of an
event of termination caused by Sprint PCS, generally we may:
- require Sprint PCS to purchase all of our operating assets used in
connection with our portion of the Sprint PCS network for an amount equal
to at least 80% of our Entire Business Value as defined below;
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- in all areas in our territory where Sprint PCS is the licensee for 20 MHz
or more of the spectrum on the date we terminate the management
agreement, require Sprint PCS to assign to us, subject to governmental
approval, up to 10 MHz of licensed spectrum for an amount equal to the
greater of either the original cost to Sprint PCS of the license plus any
microwave clearing costs paid by Sprint PCS or 9% of our Entire Business
Value; or
- choose not to terminate the management agreement and sue Sprint PCS for
damages or submit the matter to arbitration.
See "Business -- Markets and Network Build-Out Plan" for a listing of our
markets in which Sprint PCS is currently the licensee for 20 MHz or more of the
spectrum.
If Sprint PCS has the right to terminate the management agreement because
of an event of termination caused by us, generally Sprint PCS may:
- require us, without further stockholder approval, to sell our operating
assets to Sprint PCS for an amount equal to 72% of our Entire Business
Value;
- require us to purchase, subject to governmental approval, the licensed
spectrum in our territory for an amount equal to the greater of either
the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint PCS or 10% of our Entire Business Value;
- take any action as Sprint PCS deems necessary to cure our breach of the
management agreement, including assuming responsibility for, and
operating, our portion of the Sprint PCS network; or
- not terminate the management agreement and sue us for damages or submit
the matter to arbitration.
NON-RENEWAL
If Sprint PCS gives us timely notice that it does not intend to renew the
management agreement, we may:
- require Sprint PCS to purchase all of our operating assets used in
connection with our portion of the Sprint PCS network for an amount equal
to 80% of our Entire Business Value; or
- in all areas in our territory where Sprint PCS is the licensee for 20 MHz
or more of the spectrum on the date we terminate the management
agreement, require Sprint PCS to assign to us, subject to governmental
approval, up to 10 MHz of licensed spectrum for an amount equal to the
greater of either the original cost to Sprint PCS of the license plus any
microwave relocation costs paid by Sprint PCS or 10% of our Entire
Business Value.
If we give Sprint PCS timely notice of non-renewal, or we both give notice
of non-renewal, or the management agreement expires with neither party giving a
written notice of non-renewal, or the management agreement can be terminated for
failure to comply with legal requirements or regulatory considerations, Sprint
PCS may:
- purchase all of our operating assets, without further stockholder
approval, for an amount equal to 80% of our Entire Business Value; or
- require us to purchase, subject to governmental approval, the licensed
spectrum in our territory for an amount equal to the greater of either
the original cost to Sprint PCS of the license plus any microwave
clearing costs paid by Sprint PCS or 10% of our Entire Business Value.
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See "Risk Factors -- Risks Related to our Relationship with Sprint
PCS -- Provisions of our affiliation agreements with Sprint PCS may diminish our
value and restrict the sale of our business" for a discussion of possible
effects of this part of the management agreement.
DETERMINATION OF ENTIRE BUSINESS VALUE
If the Entire Business Value is to be determined, we and Sprint PCS will
each select one independent appraiser and the two appraisers will select a third
appraiser. The three appraisers will determine the Entire Business Value on a
going concern basis using the following guidelines:
- the Entire Business Value is based on the price a willing buyer would pay
a willing seller for the entire on-going business;
- then-current customary means of valuing a wireless telecommunications
business will be used;
- the business is conducted under the Sprint and Sprint PCS brands and our
affiliation agreements with Sprint PCS;
- that we own the spectrum and frequencies presently owned by Sprint PCS
and subject to our affiliation agreements with Sprint PCS; and
- the valuation will not include any value for businesses not directly
related to the Sprint PCS products and services, and those businesses
will not be included in the sale.
The rights and remedies of Sprint PCS outlined in the management agreement
resulting from an event of termination of the management agreement have been
materially amended by the consent and agreement as discussed below.
INSURANCE
We are required to obtain and maintain with financially reputable insurers
who are licensed to do business in all jurisdictions where any work is performed
under the management agreement and who are reasonably acceptable to Sprint PCS,
workers' compensation insurance, commercial general liability insurance,
business automobile insurance, umbrella excess liability insurance and "all
risk" property insurance.
INDEMNIFICATION
We have agreed to indemnify Sprint PCS and its directors, employees and
agents and related parties of Sprint PCS and their directors, employees and
agents against any and all claims against any of the foregoing arising from our
violation of any law, a breach by us of any representation, warranty or covenant
contained in the management agreement or any other agreement between us and
Sprint PCS, our ownership of the operating assets or the actions or the failure
to act of anyone employed or hired by us in the performance of any work under
this agreement, except we will not indemnify Sprint PCS for any claims arising
solely from the negligence or willful misconduct of Sprint PCS. Sprint PCS has
agreed to indemnify us and our directors, employees and agents against all
claims against any of the foregoing arising from Sprint PCS's violation of any
law and from Sprint PCS's breach of any representation, warranty or covenant
contained in this agreement or any other agreement between Sprint PCS and us,
except Sprint PCS will not indemnify us for any claims arising solely from our
negligence or willful misconduct.
DISPUTE RESOLUTION
If the parties cannot resolve any dispute between themselves and the
management agreement itself does not provide a remedy, then either party may
require that any dispute be resolved by a binding arbitration.
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THE SERVICES AGREEMENT
The services agreement outlines various back office services provided by
Sprint PCS and available to us for an adjustment to our 92% fee. Sprint PCS can
change the amount of adjustment for any or all of the services one time in any
twelve month period. We have the option to cancel a service upon notification of
a fee increase, and if we decide to cancel the service, then Sprint PCS, at our
option, must continue to provide that service for nine months at the original
price. Some of the available services include: billing, customer care,
activation, credit checks, handset logistics, home locator record, voice mail,
prepaid services, directory assistance, operator services, roaming fees, roaming
clearinghouse fees, interconnect fees and inter-territory fees. Sprint PCS
offers three packages of available services. Each package identifies which
services must be purchased from Sprint PCS and which may be purchased from a
vendor or provided in-house. Essentially, services such as billing, activation
and customer care must all be purchased from Sprint PCS or none may be purchased
from Sprint PCS. We have chosen to initially delegate the performance of these
services to Sprint PCS but may develop an independent capability with respect to
these services over time. Sprint PCS may contract with third parties to provide
expertise and services identical or similar to those to be made available or
provided to us. We have agreed not to use the services performed by Sprint PCS
in connection with any other business or outside our territory. We may
discontinue use of any service upon three months' prior written notice, while
Sprint PCS must give nine months notice if it will no longer offer any service.
We have agreed with Sprint PCS to indemnify each other as well as officers,
directors, employees and other related parties and their officers, directors and
employees for violations of law or the services agreement except for any
liabilities resulting from the negligence or willful misconduct of the person
seeking to be indemnified or its representatives. The services agreement also
provides that no party to the agreement will be liable to the other party for
special, indirect, incidental, exemplary, consequential or punitive damages, or
loss of profits arising from the relationship of the parties or the conduct of
business under, or breach of, the services agreement except as may otherwise be
required by the indemnification provisions. The services agreement automatically
terminates upon termination of the management agreement, and neither party may
terminate the services agreement for any reason other than the termination of
the management agreement.
THE TRADEMARK AND SERVICE MARK LICENSE AGREEMENTS
We have non-transferable licenses to use, at no additional cost to us, the
Sprint and Sprint PCS brand names and "diamond" symbol, and several other U.S.
trademarks and service marks such as "The Clear Alternative to Cellular" and
"Clear Across the Nation" on Sprint PCS products and services. We believe that
the Sprint and Sprint PCS brand names and symbols enjoy a high degree of
awareness, providing us an immediate benefit in the market place. Our use of the
licensed marks is subject to our adherence to quality standards determined by
Sprint and Sprint PCS and use of the licensed marks in a manner which would not
reflect adversely on the image of quality symbolized by the licensed marks. We
have agreed to promptly notify Sprint and Sprint PCS of any infringement of any
of the licensed marks within our territory of which we become aware and to
provide assistance to Sprint and Sprint PCS in connection with Sprint's and
Sprint PCS's enforcement of their respective rights. We have agreed with Sprint
and Sprint PCS to indemnify each other for losses incurred in connection with a
material breach of the trademark license agreements. In addition, we have agreed
to indemnify Sprint and Sprint PCS from any loss suffered by reason of our use
of the licensed marks or marketing, promotion, advertisement, distribution,
lease or sale of any Sprint or Sprint PCS products and services other than
losses arising solely out of our use of the licensed marks in compliance with
certain guidelines.
Sprint and Sprint PCS can terminate the trademark and service mark license
agreements if we file for bankruptcy, materially breach the agreement or our
management agreement is terminated. We can terminate the trademark and service
mark license agreements upon Sprint's or Sprint PCS's abandonment
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of the licensed marks or if Sprint or Sprint PCS files for bankruptcy or the
management agreement is terminated. However, Sprint and Sprint PCS can assign
their interests in the licensed marks to a third party if that third party
agrees to be bound by the terms of the trademark and service mark license
agreements.
CONSENT AND AGREEMENT FOR THE BENEFIT OF THE HOLDER OF NORTEL FINANCING
Sprint PCS has entered into a consent and agreement with Nortel, which has
been acknowledged by Alamosa, that modifies Sprint PCS's rights and remedies
under our affiliation agreements with Sprint PCS, for the benefit of Nortel and
future holders of the Nortel senior financing and any refinancing thereof, which
was a condition to the funding of any amounts under the Nortel financing.
The consent and agreement with Nortel generally provides, among other
things, the following:
- Sprint PCS's consent to the pledge of substantially all of our assets,
including our rights in our affiliation agreements with Sprint PCS;
- that our affiliation agreements with Sprint PCS may not be terminated by
Sprint PCS until the Nortel financing is satisfied in full pursuant to
the terms of the consent and agreement with Nortel, unless our
subsidiaries or assets are sold to a purchaser who does not continue to
operate the business as a Sprint PCS network, which sale requires the
approval of the administrative agent, who will initially be Nortel as
discussed in more detail in "Description of Our Indebtedness -- The
Nortel Credit Facility -- Syndication;"
- for Sprint PCS to maintain 10 MHz of wireless personal communications
services spectrum in all of our markets until the Nortel financing is
satisfied or our operating assets are sold after our default under the
Nortel financing;
- for redirection of payments due to Alamosa under the management agreement
from Sprint PCS to the administrative agent during the continuation of
our default under the Nortel financing;
- for Sprint PCS and the administrative agent to provide to each other
notices of default by us under the Sprint PCS management agreement and
Nortel financing, respectively;
- the ability to appoint interim replacements, including Sprint PCS or a
designee of the administrative agent, to operate our portion of the
Sprint PCS network under our affiliation agreements with Sprint PCS after
an acceleration of our financing from Nortel or an event of termination
under our affiliation agreements with Sprint PCS;
- subject to certain requirements and limitations, the ability of the
administrative agent or Sprint PCS to assign our affiliation agreements
with Sprint PCS and sell our assets or the partnership interests of our
operating subsidiaries to a qualified purchaser that is not a major
competitor of Sprint PCS or Sprint, free of the restrictions on
assignment and change of control in the management agreement, if the
Nortel financing has been accelerated after our default; and
- subject to certain requirements and limitations, that if Sprint PCS
enters consent and agreement documents with similarly-situated lenders
that have provisions that are more favorable to the lender, Sprint PCS
will give the administrative agent written notice of the amendments and
will amend the consent and agreement with Nortel in the same manner at
the administrative agent's request; consequently, from time to time,
Nortel and Sprint PCS may modify the consent and agreement so that it
will contain terms and conditions more favorable to Nortel.
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SPRINT PCS'S RIGHT TO PURCHASE ON ACCELERATION OF AMOUNTS OUTSTANDING UNDER
THE NORTEL FINANCING
Subject to the requirements of applicable law, so long as the Nortel
financing remains outstanding, Sprint PCS has the right to purchase our
operating assets or the partnership interests of our operating subsidiaries,
upon its receipt of notice of an acceleration of the Nortel financing, under the
following terms:
- Sprint PCS elects to make such a purchase within a specified period;
- the purchase price is the greater of an amount equal to 72% of our Entire
Business Value or the amount we owe under the Nortel financing;
- if Sprint PCS has given notice of its intention to exercise the purchase
right, then the administrative agent is prohibited for a specified period
after the acceleration or until Sprint PCS rescinds its intention to
purchase, from enforcing its security interest; and
- if we receive a written offer that is acceptable to us to purchase our
operating assets or the partnership interests of our operating
subsidiaries after the acceleration, then Sprint PCS has the right to
purchase our operating assets or the partnership interests of our
operating subsidiaries on terms at least as favorable to us as the offer
we receive. Sprint PCS must agree to purchase the operating assets or the
partnership interests of our operating subsidiaries within 14 business
days of its receipt of the offer, on acceptable conditions, and in an
amount of time acceptable to us.
SALE OF OPERATING ASSETS OR THE PARTNERSHIP INTERESTS OF OUR OPERATING
SUBSIDIARIES TO THIRD PARTIES
If Sprint PCS does not purchase our operating assets or the partnership
interests of our operating subsidiaries after an acceleration of the obligations
under the Nortel financing, then the administrative agent may sell the operating
assets or partnership interests. Subject to the requirements of applicable law,
including the law relating to foreclosures of security interests, the
administrative agent has two options:
- to sell the assets or partnership interests to an entity that meets the
requirements to be our successor under our affiliation agreements with
Sprint PCS; or
- to sell the assets or partnership interests to any third party, subject
to specified conditions.
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DESCRIPTION OF OUR INDEBTEDNESS
THE NORTEL CREDIT FACILITY
GENERAL
We entered into a credit facility effective June 10, 1999 with Nortel for
$123.0 million. We have since entered into a commitment letter with Nortel to
increase the credit facility to $250.0 million to be effective as of the closing
of this offering. As of December 31, 1999, we had borrowed $71.9 million under
the facility. This facility constitutes senior debt secured by a first priority
security interest in substantially all of our assets, including all the assets
of Texas Telecommunications, LP and Alamosa Wisconsin Limited Partnership, our
operating subsidiaries. This facility will be between Nortel, as lender and
administrative agent, and our subsidiary, Alamosa PCS, Inc., a Delaware
corporation, as borrower. We have agreed, and our current and future
subsidiaries have agreed, to guarantee this facility. This description of the
facility assumes that the terms of the commitment letter increasing the facility
are currently in place. Nortel will not fund this increase in the facility
unless various conditions are met, such as the negotiation, execution and
delivery of definitive loan documents and the absence of adverse changes
affecting us or our operations. There can be no assurance that we will fulfill
all of these conditions.
AMOUNT AND PURPOSE OF LOANS
The credit agreement provides for three different tranches of borrowings
evidenced by a single promissory note of $250.0 million. The Tranche A
Commitment provides for borrowings up to $167.0 million, the Tranche B
Commitment provides for borrowings up to $58.0 million and the Tranche C
Commitment provides for borrowings up to $25.0 million. This facility is used to
purchase equipment and services from Nortel, to fund other costs of the
build-out of our portion of the Sprint PCS network and to fund costs associated
with the financing. Nortel is the primary vendor of the equipment and services
necessary to install our portion of the Sprint PCS network. See
"Business -- Network Operations -- Nortel Equipment Agreement."
The amount that can be borrowed under Tranche B, and the amount that can be
borrowed under Tranche C to pay third party expenses, is further limited to a
borrowing base that is computed by the administrative agent at specified times,
as provided in the credit agreement. The borrowing base is defined as 50% of the
amount paid to Nortel to purchase equipment and services used in our portion of
the Sprint PCS network. We have the option to reduce the amount of any of the
commitments, and avoid the periodic fee charged on those unborrowed amounts. Any
reduction must be at least $3.0 million. This is not a revolving credit
arrangement so reductions cannot be reinstated, except for reductions that
result from prepayments made with proceeds of our senior notes offering.
COMMITMENT TERMINATION
The Tranche A Commitment and the Tranche B Commitment are both scheduled to
terminate 30 months from the closing date of the credit facility. The Tranche C
Commitment is scheduled to terminate six months earlier. These commitments may
also terminate:
- when any commitment is fully funded;
- on the first anniversary of the closing date if we have borrowed less
than an aggregate of $100.0 million under all three commitments by that
date, including borrowings under the June 10, 1999 facility;
- upon a change of control of Alamosa PCS Holdings, Inc. or Alamosa PCS,
Inc.;
- if we voluntarily terminate any commitment; and
- if the administrative agent terminates one or all of the commitments due
to the occurrence of an event of default under the credit agreement.
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A change in control will occur if:
- Alamosa PCS Holdings, Inc. ceases to own all of the capital stock of
Alamosa PCS, Inc.;
- Alamosa PCS, Inc. ceases to own all of the capital stock of each
subsidiary of Alamosa PCS, Inc., except that:
- Alamosa Texas GP may own up to one percent of the ownership interests of
Alamosa Texas;
- Alamosa Wisconsin GP may own up to one percent of Alamosa Wisconsin; and
- Wisconsin telephone companies may own up to three percent of Alamosa
Wisconsin;
- any person or group acquires more than 35% of the voting stock of Alamosa
PCS Holdings, Inc.;
- the directors of Alamosa PCS Holdings, Inc. who are elected or approved
by the board of directors as of the closing of this offering, cease for
any reason to constitute at least a majority of the board of directors of
Alamosa PCS Holdings, Inc.; or
- any person or group acquires more voting stock of Alamosa PCS Holdings,
Inc. than is owned collectively by specific persons delineated in the
credit agreement.
SYNDICATION
Nortel may reduce part or all of its total commitment through syndicating
the loan to other lenders. If the loan is syndicated, then the administrative
agent may change from Nortel to any successor administrative agent, acting on
behalf of the lenders in the syndicated group.
LOANS AND INTEREST OPTIONS
We have multiple interest rate options available under the credit
agreement:
- we may borrow money as either a base rate loan with an interest rate
equal to the prime or base rate of Citibank, N.A. (New York), plus 2.75%,
or a Eurodollar loan with an interest rate equal to the London interbank
offered rate, as adjusted for reserve requirements, plus 3.75%;
- we may convert a base rate loan to a Eurodollar loan, or a Eurodollar
loan to a base rate loan, at any time;
- accrued interest is payable either on the last day of each month for base
rate loans, the last day of the interest period for Eurodollar loans or,
in the case of an interest period greater than three months, at three
month intervals after the first day of such interest period;
- we have the option to pay interest due on the loans with borrowings
obtained under the Tranche C Commitment until the earlier of:
- the second anniversary of the closing date;
- the date the Tranche C Commitment is fully funded; and
- the first anniversary of the closing date only if we have not borrowed
at least $100.0 million under the Nortel financing by that date,
including borrowings under the June 10, 1999 facility;
- interest is due upon any prepayment or conversion from one interest type
to another; and
- all outstanding interest is due on the maturity date, which is 90 months
after the closing date of the credit facility unless all of the
commitments are terminated on the first anniversary of the closing date
because we have borrowed less than $100.0 million, in which case the
maturity date is the sixth anniversary of the closing date.
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PAYMENT OF PRINCIPAL
Scheduled. At the termination of the Tranche A and Tranche B Commitments,
we must begin to repay, in quarterly installments, the principal on all
borrowings made under that commitment. A fixed percentage is due each quarter:
- for the first eight quarters, 3.75% of the principal balance of the loan
is due per quarter;
- for quarters nine through twelve, 5.00% per quarter; and
- for quarters thirteen through the maturity date, 6.25% per quarter.
Any principal that has not been paid by the maturity date is due at that time.
Optional Prepayments. We may voluntarily prepay any of the loans at any
time, but any amount repaid may not be reborrowed since there are no revolving
credit features.
Mandatory Prepayments. We also must make mandatory prepayments under
certain circumstances, including among others:
- 50% of Alamosa PCS, Inc.'s excess cash flow, after March 31, 2003, or
after March 31, 2001 if the commitments terminate on the first
anniversary of the closing date;
- any amount in excess of $250,000 received for asset sales outside the
ordinary course of business or insurance proceeds, to the extent not
reinvested in property or assets within a stated period of time; and
- if we complete our senior notes offering, the credit agreement obligates
us to prepay on the Nortel facility the lesser of $75.0 million or the
amount then outstanding under that facility.
All prepayments are applied to the outstanding loan balances pro rata in
the inverse order of maturity, except where there is a borrowing base shortage,
in which case prepayments are first applied there, and then pro rata among all
three commitment tranches.
All payments of principal, including voluntary and mandatory prepayments,
reduce the amount of the commitments by the amount of the principal paid.
FEES
We are required to pay:
- an origination fee of $3.8 million, 3% of the additional $127.0 million
loan commitment made in the amended and restated credit agreement, at the
execution of the credit agreement; and
- a fee on the unfunded portion of each commitment, computed by multiplying
the average daily unused amount of each commitment by 0.75% per year.
This second fee begins to accrue on the date that is six months after the
closing date, and is payable in arrears on the last day of each calendar quarter
until the termination of the relevant commitment. We must also pay a separate,
annual agent's fee of $35,000 to the administrative agent.
WARRANTS
As additional consideration to Nortel for its financing commitment, we are
required to issue to Nortel warrants for 2% of our total equity as of the
closing date, on a fully-diluted basis. The warrants will spring into existence
and be exercisable by Nortel on the second anniversary of the closing date,
unless, among other options, we contribute $75.0 million of equity to Alamosa
PCS, Inc. and prepay indebtedness outstanding under the Nortel facility. We
intend to use a portion of the proceeds from our offering of senior discount
notes to prepay enough of the Nortel financing to prevent the exercise of the
warrants.
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However, we cannot assure you that we will choose to complete our notes offering
and prepay any portion of the Nortel financing. Other options to terminate the
warrants include:
- the assignment of a portion of the loans by Nortel to unrelated lenders;
- the combination of a minimum amount of loan prepayments and assignments
of loans; or
- the achievement of a maximum ratio of senior debt to total capitalization
as of the second anniversary of the closing date and for the two
consecutive calendar quarters immediately prior to the second anniversary
of the closing date.
However, if we do not complete an additional offering of equity or debt, we
do not anticipate that the warrants will be terminated. The exercise price for
the warrants will be the price paid for our common stock in this offering.
Nortel may not transfer any of its rights with respect to the warrants before
the first anniversary of the closing date, and any warrants transferred before
the second anniversary of the closing date will be subject to the provisions
preventing exercise of the warrants. In no event may the warrants be exercised
after the eighth anniversary of the closing date.
Nortel is entitled to multiple demand registration rights and unlimited
piggyback registration rights of the common stock warrants.
BOARD OBSERVATION RIGHT
So long as Nortel holds any loans or commitments under the credit
agreement, it is entitled to receive notices of all of our board and committee
meetings and to have a non-voting observer in attendance at any of those
meetings. However, Nortel will not have these rights if Alamosa PCS, Inc.'s
ratio of annualized earnings before interest, taxes, depreciation and
amortization to annualized cash interest expense plus principal payments is 1.0
to 1 or more for four consecutive quarters. Nortel may share information learned
at those meetings with employees, officers, directors and attorneys who have a
professional need to know the information, but the information must be kept
confidential by those persons. The observer may be excused from a meeting at the
request of a majority of the directors present during discussions involving
sensitive information regarding Nortel or competitors of Nortel.
MANAGEMENT TEAM; EMPLOYMENT AGREEMENTS
The credit agreement requires us to have an experienced telecommunications
management team reasonably satisfactory to the administrative agent, including a
chief executive officer, chief financial officer, chief operating officer and
chief technology officer. As a condition to closing the financing, key
management is required to enter into employment agreements with a minimum term
of two years, non-competition agreements and non-disclosure agreements.
COLLATERAL
The Nortel financing is secured by:
- a perfected first priority lien on substantially all of Alamosa PCS
Holdings, Inc.'s, Alamosa PCS, Inc.'s and the operating subsidiaries'
current and future assets, and the assets of future subsidiaries;
- a collateral assignment of our affiliation agreements with Sprint PCS;
- a pledge by Alamosa PCS Holdings, Inc. to Nortel of shares of Borrower's
capital stock owned by Alamosa and by Borrower of its ownership interests
in the operating subsidiaries; and
- guarantees from Alamosa PCS Holdings, Inc., the operating subsidiaries
and all future direct or indirect subsidiaries of Alamosa PCS, Inc.
We are obligated to grant to the administrative agent a first lien mortgage
on any real property we acquire, together with a mortgagee policy of title
insurance, a survey, an appraisal and an environmental survey.
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MINIMUM EQUITY REQUIREMENTS
As a closing condition of the credit facility, we must raise a combined
$148.0 million in equity capital. This amount will be comprised of the net
proceeds from this offering of our common stock and the amount of capital
contributed by our current stockholders. The current stockholders have
contributed an aggregate of $37.0 million.
CONDITIONS
Alamosa PCS, Inc. must meet certain conditions before it may obtain any
future borrowings under the credit agreement, including:
- that there has been no event of default;
- a reaffirmation of representations;
- Alamosa PCS, Inc. has a debt to contributed capital ratio of less than or
equal to 1.5 to 1;
- submission of a borrowing base report;
- that the loan would not exceed the borrowing base, if applicable; and
- that there has not been a Material Adverse Effect, as defined in the
credit agreement.
NEGATIVE COVENANTS
Other Debt. With limited exceptions such as intercompany debt incurred in
the ordinary course of business and the guarantees of the senior discount notes,
Alamosa PCS, Inc. and the operating subsidiaries have agreed not to incur
additional debt.
Organizational Issues and Capital Stock. Alamosa PCS, Inc. and the
operating subsidiaries have agreed, with an exception for mergers with
subsidiaries, not to:
- become a party to a merger or a consolidation;
- wind-up, dissolve or liquidate;
- acquire all or a material or substantial part of the business or
properties of another person; or
- issue any capital stock other than to Alamosa PCS Holdings, Inc. or to
Alamosa PCS, Inc.
Alamosa PCS, Inc. further agreed not to issue, sell, assign or otherwise
dispose of, to any person:
- any of its capital stock;
- any securities exchangeable for or convertible into or carrying any
rights to acquire any of its capital stock; or
- any option to acquire its capital stock.
Payments and Investments. Alamosa PCS, Inc. and the operating subsidiaries
have agreed not to make any "restricted payments." Restricted payments include:
- dividends or distributions on account of shares of capital stock, except:
- one payable solely in shares of stock;
- intercompany dividends; and
- dividends from Alamosa PCS, Inc. to Alamosa PCS Holdings, Inc. for use
to pay interest on the senior discount notes;
- any redemption, conversion, exchange, retirement, sinking fund, or other
similar purchase of shares of capital stock;
- any payment or prepayment of principal, premium, if any, or interest on,
any subordinated debt;
- any redemption, conversion, exchange, purchase, retirement or defeasance
of any subordinated debt;
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- any loan, advance or payment to any officer, director or shareholder,
except for reasonable compensation paid to officers or directors in the
ordinary course; and
- any payment made to retire any outstanding warrants, options or other
rights to acquire capital stock.
Modification of Agreements. Alamosa PCS, Inc. has agreed that, with limited
exceptions, it will not consent to or implement any termination, amendment,
modification, supplement or waiver of:
- our affiliation agreements with Sprint PCS;
- its business plan; or
- any material contract.
Other Negative Covenants. Alamosa PCS, Inc. and the operating subsidiaries
have agreed not to:
- dispose of property except in certain circumstances;
- enter into any operating leases or sale/leaseback transactions, other
than specified exceptions;
- engage in any line of business other than operation of our portion of the
Sprint PCS network, and related ownership and financing activities;
- conduct any activity on real property that would violate environmental
laws;
- restrict any subsidiary's ability to pay dividends;
- pay management fees other than to Sprint PCS;
- terminate the Supply Agreement, the agreement pursuant to which Nortel
provides goods and services to us relating to the Sprint PCS network,
before the third anniversary of the closing date, or before the first
anniversary of the closing date if less than $100.0 million has been
borrowed at that time;
- take certain actions that would violate ERISA; or
- prepay fees owed to Sprint PCS.
Alamosa PCS Holdings, Inc. has agreed not to engage in any business other
than the ownership of capital stock and other capital raising activities.
Alamosa PCS Holdings, Inc. has also agreed to maintain a ratio of total debt to
total capitalization of 0.75 to 1 or less when its senior debt is 40% or more of
its total debt and 0.80 to 1 or less when its senior debt is less than 40% of
its total debt.
FINANCIAL AND OPERATING COVENANTS
Alamosa PCS, Inc. is subject to financing and operating covenants
including:
- a maximum ratio of total debt to total capitalization;
- a maximum ratio of total debt to annualized earnings before interest,
taxes, depreciation and amortization, referred to as EBITDA, for each
quarter;
- minimum annualized EBITDA for each quarter;
- minimum number of subscribers;
- minimum quarterly revenue;
- maximum cumulative capital expenditures not to exceed a specified amount;
- maximum yearly payments under operating leases; and
- minimum quarterly fixed charge coverage ratio, which is the ratio of
EBITDA plus cash and the unused portion of the loan to consolidated fixed
charges.
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EVENTS OF DEFAULT
In addition to failing to perform, observe or comply with the covenants,
agreements and terms of the credit agreement, it is an event of default under
the credit agreement if any party with financial responsibility for the loans or
the outstanding, unsecured equity commitments, or Sprint PCS signatory to the
management agreement with Sprint PCS:
- becomes insolvent, commences or suffers bankruptcy proceedings or suffers
other indicia of extreme financial duress.
Other events of default include:
- an attachment against Alamosa PCS, Inc.'s or its subsidiaries' property
that is not released within 30 days and the amount of the proceedings is
greater than $500,000;
- a judgment against Alamosa PCS, Inc. or its subsidiaries of greater than
$500,000;
- failure to pay other loans as they become due;
- a breach by Alamosa PCS, Inc. under the supply agreement with Nortel, the
consent and agreement with Nortel or our affiliation agreements with
Sprint PCS;
- any change in control of Alamosa PCS Holdings, Inc.; or
- any Material Adverse Effect occurs, which effect is broadly defined in
the credit agreement to include things that could have a material adverse
effect on Alamosa PCS, Inc.'s business, on Alamosa PCS, Inc.'s ability to
repay the loan, or on Nortel's collateral.
SENIOR DISCOUNT NOTES
We intend to raise approximately $156 million through a public offering of
our senior discount notes. The senior discount notes will be unsecured
obligations, will rank equally with all our existing and future senior debt and
will rank senior to all our existing and future subordinated debt.
The senior discount notes will be fully and unconditionally, jointly and
severally guaranteed on a senior subordinated basis by our current subsidiaries
and our future restricted subsidiaries. See "The Reorganization" regarding the
ownership structure of our subsidiaries. The guarantees will be unsecured
obligations and:
- will be subordinate to all existing and future senior debt of each
subsidiary guarantor, including the Nortel financing;
- will rank equally with all existing and future senior subordinated debt
of each subsidiary guarantor; and
- will be senior to all existing and future subordinated debt of each
subsidiary guarantor.
We may redeem some or all of the senior discount notes beginning in 2005,
and until 2003 we may redeem a portion of the senior discount notes with the net
proceeds of an equity offering.
The senior discount notes will be issued at a discount to their principal
amount and will accrete in value until 2005, at which time their accreted value
will equal their principal amount. Interest will begin to accrue at this time
and will be payable semi-annually. The senior discount notes will contain
covenants limiting our ability and the ability of our subsidiaries to:
- incur additional debt or issue preferred stock;
- pay dividends, redeem capital stock or make other restricted payments or
investments;
- create liens on assets;
- merge, consolidate or dispose of assets;
- enter into transactions with affiliates; and
- change lines of business.
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Holders of the senior discount notes will have the right to require us to
repurchase all or any part of their senior discount notes, at 101% of the
accreted value, if before 2005, or 101% of the aggregate principal amount
thereafter, together with accrued and unpaid interest, upon a change of control
of Alamosa.
Events of default in respect of the senior discount notes include, among
others, failure to pay interest or principal on the senior discount notes when
due, failure to perform covenants, acceleration of the maturity of other debt,
events of bankruptcy, certain judgments against us and the occurrence of any
event of default pursuant to our affiliation agreements with Sprint PCS.
We anticipate that the proceeds from our proposed offering of senior
discount notes will not be needed to fund the required capital expenditures,
working capital requirements, operating losses and other cash needs of our
current business plan. We intend to use a portion of the proceeds of that
offering to prepay $75.0 million of indebtedness outstanding under the Nortel
facility. We may decide to use the remaining proceeds of that offering to:
- expand our existing territory;
- build-out additional areas or accelerate coverage within our existing
territory;
- pursue additional wireless telecommunications business opportunities or
acquire other wireless telecommunications businesses or assets; or
- cover general corporate purposes.
However, if we do not use the remaining proceeds of our notes offering for
these purposes, we may decide to:
- prepay additional debt outstanding under the Nortel facility; or
- avoid drawing additional amounts under the Nortel facility.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table presents information with respect to our directors and
executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David E. Sharbutt......................... 50 Chairman of the Board of Directors and
Chief Executive Officer
Jerry W. Brantley......................... 54 Chief Operating Officer
Kendall W. Cowan.......................... 45 Chief Financial Officer
W. Don Stull.............................. 37 Chief Technology Officer
Michael R. Budagher....................... 41 Director
Ray M. Clapp, Jr.......................... 39 Director
Scotty Hart............................... 49 Director
Thomas Hyde............................... 54 Director
Schuyler B. Marshall...................... 54 Director
Tom M. Phelps............................. 50 Director
Reagan W. Silber.......................... 38 Director
Jimmy R. White............................ 60 Director
</TABLE>
David E. Sharbutt. Mr. Sharbutt has been our Chairman and a director since
Alamosa was founded in July 1998. Mr. Sharbutt was named our Chief Executive
Officer on October 1, 1999. Mr. Sharbutt was formerly the President and Chief
Executive Officer of Hicks & Ragland, now known as CHR Solutions, Inc. Mr.
Sharbutt is currently employed by CHR Solutions as a Senior Consultant. He has
been at CHR Solutions since 1977, where he has worked with independent telephone
companies in developing strategic, engineering and implementation plans for
various types of telecommunications services. Before he joined CHR Solutions,
Mr. Sharbutt was employed by Southwestern Bell. Mr. Sharbutt holds a Bachelor of
Science degree in Electrical Engineering from Texas Tech University. Mr.
Sharbutt was Vice President of Alamo IV LLC until its dissolution in November
1999. He also serves as a director for, and is a shareholder of, CHR Solutions
and is a director for, and shareholder and President of US Consultants, Inc. In
addition, he is a director for TechTel Communications Corporation, Accipiter
Communications, and previously was a director of Alamo Cellular, Inc., all
non-public companies.
Jerry W. Brantley. Mr. Brantley has been our Chief Operating Officer since
October 1998. He is responsible for overseeing all aspects of operations
including market operations, network build-out, marketing and distribution. From
June 1996 to October 1998, he was General Manager of the H&R Strategic Group of
Hicks & Ragland. From December 1994 to June 1996, Mr. Brantley was Executive
Vice President and General Manager for Mainstreet Wireless, a national wireless
personal communications services consortium of independent telecommunications
companies and other companies. From May 1993 to November 1994, Mr. Brantley was
President and General Manager of the Business Crime Council of South Texas,
Inc., a crime prevention organization. From 1984 to 1993, Mr. Brantley held
various executive management positions in sales, marketing, public relations and
regulatory matters for Southwestern Bell Mobile Systems. Mr. Brantley holds a
Bachelor of Business Administration degree from the University of Oklahoma.
Kendall W. Cowan. Mr. Cowan became our Chief Financial Officer in December
1999. From October 1993 to December 1999, he was a partner in the public
accounting firm of Robinson Burdette Martin & Cowan, L.L.P. and from January
1986 to September 1993, he was a partner in the Lubbock and Dallas offices of
Coopers & Lybrand. He provided consulting and accounting services to a wide
range of clients at both firms including public companies. He is a Certified
Public Accountant and a member of both the American Institute of Certified
Public Accountants and the Texas Society of Certified Public Accountants. Mr.
Cowan is Chairman of the Board and a stockholder of ShaCo Xpress, Inc., a
director of Robert Heath Trucking, Inc., and a member of C.C. & Co., L.L.C., all
of which are non-public companies.
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<PAGE> 75
W. Don Stull. Mr. Stull has been our Chief Technology Officer since October
1998. He was formerly Vice President of Hicks & Ragland. He has held various
management and engineering positions at Hicks & Ragland since 1988. From 1985 to
1988 he was an engineer at Turner Collie & Braden, Inc. From 1980 to 1984, he
was an engineering technician for different companies. Mr. Stull received his
M.B.A. from Texas Tech University and holds a Bachelor of Science degree in
Civil Engineering from Texas Tech University.
Michael R. Budagher. Mr. Budagher has served as a director of Alamosa since
December 21, 1998. Mr. Budagher was the founder of Specialty Constructors, a
wholly owned subsidiary of Specialty Teleconstructors, Inc., a wireless
infrastructure installation company. He served as the President, Chairman of the
Board, Chief Executive Officer and Chief Operating Officer of Specialty from
1990 to 1998. Mr. Budagher is also a founder, stockholder and the President of
Specialty Antenna Site Resources, Inc. and was a founder and served as the
President of Specialty Constructors Coatings, Inc. until March 1997. He also
serves as the managing member and President of the Budagher Family LLC as well
as a Manager of West Texas PCS, LLC, both non-public limited liability
companies.
Ray M. Clapp, Jr. Mr. Clapp has served as a director since Alamosa was
founded in July 1998. Since 1995, Mr. Clapp has been Managing Director,
Acquisitions and Investments for The Rosewood Corporation, the primary holding
company for the Caroline Hunt Trust Estate. From 1989 to 1995, he has held
various officer level positions with The Rosewood Corporation and its
subsidiaries. Prior to his employment with The Rosewood Corporation, Mr. Clapp
was a consultant with Booz, Allen & Hamilton, a management consulting firm.
Scotty Hart. Mr. Hart has served as a director since Alamosa was founded in
July 1998. He has also served as General Manager of South Plains Telephone
Cooperative, a wireline and wireless telecommunications company, since April 10,
1995, and previously as Assistant Manager of South Plains Telephone Cooperative.
Mr. Hart is currently Vice President of SPPL, Inc., Chairman of the General
Partners Committee for Caprock Cellular Limited Partnership and past Chairman
for Texas RSA3 Limited Partnership, all affiliates of South Plains Telephone
Cooperative. He is also General Manager of South Plains Advanced Communications
& Electronics, Inc., a wholly owned subsidiary of South Plains Telephone
Cooperative, and Secretary of Alamo Cellular, Inc., a non-public holding company
with interests in a wireless telecommunications service provider and an
affiliate of South Plains Advanced Communications & Electronics, Inc. In
addition, Mr. Hart is the general partner and a limited partner of Lubbock HLH,
Ltd. He was President of Alamo IV LLC until its dissolution in November 1999.
Mr. Hart also serves as a director of Texas Statewide Telephone Cooperative,
Inc., a non-public company.
Thomas Hyde. Mr. Hyde has served as a director since Alamosa was founded in
July 1998. From 1996 to 1997, Mr. Hyde served as an Assistant Manager of Taylor
Telephone Cooperative, Inc., a landline telephone service provider, and has
served as Manager of that company since 1998. He has also served as Manager of
Taylor Telecommunications, Inc., a cellular services provider. Prior to 1996,
Mr. Hyde was self-employed in the farming and ranching business. Mr. Hyde was
also Secretary of Alamo IV LLC until its dissolution in November 1999. Mr. Hyde
currently serves as a director of Alamo Cellular, Inc. and was a director of
Taylor Telephone Cooperative, Inc. and Taylor Telecommunications, Inc. from 1979
to 1996.
Schuyler B. Marshall. Mr. Marshall has served as a director of Alamosa
since November 1999. He has served as President of The Rosewood Corporation, the
primary holding company for the Caroline Hunt Trust Estate, since January 1,
1999. From 1996 through 1998, he served as Senior Vice President and General
Counsel, and Executive Director of The Rosewood Corporation, and as director and
president of various of its subsidiaries. He currently serves as a member of the
advisory board of Rosewood Capital IV, L.P., a San Francisco based venture
capital fund that will focus on e-commerce, telecommunications and other
consumer oriented investments. Mr. Marshall also serves as the sole manager of
Rosewood Telecommunications, L.L.C., a stockholder of Alamosa. Prior to his
employment with The Rosewood Corporation, Mr. Marshall was a senior shareholder
with Thompson & Knight, P.C., in Dallas, where he practiced law since 1970.
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<PAGE> 76
Tom M. Phelps. Mr. Phelps has served as a director of Alamosa since
December 21, 1998. He has served as Executive Vice President and General Manager
of ENMR Telephone Cooperative, a telecommunications services provider, and of
Telecommunications Holdings East, since September 1997. Mr. Phelps is also
currently Executive Vice President of Plateau Telecommunications Incorporated, a
wireless and wireline telecommunications provider and wholly owned subsidiary of
Telecommunications Holdings East. Additionally, Mr. Phelps served as Assistant
Manager of ENMR Telephone Cooperative and its wholly owned subsidiaries from
1995 to 1997, and as Area Manager of GTE Corporation, a telephone service
provider, from 1994 to 1995. He is currently a director of Rocky Mountain
Telecommunications Association, a non-public company.
Reagan W. Silber. Mr. Silber has served as a director since Alamosa was
founded in July 1998. He has been the founder and managing shareholder of Silber
Pearlman, P.C., a law firm, since 1989. He is also a director and the President
of Tregan International Corp., a director and the President of BPS Realty, Inc.,
and a director of Independent Bank of Plano, all non-public companies.
Jimmy R. White. Mr. White has served as a director since Alamosa was
founded in July 1998. He has served as the General Manager of XIT Rural
Telephone Cooperative, Inc. and its subsidiaries, XIT Telecommunication &
Technology, Inc., XIT Cellular, and XIT Fiber, Inc., all wireline and wireless
telecommunications services providers, since 1975. He was the Treasurer of Alamo
IV LLC until its dissolution in November 1999. Mr. White currently serves as the
President of Alamo Cellular, Inc. He also currently serves as a director of
Texas Telephone Association, a non-public company, and Forte of Colorado, a
general partnership.
BOARD OF DIRECTORS
Under the terms of Alamosa PCS, LLC's Regulations, the number of managers
to serve on the Alamosa's board of managers was fixed at nine managers. Alamo IV
had the right to appoint five of the managers and the financial members,
comprised of Rosewood Telecommunications, LLC, Tregan International Corp., West
Texas PCS LLC, Longmont PCS LLC and Yellow Rock PCS, L.P., had the right to
appoint a total of four of the managers. If Alamo IV's percentage interest in
Alamosa PCS, LLC fell below 45% then the number of managers it was able to
appoint also fell in a corresponding manner. Likewise, if the financial members
combined percentage interest in Alamosa PCS, LLC fell below 33% then the number
of managers they were able to appoint as a group also fell in a corresponding
manner. Neither Alamo IV's number of appointments nor the financial members'
number of appointments increased as a result of a decrease in the other group's
percentage interest. Any remaining manager position was to be filled by a
manager elected by a majority of the members of Alamosa PCS, LLC. As a result of
Alamo IV's dissolution in November 1999, Alamo IV no longer holds any right to
appoint managers, but the former members of Alamo IV are currently still able to
act together to appoint five of the managers. Prior to the closing of this
offering, Alamosa PCS, LLC will be reorganized and the current managers of
Alamosa PCS, LLC will become directors of Alamosa PCS Holdings, Inc. Upon this
reorganization, the former members of Alamo IV and the financial members will
lose their right to appoint any future directors. For further information on the
reorganization, see "The Reorganization."
After the reorganization, our board of directors will be fixed at nine
members. We will divide our board of directors into three classes. Ray M. Clapp,
Jr., Jimmy White and Thomas Hyde constitute Class I and will stand for election
at the annual meeting of stockholders to be held in 2001. Michael R. Budagher,
Schuyler B. Marshall and Reagan W. Silber constitute Class II and will stand for
election at the annual meeting of stockholders to be held in 2002. Tom M.
Phelps, David E. Sharbutt, and Scotty Hart constitute Class III and will stand
for election at the annual meeting of stockholders to be held in 2003. After the
initial term following the offering, directors in each class will serve for a
term of three years, or until his or her successor has been elected and
qualified and will be compensated at the discretion of the board of directors.
Executive officers are ordinarily elected annually and serve at the discretion
of the board of directors.
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<PAGE> 77
COMPENSATION OF DIRECTORS
Currently, we do not compensate our directors. No director who is an
employee of Alamosa receives separate compensation for services rendered as a
director. Starting in June 1999, we had an arrangement with Hicks & Ragland, now
known as CHR Solutions, to pay $175 per hour for David Sharbutt's services as
Chairman of our board of directors. This arrangement with Hicks & Ragland ended
on October 1, 1999, when Mr. Sharbutt became our Chief Executive Officer.
Following the closing of this offering, pursuant to the 1999 Long Term
Incentive Plan, each of our directors who is an independent director because he
or she is not an officer or employee of Alamosa will automatically receive an
initial option to purchase 28,000 shares of our common stock upon the closing of
this offering or on the date he or she becomes one of our directors. We granted
an option to purchase an additional 15,000 shares of our common stock to Mr.
Clapp for his performance of additional duties as director with respect to this
initial public offering and our debt offering. The initial option becomes
exercisable with respect to 100% of the shares covered thereby six months after
the date of grant and will expire on the tenth anniversary of the date of grant.
In addition to the initial option, each independent director will receive a
grant pursuant to our 1999 Long Term Incentive Plan of an annual option to
purchase that number of shares of our common stock equal to $60,000 divided by
the fair market value of our common stock on the date of grant. The annual
option will be automatically granted on the date of the first full meeting of
our board of directors following the end of each fiscal year. The annual option
will immediately vest on the date of grant and will expire on the tenth
anniversary of the date of grant. The exercise price of all options granted to
independent directors must be equal to the fair market value of our common stock
on the date of grant. Directors who are also our officers or employees receive
no additional compensation for serving as directors. All of our directors are
entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to, and attendance at, meetings of the board of
directors or committees thereof.
BOARD COMMITTEES
Our board of directors has established five committees. They are the:
- audit committee;
- compensation committee;
- finance committee;
- stock option plan committee; and
- nominating committee.
The audit committee is responsible for recommending to the board of
directors the engagement of our independent auditors and reviewing with the
independent auditors the scope and results of the audits, our internal
accounting controls, audit practices and the professional services furnished by
the independent auditors. The current members of the audit committee are Messrs.
White, Phelps, Budagher and Clapp.
The compensation committee is responsible for reviewing and approving all
compensation arrangements for our officers. The current members of the
compensation committee are Messrs. Silber, Marshall and Hyde.
The finance committee is responsible for providing budget oversight and
dealing with capital structure issues. The current members of the finance
committee are Messrs. Clapp, White, Sharbutt and Hart.
The stock option plan committee is responsible for reviewing and approving
the terms of any stock option grants or other awards under the 1999 Long Term
Incentive Plan and reviewing and approving the terms of any future stock option
plans. The current members of the stock option plan committee are Messrs.
Silber, Marshall and Hyde.
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<PAGE> 78
The nominating committee is responsible for:
- seeking out possible candidates for the board of directors;
- reviewing the slate of directors to be elected by the stockholders;
- reviewing the qualifications for candidates for corporate offices
recommending the officers for approval by the board of directors;
- and evaluating the performance of current directors.
The current members of the nominating committee are Messrs. Phelps,
Budagher, White, Clapp, Silber, Marshall, Hyde and Sharbutt.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of our board of directors currently consists of
Messrs. Silber, Marshall and Hyde. None of these committee members are or have
been executive officers of us or our subsidiaries. From our inception on July
16, 1998 through December 9, 1999, our board of directors determined the
compensation of our executive officers. David Sharbutt, our Chief Executive
Officer, is Chairman of our board of directors. He is also employed as a Senior
Consultant and is a director and shareholder of CHR Solutions, an engineering
consulting firm that provides services to us. See "Certain Relationships and
Related Transactions" for more details on these transactions. Mr. Sharbutt has
also served on the board of directors of Alamo Cellular, Inc. Currently Scotty
Hart is Secretary of Alamo Cellular, Inc. and Jimmy White is President of Alamo
Cellular, Inc. Both Mr. Hart and Mr. White are also on our board of directors.
In addition, Alamo IV LLC, prior to its dissolution in November 1999, had been
controlled by its members. Mr. Sharbutt represents a company called Harlamo LLC
that is a member of Alamo IV LLC and he also serves as Vice President of Alamo
IV LLC. Thomas Hyde, who is one of our directors, along with Scotty Hart and
Jimmy White, serve as executive officers of Alamo IV LLC.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Our full board of directors addressed all matters concerning executive
compensation until December 9, 1999, when we formed an executive compensation
committee consisting of Messrs. Silber, Marshall and Hyde. Since its formation,
the compensation committee has addressed executive compensation matters.
Our executive compensation philosophy reflects our belief that the
compensation of executives should:
- be linked to achievement of our business and strategic goals;
- be aligned with the interests of stockholders through awards of stock
options and other stock-based compensation;
- recognize individual contributions, as well as overall business results;
and
- result in attracting, motivating and retaining highly-talented executives
to serve us.
To achieve these objectives, our current compensation program consists of the
following elements:
- Base salary;
- Annual incentive compensation, the receipt of which is based on:
- our financial performance from year to year; and/or
- significant individual contributions; and
- Long-term incentive compensation, primarily in the form of stock options.
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Jerry Brantley, as Chief Operating Officer, acted in a capacity similar to
that of chief executive officer during the period from the inception of Alamosa,
July 16, 1998, to October 1, 1999, when David Sharbutt was elected Chief
Executive Officer. Mr. Sharbutt has served as our chief executive officer since
that time. The structure of Mr. Brantley's fiscal 1999 compensation was based in
part on comparisons to the compensation of executives in similar positions with
other companies in the industry, as well as Mr. Brantley's level of
responsibility, experience and contribution to our business objectives and the
board's ongoing assessment of our operations. In accordance with such factors,
we entered into an amended and restated employment agreement with Mr. Brantley,
effective October 1, 1999. This agreement provides for a base salary of
$175,000, subject to increases at our board's discretion. In addition, the
agreement provides that Mr. Brantley is eligible for quarterly bonuses upon the
achievement of certain performance targets established by our board, and grants
Mr. Brantley stock options that vest over three years. See "-- Employment
Agreements -- Jerry W. Brantley." Pursuant to this employment agreement, Mr.
Brantley received compensation totaling $302,200 for fiscal 1999, representing a
salary of $175,000, a bonus of $120,000 and a car allowance of $7,200. Our board
believes that the structure of Mr. Brantley's compensation, with its emphasis on
our performance, is in the best interest of our stockholders because it more
closely aligns the interests of Mr. Brantley and our stockholders.
The structure of Mr. Sharbutt's fiscal 1999 compensation was also based in
part on comparisons to the compensation of executives in similar positions with
other companies in the industry, as well as Mr. Sharbutt's level of
responsibility, experience and contribution to our business objectives and the
board's ongoing assessment of our operations. In accordance with such factors,
we entered into an employment agreement with Mr. Sharbutt, effective October 1,
1999. This agreement provides for a base salary of $175,000, subject to
increases at our board's discretion. In addition, the agreement provides that
Mr. Sharbutt is eligible for quarterly bonuses upon the achievement of certain
performance targets established by our board. See "-- Employment
Agreements -- David E. Sharbutt." Pursuant to this employment agreement, Mr.
Sharbutt received compensation totaling $91,250 for fiscal 1999, representing a
salary of $43,750, a bonus of $43,750 and a car/club dues allowance of $3,750.
Our board believes that the structure of Mr. Sharbutt's compensation, with its
emphasis on our performance, is in the best interest of our stockholders because
it more closely aligns the interests of Mr. Sharbutt and our stockholders.
Other than Mr. Brantley as Chief Operating Officer and Mr. Sharbutt as
Chief Executive Officer, W. Don Stull, as Chief Technology Officer, also
received substantial compensation during fiscal 1999. Our philosophy for the
compensation of our executive officers focuses on each individual's level of
responsibility, experience and contribution to our business objectives and the
board's ongoing assessment of our operations. The board places emphasis on
compensation that closely aligns the executive's interests with the
stockholders' interests. Therefore, a significant percentage of each executive
officer's total compensation is tied to our performance through:
- bonus eligibility, based on a combination of our performance and
individual achievement; and
- stock option awards.
In August 1993, as part of the Omnibus Budget Reconciliation Act of 1993,
Section 162(m) of the Internal Revenue Code was enacted, which section provides
for an annual one million dollar limitation on the deduction that an employer
may claim for compensation of certain executives. Section 162(m) of the Internal
Revenue Code provides an exception to the deduction limitation for certain
performance-based compensation, and it is the intent of the board to qualify
executive compensation for such exception to the extent necessary, feasible and
in our best interests.
<TABLE>
<S> <C>
David E. Sharbutt (Chairman) Schuyler B. Marshall
Michael R. Budagher Tom M. Phelps
Ray M. Clapp, Jr. Reagan W. Silber
Scotty Hart Jimmy R. White
Thomas Hyde
</TABLE>
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<PAGE> 80
EXECUTIVE COMPENSATION
The following table presents summary information with respect to the
compensation paid to David E. Sharbutt, Jerry W. Brantley, Kendall W. Cowan and
W. Don Stull during the period from the inception of Alamosa, July 16, 1998, to
December 31, 1998 and for the year ended December 31, 1999. We had no chief
executive officer during the period from inception, July 16, 1998, to December
31, 1998. Mr. Brantley, as Chief Operating Officer, acted in a capacity similar
to that of chief executive officer during that period. David E. Sharbutt became
our chief executive officer effective as of October 1, 1999, and has served as
our chief executive officer since that time.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
-------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS COMPENSATION
- --------------------------- ---- -------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
David E. Sharbutt
Chief Executive
Officer(1).................. 1999 $ 43,750 $ 43,750 -- 1,697,500 $ 3,750(2)
Jerry W. Brantley
Chief Operating Officer... 1999 $175,000 $120,000 -- 1,697,500(3) $ 7,200(4)
1998 $ 40,385 $ 13,846 -- --(3) $ 1,662(4)
Kendall W. Cowan
Chief Financial
Officer(5).................. 1999 $ 12,500 $ 12,500 -- 1,455,000 $ 600(4)
W. Don Stull
Chief Technology
Officer..................... 1999 $ 90,000 $ 60,000 -- -- $ 4,800(4)
1998 14,723 $ 0 -- 145,500(6) $ 554(4)
</TABLE>
- ---------------
(1) Mr. Sharbutt became Chief Executive Officer on October 1, 1999.
(2) Consists of a monthly car and club dues allowance.
(3) During 1998, we granted Mr. Brantley three series of options to purchase up
to an aggregate 1.5% membership interest in Alamosa PCS, LLC. The exercise
price per share was $1.08 for the first of these series, $1.15 for the
second series and $1.25 for the third series. We will record compensation
expense totaling $9,341,100 in connection with these options. As part of the
reorganization, these options were terminated and replaced by two options
granted under the 1999 Long-Term Incentive Plan. The first option is
exercisable immediately for 242,500 shares of our common stock at an
exercise price of $1.15 per share. The second option vests over the next
four years and is exercisable for 1,455,000 shares of our common stock with
an exercise price equal to the initial public offering price.
(4) Consists of a monthly car allowance.
(5) Mr. Cowan became Chief Financial Officer on December 1, 1999.
(6) During 1998, we granted Mr. Stull three series of options to purchase up to
an aggregate 0.3% membership interest in Alamosa PCS, LLC that vest monthly
beginning on April 29, 2000 and expire on December 31, 2006. As part of the
reorganization, these options will be exchanged for three series of options
to purchase an aggregate of 145,500 shares of our common stock. The exercise
price per share is $1.1296 for the first series, $1.2477 for the second
series and $1.4238 for the third series of these common stock options.
One-third of each option series is fully vested and exercisable and another
one-third of each series will vest on each of October 29, 2000 and October
29, 2001.
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STOCK OPTION GRANTS IN LAST FISCAL YEAR
The table below provides information regarding stock options granted to the
named executive officers in fiscal year 1999. None of the named executive
officers received stock appreciation rights, or SARs.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERM(1)
UNDERLYING EMPLOYEES IN PRICE EXPIRATION -----------------------------------
NAME OPTIONS FISCAL YEAR (PER SHARE) DATE 0%($) 5%($) 10%($)
- ---- ---------- ------------ -------------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
David E. Sharbutt.... 242,500(2) 5% $1.15 12/9/2009 3,116,125 5,251,222 8,526,881
1,455,000 30% initial public 12/9/2009 -- 12,810,584 32,464,534
offering price
Jerry W. Brantley.... 242,500(3) 5% $1.15 12/9/2009 3,116,125 5,251,222 8,526,881
1,455,000(3) 30% initial public 12/9/2009 -- 12,810,584 32,464,534
offering price
Kendall W. Cowan..... 1,455,000 30% initial public 12/9/2009 -- 12,810,584 32,464,534
offering price
</TABLE>
- ---------------
(1) Based on an assumed initial public offering price of $14.00
(2) In connection with these options, we will record compensation expense
totaling $3,116,125.
(3) During 1998, we granted Mr. Brantley three series of options to purchase up
to an aggregate 1.5% membership interest in Alamosa PCS, LLC. The exercise
price per share is $1.08 for the first of these series, $1.15 for the second
series and $1.25 for the third series. We will record compensation expense
totaling $9,341,100 in connection with these options. As part of the
reorganization, these options were terminated and replaced by two options
granted under the 1999 Long-Term Incentive Plan. The first option is
exercisable immediately for 242,500 shares of our common stock at an
exercise price of $1.15 per share. The second option vests over the next
four years and is exercisable for 1,455,000 shares of our common stock with
an exercise price equal to the initial public offering price.
AGGREGATED FISCAL YEAR-END OPTION VALUES
The following table provides summary information regarding options held by
our named executive officers as of December 31, 1999. There was no public market
for the common stock as of December 31, 1999. Accordingly, the value of
unexercised in-the-money options is based on an assumed initial public offering
price of $14.00, less the exercise price payable for such shares.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/
ACQUIRED VALUE YEAR-END(#) SARS AT FISCAL YEAR-END
NAME ON EXERCISE(#) REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
- ---- -------------- -------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
David E. Sharbutt............... -- -- 242,500/1,455,000 $3,116,125/$0
Jerry W. Brantley............... -- -- 242,500/1,455,000 $3,116,125/$0
Kendall W. Cowan................ -- -- --/1,455,000 --/$0
W. Don Stull.................... -- -- 48,500/97,000 $617,549/$1,235,098
</TABLE>
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BENEFIT PLANS
1999 LONG TERM INCENTIVE PLAN
The 1999 Long Term Incentive Plan has been adopted by our board of
directors and stockholders. The purpose of the plan is to attract and retain the
services of our key management employees, outside directors and consultants by
providing those persons with a proprietary interest in us. The plan allows us to
provide that proprietary interest through the grant of:
- incentive stock options;
- nonqualified stock options;
- tandem and independent stock appreciation rights;
- stock bonuses; and
- restricted stock.
The aggregate number of shares of common stock that may be issued under the plan
is 7,000,000. We have granted options effective as of the closing of this
offering to purchase 6,028,000 shares of our common stock with an exercise price
equal to the initial public offering price per share to directors, officers,
employees and consultants and to purchase 485,000 shares of our common stock
with an exercise price of $1.15 per share to two of our executive officers.
The option plan will be administered by our board of directors or by a
stock option plan committee appointed by our board of directors, which will be
authorized, subject to the provisions of the option plan, to grant awards and
establish rules and regulations as it deems necessary for the proper
administration of the option plan and to make whatever determinations and
interpretations it deems necessary or advisable.
An incentive option may not have an exercise price less than the fair
market value of the common stock on the date of grant or an exercise period that
exceeds ten years from the date of grant and is subject to other limitations
which allow the option holder to qualify for favorable tax treatment.
Nonqualified options may have an exercise price of less than, equal to or
greater than the fair market value of the underlying common stock on the date of
grant but, like incentive options, are limited to an exercise period of no
longer than ten years.
The committee determines and designates those persons to whom awards are
granted and determines:
- the award period;
- the date of grant;
- the vesting period; and
- other terms, provisions, limitations and performance requirements
approved by the committee, but not inconsistent with the plan.
The committee also has the discretion to reprice stock option awards.
An option will not be transferable except by will or by the laws of descent
or distribution or unless determined otherwise by our board of directors or the
committee.
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Awards under the plan may contain provisions that, if a change in control
of Alamosa occurs, give the stock option plan committee discretion to offer to
purchase awards from plan participants and make adjustments or modifications to
outstanding awards to protect and maintain the rights and interests of the plan
participants or take any other action the award agreements may authorize. A
change in control of Alamosa is deemed to occur for purposes of the plan upon
any of the following events:
- the approval by our stockholders of a plan to dissolve or liquidate
Alamosa;
- continuing directors, who are persons who were serving on our board of
directors when the plan was adopted or who afterwards were elected to the
board of directors by majority of the directors in office, cease to
constitute at least 50% of the board of directors;
- a consolidation or merger in which we do not survive, or in which our
stockholders do not retain the same proportionate common stock ownership
in the surviving company after the merger; or
- a sale of substantially all of our assets, unless the sale is due to the
default by us or our affiliates under any:
- credit or related agreement among us or our affiliates or successors and
Nortel Networks, Inc. or any other lender; or
- management or related agreement among us or our affiliates or successors
and Sprint Spectrum, LP, SprintCom, Inc., WirelessCo, LP, Sprint
Communications Company, LP or their affiliates or successors.
The events described in the third and fourth bullet points above will not
be deemed a change in control of Alamosa if after the event:
- continuing directors constitute at least 50% of the board of directors of
the continuing, surviving or acquiring entity, or that entity's ultimate
parent entity if the parent entity has at least a majority of the voting
power of the entity; and
- the continuing, surviving or acquiring entity, or that entity's ultimate
parent entity, assumes all of the outstanding stock options under the
plan.
401(K) RETIREMENT PLAN
We have established a tax-qualified employee savings and retirement plan.
Employees may elect to contribute up to 20% of their annual compensation on a
pre-tax basis and up to an additional 10% of their annual compensation on an
after-tax basis to the retirement plan. "Highly Compensated Employees," as
defined in the retirement plan, are subject to certain other provisions
regarding the amount of eligible contributions. Employee contributions may begin
from the date of hire and are immediately vested. Currently, we do not make
matching or profit-sharing contributions to the retirement plan.
EMPLOYMENT AGREEMENTS
David E. Sharbutt. We are a party to an employment agreement with David E.
Sharbutt, effective October 1, 1999. This employment agreement has a three-year
term and provides that Mr. Sharbutt receive a minimum base salary of $175,000,
payable no less often than semi-monthly, subject to increases at our discretion.
Additionally, Mr. Sharbutt is entitled to receive a bonus of up to $43,750 for
each calendar quarter in which we meet certain corporate milestones. Mr.
Sharbutt is also entitled to $5,000,000 in term life insurance coverage,
reimbursement for reasonable expenses, $1,250 per month as a vehicle and club
dues allowance, reimbursement for vehicle business mileage at the standard rate
set by the Internal Revenue Service, and incentive, retirement, profit-sharing,
life, medical, disability and other benefit plans as may be available to our
other executives with comparable responsibilities, subject to the terms of those
programs. If we terminate Mr. Sharbutt's employment other than for cause, a
change in control or for non-performance, all as defined in the employment
agreement, or due to his death or disability, we would be required to pay him
severance pay equal to one year's base salary. If Mr. Sharbutt should terminate
his
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employment agreement for cause, as defined in the employment agreement he will
be entitled to severance pay equal to the lessor of one year's base salary and
the unpaid balance of his salary that would be payable to him through September
30, 2002. If Mr. Sharbutt is terminated by us within one year after a change in
control or any reason other than cause, he will be entitled to severance pay
equal to the unpaid balance of the base salary which would have been payable to
him through September 30, 2002. Pursuant to the employment agreement, Mr.
Sharbutt has agreed not to compete with us during his employment and not to
compete with us within a defined area for a period of two years following
termination of his employment. The employment by CHR Solutions, Mr. Sharbutt's
investment in the securities of any public company where such investment does
not represent greater than five percent of the outstanding stock of that company
and Mr. Sharbutt's investment in any company or entity in which Mr. Sharbutt was
an owner or stockholder at the time of entering into the employment agreement
are exceptions to the non-competition covenant. Further Mr. Sharbutt has agreed
not to disclose any of our confidential information at any time during or
subsequent to his employment with us without our written consent.
Jerry W. Brantley. We are a party to an employment agreement with Jerry W.
Brantley effective October 1, 1999. This employment agreement has a four-year
term and provides that Mr. Brantley receive a minimum base salary of $175,000,
payable no less often than semi-monthly, subject to increases at our discretion.
Additionally, Mr. Brantley is entitled to receive a bonus of up to $30,000 for
each calendar quarter in which we meet certain corporate milestones. Mr.
Brantley is also entitled to reimbursement for reasonable expenses, $600 per
month as a vehicle allowance, reimbursement for vehicle business mileage at the
standard rate set by the Internal Revenue Service, and incentive, retirement,
profit-sharing, life, medical, disability and other benefit plans as may be
available to our other executives with comparable responsibilities, subject to
the terms of those programs. If we terminate Mr. Brantley's employment for other
than cause or nonperformance, or within one year after a change in control, all
as defined in the employment agreement, or due to his death or disability, we
would be required to pay him severance pay equal to one year's base salary. If
Mr. Brantley should terminate his employment for cause, as defined in the
employment agreement, he would be entitled to severance pay equal to the lesser
of one year's base salary or the unpaid balance of the base salary which would
be payable to him through September 30, 2003. If Mr. Brantley is terminated by
us for any reason other than cause within one year after a change in control, he
will be entitled to severance pay equal to the unpaid balance of the base salary
which would have been payable to him through September 30, 2003. Pursuant to the
employment agreement, Mr. Brantley has agreed not to compete with us during his
employment and not to compete with us within a defined area for a period of two
years following termination of employment. Mr. Brantley's investment in the
securities of any public company where such investment does not represent
greater than five percent of the outstanding stock of that company and Mr.
Brantley's investment in any company or entity in which Mr. Brantley was an
owner or stockholder at the time of entering into the employment agreement are
exceptions to the non-competition covenant. Further, Mr. Brantley has agreed not
to disclose any of our confidential information at any time during or subsequent
to his employment with us without our written consent.
Kendall W. Cowan. We are party to an employment agreement with Kendall
Cowan, effective December 1, 1999. This employment agreement has a five-year
term and provides that Mr. Cowan receive a minimum base salary of $150,000,
subject to increases at our discretion. Additionally, Mr. Cowan is entitled to
receive a bonus of up to $37,500 for each calendar quarter in which we meet
certain corporate milestones. Mr. Cowan is also entitled to reimbursement for
reasonable expenses, a $600 per month vehicle allowance, reimbursement for
vehicle business mileage at the standard mileage rate set by the Internal
Revenue Service, and incentive, retirement, profit-sharing, life, medical,
disability and other benefit plans as may be available to our other executives
with comparable responsibilities, subject to the terms of those programs.
Pursuant to the employment agreement, we will pay the costs of all continuing
professional education courses required for Mr. Cowan to maintain his certified
public accountant license, as well as all professional dues and licenses
attributable to his certified public accountant license. If we terminate Mr.
Cowan's employment for other than cause or non-performance, both as defined in
the employment agreement, or due to his death or disability, we would be
required to pay him severance pay equal to one year's base salary. If Mr. Cowan
should terminate his employment for cause, as defined in
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the employment agreement, he will be entitled to severance pay equal to the
lesser of one year's base salary and the unpaid balance of his salary which
would be payable to him through November 30, 2004. Mr. Cowan has agreed,
pursuant to the employment agreement, not to compete with us during employment
and for a period of two years following termination of his employment. Mr.
Cowan's investment in the securities of any publicly traded company where such
investment does not represent greater than five percent of the outstanding stock
of that company, and Mr. Cowan's investment in any company or entity in which
Mr. Cowan is an owner or stockholder at the time of entering into the employment
agreement are, however, exceptions to the non-competition covenant. Further, Mr.
Cowan has agreed not to disclose any of our confidential information at any time
during or subsequent to his employment with us without our written consent.
W. Don Stull. We are a party to an employment agreement with W. Don Stull,
dated October 29, 1998. This agreement has a three-year term. We are currently
negotiating an amended and restated employment agreement with Mr. Stull,
effective October 29, 1999 and continuing until October 31, 2001. This amended
employment agreement provides that Mr. Stull receive a minimum base salary of
$90,000, payable no less often than semi-monthly, subject to increases at our
discretion. Additionally, Mr. Stull is entitled to receive a bonus of up to
$15,000 for each calendar quarter in which we meet certain corporate milestones.
Mr. Stull also is entitled to reimbursement for reasonable expenses, $400 per
month as a vehicle allowance, reimbursement for vehicle business mileage at
eighteen cents per mile, and incentive, retirement, profit-sharing, life,
medical, disability and other benefit plans as may be available to our other
executives with comparable responsibilities, subject to the terms of those
programs. If we terminate Mr. Stull's employment for other than cause or
nonperformance, both as defined in the employment agreement, or due to his death
or disability, we would be required to pay him severance pay equal to one year's
base salary. If Mr. Stull should terminate his employment for cause, as defined
in the employment agreement, he will be entitled to severance pay equal to the
lesser of one year's base salary or the unpaid balance of the base salary that
would be payable to him through September 30, 2001. Pursuant to the employment
agreement, Mr. Stull has agreed not to compete with us during his employment and
not to compete with us within a defined area for a period of two years following
termination of his employment. Mr. Stull's investment in the securities of any
public company where such investment does not represent greater than five
percent of the outstanding stock of that company and Mr. Stull's investment in
any company or entity in which Mr. Stull was an owner or stockholder at the time
of entering into the employment agreement are exceptions to the non-competition
covenant. Further, Mr. Stull has agreed not to disclose any of our confidential
information at any time during or subsequent to his employment with us without
our written consent. The employment agreement also modifies the options granted
to Mr. Stull to convert those options into three series of options, each series
consisting of an option to purchase 48,500 shares, for an aggregate of 145,500
shares. The three series of options provide for exercise prices of $1.1296,
$1.2477 and $1.4238 per share, respectively. One-third of each option series is
fully vested and exercisable and another one-third of each series will vest on
each of October 29, 2000 and October 29, 2001. In addition, upon Mr. Stull's
death or disability he shall be vested in a fractional portion of the series
options that would have vested on the October 29 immediately following such
death or disability based on the number of months since the previous October 29.
If Mr. Stull should terminate his employment for cause, as defined in the
employment agreement, he shall be vested in the portion of the series options
that would have vested on the October 29 immediately following such termination.
If we terminate Mr. Stull's employment for other than cause or nonperformance,
both as defined in the employment agreement, all of the options in each series
not previously vested shall be immediately vested, and if we terminate his
employment for cause all of his previously unexercised options in each series,
regardless of whether or not previously vested, shall be forfeited. All vested
options not exercised by December 31, 2006, shall be canceled.
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PRINCIPAL STOCKHOLDERS
The following table presents information regarding the beneficial ownership
of common stock, as of November 30, 1999 and assumes (1) that each member of
Alamosa PCS, LLC has contributed its membership interest to Alamosa in exchange
for its proportional number of shares of Alamosa common stock immediately prior
to completion of this offering and (2) the proposed dissolution of Alamo IV, LLC
has occurred, with respect to:
- each person who, to our knowledge, is the beneficial owner of 5% or more
of the outstanding common stock;
- each of the directors;
- each of the executive officers; and
- all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF NUMBER OF PERCENTAGE OF
BENEFICIALLY OWNERSHIP PRIOR SHARES PURCHASED OWNERSHIP AFTER
NAME AND ADDRESS(1) OWNED(2) TO OFFERING IN THE OFFERING(3) OFFERINGS(4)
- ------------------- ---------------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS:
Rosewood Telecommunications, L.L.C. ..... 9,725,000 20.1% 16.4%
100 Crescent Court, Suite 1700
Dallas, TX 75201
Caroline Hunt Trust Estate(5)............ 9,725,000 20.1 16.4
South Plains Advanced Communications &
Electronics, Inc.(5)................... 8,652,085 17.8 14.6
Post Office Box 1379
Lubbock, TX 79408
West Texas PCS, LLC...................... 7,072,915 14.6 11.9
3702 Holland Avenue #2
Dallas, TX 75219
Taylor Telecommunications, Inc.(6)....... 5,100,000 10.5 8.6
9796 N. Interstate 20
Merkel, TX 79536
Tregan International Corp. .............. 3,000,000 6.2 5.1
2711 North Haskell Avenue
5th Floor LB 32
Dallas, TX 75204
Trevor Pearlman(7)....................... 3,000,000 6.2 5.1
Plateau Telecommunications,
Incorporated(5)........................ 3,000,000 6.2 5.1
7111 North Prince
Clovis, NM 88102-1947
XIT Telecommunication & Technology,
Inc.(5)................................ 2,750,000 5.7 4.6
Highway 87 North
Dalhart, TX 79022
LEC Development, Inc.(6)(8).............. 2,500,000 5.2 4.2
1807 Main Street
Tahoka, TX 79373
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF NUMBER OF PERCENTAGE OF
BENEFICIALLY OWNERSHIP PRIOR SHARES PURCHASED OWNERSHIP AFTER
NAME AND ADDRESS(1) OWNED(2) TO OFFERING IN THE OFFERING(3) OFFERINGS(4)
- ------------------- ---------------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Wes-Tex Telecommunications, Inc.(6)(9)... 2,500,000 5.2 4.2
1500 West Business 20
Stanton, TX 79782
DIRECTORS AND EXECUTIVE OFFICERS:
David E. Sharbutt(10).................... 1,177,461 2.4 2.0
Jerry W. Brantley(11).................... 242,500 * *
Kendall W. Cowan......................... -- -- --
W. Don Stull(12)......................... 146,147 * *
Michael R. Budagher(13).................. 7,072,915 14.6 11.9
Ray M. Clapp............................. -- -- --
Schuyler B. Marshall(14)................. 9,725,000 20.1 16.4
Scotty Hart(15).......................... 8,652,085 17.8 14.6
Thomas Hyde(16).......................... 5,100,000 10.5 8.6
Tom M. Phelps(17)........................ 3,000,000 6.2 5.1
Reagan W. Silber(18)..................... 3,000,000 6.2 5.1
Jimmy R. White(19)....................... 2,750,000 5.7 4.6
All Directors and Executive Officers as a
Group (12 persons)..................... 30,607,608 63.1 51.3
</TABLE>
- ---------------
* Less than one percent.
(1) Except as otherwise indicated below, the address for each executive officer
and director is 4403 Brownfield Hwy., Lubbock, Texas 79407.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Securities Exchange Act. A person is deemed to be the beneficial owner of
any shares of common stock if that person has or shares voting power or
investment power with respect to that common stock, or has the right to
acquire beneficial ownership at any time within 60 days of the date of the
table. As used herein, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares.
(3) As part of this sale of our common stock, the underwriters have agreed to
reserve a maximum of 10% of the shares of our common stock to be sold in
this offering for sale to our current stockholders at a price per share
equal to the public offering price less the underwriting discount.
(4) Assumes no exercise of the underwriters' over-allotment option and no
purchase in the offering of any additional shares by existing stockholders.
(5) Consists of shares beneficially owned by Rosewood Telecommunications,
L.L.C. The Caroline Hunt Trust estate is a beneficial owner of these shares
based on its 100% ownership of the Rosewood Corporation, which owns a 100%
interest in Rosewood Financial, Inc. Rosewood Financial, Inc. owns 84.4% of
Rosewood Telecommunications, L.L.C. The address for the Caroline Hunt Trust
Estate is the same as the address for Rosewood Telecommunications, L.L.C.
(6) Previous member of Alamo IV, LLC. Prior to its dissolution, Alamo IV LLC
held 56.3% of Alamosa PCS, LLC, and was comprised of these previous members
and Harlamo, LLC.
(7) Consists of shares beneficially owned by Tregan International Corp. Mr.
Pearlman is a director, officer and 50% stockholder of Tregan International
Corp. and is a beneficial owner of these shares. The address for Mr.
Pearlman is the same as the address for Tregan International Corp.
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(8) Wilton J. Payne is the general manager of LEC Development, Inc. and may be
considered the beneficial owner of these shares. Mr. Payne disclaims
beneficial ownership of these shares. The address for Mr. Payne is the same
as the address for LEC Development, Inc.
(9) J.R. Wilson is the general manager of Wes-Tex Telecommunications, Inc. and
may be considered the beneficial owner of these shares. Mr. Wilson
disclaims beneficial ownership of these shares. The address for Mr. Wilson
is the same as the address for Wes-Tex Telecommunications, Inc.
(10) Consists of 48,823 shares held in Mr. Sharbutt's 401(k) plan, options to
purchase 242,500 shares exercisable within 60 days, 593,200 shares
beneficially owned by Five S, Ltd. and 292,938 shares beneficially owned by
Harness, Ltd. Mr. Sharbutt is a limited partner of Five S, Ltd. and
President of Sharbutt Inc., the general partner of Five S Ltd., and is a
beneficial owner of the shares owned by Five S, Ltd. Five S, Ltd. is a
limited partner of Harness, Ltd. and Mr. Sharbutt is a director,
shareholder and the President of US Consultants, Inc., the general partner
of Harness, Ltd., and is a beneficial owner of the shares owned by Harness,
Ltd. The address for Five S Ltd. is 4606 91st Street, Lubbock, Texas 79424
and the address for Harness, Ltd. is P.O. Box 65700, 4747 S. Loop 289,
Lubbock, Texas 79464.
(11) Consists of options to purchase 242,500 shares exercisable within 60 days.
(12) Consists of 73,235 shares held individually by Mr. Stull, 24,412 shares
held in Mr. Stull's 401(k) plan and options to purchase 48,500 shares
exercisable within 60 days.
(13) Consists of shares beneficially owned by West Texas PCS, LLC. Mr. Budagher
is a Manager of West Texas PCS, LLC and is a beneficial owner of these
shares. Mr. Budagher's address is the same as the address for West Texas
PCS, LLC.
(14) Consists of shares beneficially owned by Rosewood Telecommunications,
L.L.C. Mr. Marshall is sole manager of Rosewood Telecommunications, L.L.C.
and is a beneficial owner of these shares. The address for Mr. Marshall is
the same as the address for Rosewood Telecommunications, L.L.C.
(15) Consists of shares beneficially owned by South Plains Advanced
Communications & Electronics, Inc. (SPACE). Mr. Hart is General Manager of
SPACE and may be considered the beneficial owner of these shares. Mr. Hart
disclaims beneficial ownership of these shares. Mr. Hart's address is the
same as the address for SPACE.
(16) Consists of shares beneficially owned by Taylor Telecommunications, Inc.
Mr. Hyde is a Manager of Taylor Telecommunications, Inc. and may be
considered the beneficial owner of these shares. Mr. Hyde disclaims
beneficial ownership of these shares. Mr. Hyde's address is the same as the
address for Taylor Telecommunications, Inc.
(17) Consists of shares beneficially owned by Plateau Telecommunications,
Incorporated. Mr. Phelps is the Executive Vice President of Plateau
Telecommunications, Incorporated and may be considered the beneficial owner
of these shares. Mr. Phelps disclaims beneficial ownership of these shares.
The address for Mr. Phelps is the same as the address for Plateau
Telecommunications, Incorporated.
(18) Consists of shares beneficially owned by Tregan International Corp. Mr.
Silber is a director, the President and 50% stockholder of Tregan
International Corp. and is a beneficial owner of these shares. Mr. Silber's
address is the same as the address for Tregan International Corp.
(19) Consists of shares beneficially owned by XIT Telecommunication &
Technology, Inc. Mr. White is the General Manager of XIT Telecommunication
& Technology, Inc. and may be considered the beneficial owner of these
shares. Mr. White disclaims beneficial ownership of these shares. Mr.
White's address is the same as the address for XIT Telecommunication &
Technology, Inc.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FORMATION OF ALAMOSA PCS, LLC
On July 24, 1998, Alamo IV LLC, Rosewood Telecommunications, L.L.C., Tregan
International Corp., West Texas PCS, LLC and Longmont PCS, LLC formed Alamosa
PCS, LLC. Those investors received membership interests in exchange for their
capital commitments. The investors amended the formation documents on December
11, 1998 to allow for a new member, Yellow Rock PCS, L.P., and to modify their
membership interests and capital commitments. Yellow Rock agreed to contribute a
total of $400,000 of capital in exchange for a 0.82% membership interest in us.
Pursuant to the agreement, Yellow Rock committed to a funding schedule beginning
with a payment of $123,711 on December 15, 1998 and ending on January 1, 2001.
The original investors retained the remaining 99.18% membership interest in us
in exchange for their capital commitments of $48,100,000. The members of Alamo
IV LLC plan to dissolve Alamo IV LLC and distribute Alamo IV's membership
interest in Alamosa PCS, LLC to Alamo IV's members.
The obligations to commit capital and the other regulations under the
formation documents will be eliminated when we reorganize from a limited
liability company to a holding company structure prior to closing of this
offering.
NORTEL CREDIT AGREEMENT GUARANTIES
In connection with our credit agreement with Nortel, each of our
stockholders pledged its ownership interest in Alamosa to Nortel to guaranty our
obligations under the credit agreement. Our stockholders were required to secure
their unfunded contributions with either a letter of credit or a marketable
securities pledge agreement. Each guaranty, pledge, letter of credit and
marketable securities pledge agreement will be terminated prior to the closing
of this offering.
AGREEMENTS WITH CHR SOLUTIONS
We have entered into a number of arrangements with CHR Solutions as
described in more detail below. David Sharbutt, our Chairman and Chief Executive
Officer, was at the time the agreements were executed the President, Chief
Executive Officer, a director and a shareholder of CHR Solutions. Mr. Sharbutt
is currently employed as a Senior Consultant by CHR Solutions.
- On July 27, 1998, we entered into an engineering service contract with
CHR Solutions that is to last through August 2001 for a maximum fee of
approximately $7.0 million, excluding taxes. We paid $902,243 for these
services during 1998.
- On November 20, 1998, we entered into a special service contract
effective as of September 20, 1998 with CHR Solutions, who provided us
with marketing and operations consulting services for a maximum amount of
$100,000, excluding taxes.
- As of April 6, 1999, we entered into a telecommunications service
agreement with Tech Telephone Company Limited Partnership, an affiliate
of CHR Solutions, to install and provide DS1 telecommunications lines
between Sprint PCS and our Lubbock operations and between our Lubbock
operations and our other markets. The original term of the agreement is
three years, with automatic renewal for successive 30-day terms until
terminated by either party. The total amount of fees paid through the end
of 1999 was approximately $395,000.
- As of April 9, 1999, we entered into a data communications services
contract with CHR Solutions to perform design and implementation services
for us in connection with our wide area network and local area networks
for a maximum fee of $262,040, excluding taxes. The agreement lasts until
the project is completed, unless either party terminates it earlier for
cause.
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- As of August 13, 1999, we entered into a distribution agreement with
TechTel Communications Corporation, an affiliate of CHR Solutions,
authorizing it to become a third party distributor of Sprint PCS products
and services for Alamosa in Lubbock. This is a standard agency agreement
identical with numerous other agreements between Alamosa and other third
party distributors, under which TechTel Communications Corporation is
obligated to purchase ten handsets from us every quarter for the term of
one year.
- As of October 8, 1999, we entered into a special service contract with
CHR Solutions to perform marketing and operations consulting services in
selected areas in Wisconsin for a maximum fee of $100,000, excluding
taxes. This agreement lasts until the project is completed, unless either
party terminates it earlier.
- As of October 8, 1999, we entered into a special service contract with
CHR Solutions to perform business planning and consulting services and a
feasibility study in selected areas of Wisconsin for a fixed fee of
$81,000. This agreement lasts until the project is completed, unless
either party terminates it earlier.
- As of October 8, 1999, we entered into a special service contract with
CHR Solutions to perform business planning and consulting services and a
feasibility study in selected areas of our territory for an estimated
probable cost of $200,000, excluding taxes. This agreement lasts until
the project is completed, unless either party terminates it earlier.
- As of October 8, 1999, we entered into a special service contract with
CHR Solutions to provide us with radio frequency "drive testing" to
predict the propagation characteristics of given areas in our territory
for an estimated probable cost of $62,085, excluding taxes. This
agreement lasts until the project is completed, unless either party
terminates it earlier.
AGREEMENT WITH AMERICAN TOWER CORPORATION
In August 1998, we entered into a master site development and lease
agreement with Specialty, a subsidiary of Specialty Teleconstructors, Inc. that
has since merged with American Tower Corporation. Pursuant to the agreement,
Specialty arranges for collocation of our equipment, or constructs new
facilities, in areas we identify for build-out. The initial term of this lease
is for five years, with automatic renewal for three additional terms of five
years each. The agreement provides for monthly payments aggregating to
approximately $5 million a year, subject to an annual adjustment based on the
Consumer Price Index. Michael Budagher, who is one of our directors and a
manager of West Texas PCS, LLC, one of our stockholders, was, at the time the
agreement was entered into the Vice Chairman, Chief Operating Officer and a
director of Specialty Teleconstructors, Inc., and the Chief Executive Officer,
President and sole director of Specialty. Michael Budagher is also a member and
the General Manager of the Budagher Family LLC, which was, at the time the
agreement was entered into, a stockholder of Specialty Teleconstructors, Inc.
Mr. Budagher no longer holds any of these positions at Specialty or Specialty
Teleconstructors, Inc. and the Budagher Family LLC is no longer a stockholder of
Specialty Teleconstructors, Inc. Additionally, Jeff Howard, who was one of our
directors at the time the agreement was entered into, is a manager of Longmont
PCS, LLC, one of our stockholders, is a stockholder of Specialty
Teleconstructors, Inc. and acts as a Vice President of American Tower
Corporation though he has not been designated as an officer by American Tower
Corporation's board of directors and has no management authority.
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SALE OF COMMON STOCK IN THIS OFFERING TO CURRENT STOCKHOLDERS
As part of this sale of our common stock, the underwriters have agreed to
reserve a maximum of 10% of the shares of our common stock to be sold in this
offering for sale to our current stockholders at a price per share equal to the
public offering price less the underwriting discount. The underwriters will not
be entitled to any discount or commission on these shares and the proceeds to us
will be the same as if the shares were sold to the general public. However, the
number of shares of common stock available for sale to the general public will
be reduced to the extent of sales of shares to our current stockholders.
OTHER RELATED PARTY TRANSACTIONS
In November 1998, we entered into a lease agreement to lease space for
telephone switching equipment in Albuquerque with SASR Limited Partnership, 50%
owned by Michael Budagher, one of our directors and a manager of West Texas PCS,
LLC, one of our stockholders. The lease has a term of five years commencing
January 1, 1999, with two optional five year terms. The lease provides for
monthly payments aggregating to $18,720 a year, as well as a pro rata portion of
real estate taxes on the property, subject to adjustment.
In connection with our distribution and sales of Sprint PCS wireless
communications equipment, on December 28, 1998, we entered into a build-to-suit
lease agreement for a retail store in Lubbock with Lubbock HLH, Ltd.,
principally owned by Scotty Hart, one of our directors and the General Manager
of South Plains Advanced Communications & Electronics, Inc. South Plains is one
of our stockholders. This lease, as amended, has a term of 15 years commencing
on July 1, 1999 and provides for monthly payments aggregating to approximately
$110,000 a year, subject to adjustment based on the Consumer Price Index on the
first day of the sixth lease year and on the first day of the eleventh lease
year.
On April 23, 1999, we entered into a note with our Chief Operating Officer,
Jerry W. Brantley, evidencing a loan to Mr. Brantley in the amount of $100,000.
This loan was made pursuant to Mr. Brantley's employment agreement, which
provides that Mr. Brantley is entitled to receive this loan upon his relocation
from the San Antonio, Texas vicinity. The loan matures in April 2014 and accrues
interest at an annual rate of 7.75%. Principal and interest is payable in
monthly installments of $1,052.91 each beginning April 23, 2000. As of December
31, 1999, the entire $100,000 was still outstanding on the loan.
We believe that the terms of each of the transactions described above,
taken as a whole, were no less favorable than we could have obtained from
unaffiliated third parties.
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THE REORGANIZATION
We are currently comprised of Alamosa PCS, LLC, a Texas limited liability
company, and its 99% owned subsidiary, Alamosa Wisconsin Limited Partnership, a
Wisconsin limited partnership. We expect that Chibardun Telephone Cooperative,
Inc., a rural telephone company in Wisconsin, or one of its affiliates, will own
the remaining 1% of Alamosa Wisconsin Limited Partnership. Immediately prior to
the closing of this offering, we will reorganize the business into the holding
company structure outlined below. In connection with the reorganization, the
members of Alamosa PCS, LLC will receive shares of common stock of Alamosa PCS
Holdings, Inc. in the same proportion to their membership interests in Alamosa
PCS, LLC. Unless otherwise indicated, information throughout this prospectus
assumes that the reorganization of our business from a limited liability company
into a holding company structure has already occurred.
STRUCTURE OF ALAMOSA AS OF THE CLOSING OF THIS OFFERING
[GRAPHIC SHOWING OUR PROPOSED HOLDING COMPANY AND FINANCING STRUCTURE]
Alamosa PCS Holdings, Inc. is the legal entity that is selling its common
stock in this offering and that is proposing to sell the senior discount notes
in the notes offering. Alamosa PCS, Inc. is the legal entity that is the
borrower under the Nortel financing.
Alamosa PCS, Inc. will be a wholly-owned subsidiary of Alamosa PCS
Holdings, Inc. Alamosa PCS, Inc. will hold a 99% limited partnership interest in
Texas Telecommunications, LP. Alamosa Delaware GP, LLC, a wholly-owned
subsidiary of Alamosa PCS, Inc., will hold a 1% general partnership interest in
Texas Telecommunications, L.P. We expect that Alamosa PCS, Inc. will hold a 98%
limited partnership interest in Alamosa Wisconsin Limited Partnership, Chibardun
will hold a 1% limited partnership interest and Alamosa Wisconsin GP, LLC will
hold a 1% general partnership interest.
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REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY
The Federal Communications Commission can have a substantial impact upon
entities that manage wireless personal communications services systems and/or
provide wireless personal communications services because the Federal
Communications Commission regulates the licensing, construction, operation,
acquisition and interconnection arrangements of wireless telecommunications
systems in the United States.
The Federal Communications Commission has promulgated, and is in the
process of promulgating, a series of rules, regulations and policies to, among
other things:
- grant or deny licenses for wireless personal communications services
frequencies;
- grant or deny wireless personal communications services license renewals;
- rule on assignments and/or transfers of control of wireless personal
communications services licenses;
- govern the interconnection of wireless personal communications services
networks with other wireless and wireline service providers;
- establish access and universal service funding provisions;
- impose fines and forfeitures for violations of any of the Federal
Communications Commission's rules; and
- regulate the technical standards of wireless personal communications
services networks.
The Federal Communications Commission currently prohibits a single entity
from having a combined attributable interest, of 20% or greater interest in any
license, in broadband wireless personal communications services, cellular and
specialized mobile radio, commonly referred to as SMR, licenses totaling more
than 45 MHz in any geographic area.
TRANSFERS AND ASSIGNMENTS OF WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSES
The Federal Communications Commission must give prior approval to the
assignment of, or transfers involving, substantial changes in ownership or
control of a wireless personal communications services license. This means that
our stockholders and we will receive advance notice of any and all transactions
involved in transferring control of Sprint PCS or the assignment of some or all
of the wireless personal communications services licenses held by Sprint PCS.
The Federal Communications Commission proceedings afford our stockholders and us
an opportunity to evaluate proposed transactions well in advance of closing, and
to take actions necessary to protect our interests. Non-controlling interests in
an entity that holds a wireless personal communications services license or
operates wireless personal communications services networks generally may be
bought or sold without prior Federal Communications Commission approval. In
addition, a recent Federal Communications Commission order requires only post-
consummation notification of pro forma assignments or transfers of control.
CONDITIONS OF WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSES
All wireless personal communications services licenses are granted for ten
year terms conditioned upon timely compliance with the Federal Communications
Commission's build-out requirements. Pursuant to the Federal Communications
Commission's build-out requirements, all 30 MHz broadband wireless personal
communications services licensees must construct facilities that offer coverage
to one-third of the population within five years and to two-thirds of the
population within ten years, and all 10 MHz broadband wireless personal
communications services licensees must construct facilities that offer coverage
to at least one-quarter of the population within five years or make a showing of
"substantial service" within that five year period. If the build-out
requirements are not met, wireless personal communications services licenses
could be forfeited. The Federal Communications Commission also requires
licensees to maintain control over their licenses. Our affiliation agreements
with Sprint PCS reflect a management agreement that the parties believe meets
the Federal Communications Commission requirements for licensee control of
licensed spectrum. If the Federal Communications Commission were to determine
that
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our affiliation agreements with Sprint PCS need to be modified to increase the
level of licensee control, we have agreed with Sprint PCS to use our best
efforts to modify the agreements necessary to cause the agreements to comply
with applicable law and to preserve to the extent possible the economic
arrangements set forth in the agreements. If the agreements cannot be modified,
the agreements may be terminated pursuant to their terms. In addition to
revoking the licenses, the Federal Communications Commission could impose
monetary penalties on us.
WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSE RENEWAL
Wireless personal communications services licensees can renew their
licenses for additional ten year terms. Wireless personal communications
services renewal applications are not subject to auctions. However, under the
Federal Communications Commission's rules, third parties may oppose renewal
applications and/or file competing applications. If one or more competing
applications are filed, a renewal application will be subject to a comparative
renewal hearing. The Federal Communications Commission's rules afford wireless
personal communications services renewal applicants involved in comparative
renewal hearings with a "renewal expectancy." The renewal expectancy is the most
important comparative factor in a comparative renewal hearing and is applicable
if the wireless personal communications services renewal applicant has:
- provided "substantial service" during its license term; and
- substantially complied with all applicable laws and Federal
Communications Commission rules and policies.
The Federal Communications Commission's rules define "substantial service"
in this context as service that is sound, favorable and substantially above the
level of mediocre service that might minimally warrant renewal. The Federal
Communications Commission's renewal expectancy and procedures make it very
likely that Sprint PCS will retain the wireless personal communications services
licenses managed by us for the foreseeable future.
INTERCONNECTION
The Federal Communications Commission has the authority to order
interconnection between commercial mobile radio services, commonly referred to
as CMRS, providers and any other common carrier. The Federal Communications
Commission has ordered local exchange carriers to provide reciprocal
compensation to commercial mobile radio services, providers for the termination
of traffic. Using these new rules, we will negotiate interconnection agreements
for the Sprint PCS network in our market area with all of the major regional
Bell operating companies, GTE and several smaller independent local exchange
carriers. Interconnection agreements are negotiated on a state-wide basis. If an
agreement cannot be reached, parties to interconnection negotiations can submit
outstanding disputes to state authorities for arbitration. Negotiated
interconnection agreements are subject to state approval. The Federal
Communications Commission rules and rulings, as well as the state arbitration
proceedings, will directly impact the nature and cost of the facilities
necessary for interconnection of the Sprint PCS systems with local, national and
international telecommunications networks. They will also determine the nature
and amount of revenues we and Sprint PCS can receive for terminating calls
originating on the networks of local exchange and other telecommunications
carriers.
OTHER FEDERAL COMMUNICATIONS COMMISSION REQUIREMENTS
In June 1996, the Federal Communications Commission adopted rules that
prohibit broadband wireless personal communications services providers from
unreasonably restricting or disallowing resale of their services or unreasonably
discriminating against resellers. Resale obligations will automatically expire
on November 24, 2002. The Federal Communications Commission is also considering
whether wireless providers should be required to offer unbundled communications
capacity to resellers who intend to operate their own switching facilities.
These existing resale requirements and their expiration may somewhat affect the
number of resellers competing with us and Sprint PCS in various markets.
However, to date, wireless
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resellers have not significantly impacted wireless service providers. Any losses
in retail customers have been offset, in major part, by increases in wireless
customers, traffic and wholesale revenues.
The Federal Communications Commission also adopted rules in June 1996 that
require local exchange and most commercial mobile radio services providers, to
program their networks to allow customers to change service providers without
changing telephone numbers, which is referred to as service provider number
portability. The Federal Communications Commission requires most commercial
mobile radio services providers to implement wireless service provider number
portability where requested in the 100 largest metropolitan areas in the United
States by November 24, 2002. Most commercial mobile radio services providers are
required to implement nationwide roaming by November 24, 2002 as well. The
Federal Communications Commission currently requires most commercial mobile
radio services providers to be able to deliver calls from their networks to
ported numbers anywhere in the country, and to contribute to the Local Number
Portability Fund. Implementation of wireless service provider number portability
will require wireless personal communications services providers like us and
Sprint PCS to purchase more expensive switches and switch upgrades. However, it
will also enable existing cellular customers to change to wireless personal
communications services without losing their existing wireless telephone
numbers, which should make it easier for wireless personal communications
services providers to market their services to existing cellular users.
The Federal Communications Commission has adopted rules permitting
broadband wireless personal communications services and other commercial mobile
radio services providers to provide wireless local loop and other fixed services
that would directly compete with the wireline services of local exchange
carriers. This creates new markets and revenue opportunities for us, Sprint PCS
and other wireless providers, and may do so increasingly in future years. In
June 1996, the Federal Communications Commission adopted rules requiring
broadband wireless personal communications services and other commercial mobile
radio services providers to implement enhanced emergency 911 capabilities within
18 months after the effective date of the Federal Communications Commission's
rules. In December 1997, the Federal Communications Commission revised these
rules to extend the compliance deadline for phase 1 until October 1, 1998 and
for phase II until October 1, 2001 for digital commercial mobile radio services
providers to ensure access for customers using devices for the hearing-impaired.
The Federal Communications Commission recently extended the phase 1 compliance
deadline to January 1, 1999. Further waivers of the enhanced emergency 911
capability requirements may be obtained by individual service providers by
filing a waiver request. The Federal Communications Commission's waivers and
extensions are enabling us, Sprint PCS and other commercial mobile radio
services industry members to delay emergency 911 implementation until the
required equipment becomes more functional and less expensive. However, at a
more reasonable future cost, emergency 911 services may afford wireless carriers
substantial and attractive new service and marketing opportunities.
On June 10, 1999, the Federal Communications Commission initiated a
regulatory proceeding seeking comment from the public on a number of issues
related to competitive access to multiple-tenant buildings, including the
following:
- the Federal Communications Commission's tentative conclusion that the
Communications Act of 1934, as amended, requires utilities to permit
telecommunications service providers access to rooftop and other
rights-of-way in multiple tenant buildings under just, reasonable and
nondiscriminatory rates, terms and conditions; and
- whether building owners that make access available to a
telecommunications service providers should be required to make access
available to all other telecommunications service providers on a
nondiscriminatory basis, and whether the Federal Communications
Commission has the authority to impose such a requirement.
This proceeding could affect the availability and pricing of sites for our
antennae and those of our competitors.
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COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT
The Communications Assistance for Law Enforcement Act, or CALEA, enacted in
1994 requires wireless personal communications services and other
telecommunications service providers to meet capability and capacity
requirements needed by federal, state and local law enforcement to preserve
their electronic surveillance capabilities. Wireless personal communications
services providers must comply with the current industry CALEA capability
standard, known as J-STD-025, by June 30, 2000, and with recently adopted
additions by September 30, 2001. Wireless personal communications services
providers must comply with the CALEA capacity requirements by March 12, 2001. At
present, most wireless personal communications services providers are ineligible
for federal reimbursement for the software and hardware upgrades necessary to
comply with the CALEA capability and capacity requirements, but several bills
pending in Congress may expand reimbursement rights if they are enacted. In
addition, the Federal Bureau of Investigation has been discussing with the
industry options for reducing or waiving CALEA compliance requirements in
geographic areas with minimal or nonexistent electronic surveillance needs.
In addition, the Federal Communications Commission is considering petitions
from numerous parties to establish and implement technical compliance standards
pursuant to CALEA requirements. In sum, CALEA capability and capacity
requirements are likely to impose some additional switching and network costs
upon us, Sprint PCS and other wireless entities. However, it is possible that
some of these costs will be reduced or delayed if current law enforcement or
legislative initiatives are adopted and implemented during 2000 or thereafter.
OTHER FEDERAL REGULATIONS
We must bear the expense of compliance with Federal Communications
Commission and Federal Aviation Administration regulations regarding the siting,
lighting and construction of transmitter towers and antennas. In addition,
Federal Communications Commission environmental regulations may cause some of
our base station locations to become subject to the additional expense of
regulation under the National Environmental Policy Act. The Federal
Communications Commission is required to implement the Act by requiring service
providers to meet land use and radio frequency standards.
REVIEW OF UNIVERSAL SERVICE REQUIREMENTS
The Federal Communications Commission and the states are required to
establish a "universal service" program to ensure that affordable, quality
telecommunications services are available to all Americans. Sprint PCS is
required to contribute to the federal universal service program as well as
existing state programs. The Federal Communications Commission has determined
that the Sprint PCS's "contribution" to the federal universal service program is
a variable percentage of "end-user telecommunications revenues." Although many
states are likely to adopt a similar assessment methodology, the states are free
to calculate telecommunications service provider contributions in any manner
they choose as long as the process is not inconsistent with the Federal
Communications Commission's rules. At the present time it is not possible to
predict the extent of the Sprint PCS total federal and state universal service
assessments or its ability to recover from the universal service fund. However,
some wireless entities are seeking state commission designation as "eligible
telecommunications carriers," enabling them to receive federal and state
universal service support, and are preparing to compete aggressively with
wireline telephone companies for universal service revenue. Because we serve
substantial rural areas, we are likely to obtain revenues in the future from
federal and state universal service support funds that are much greater than the
contributions we will pay.
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PARTITIONING; DISAGGREGATION
The Federal Communications Commission has modified its rules to allow
broadband wireless personal communications services licensees to partition their
market areas and/or to disaggregate their assigned spectrum and to transfer
partial market areas or spectrum assignments to eligible third parties. These
rules may enable us to purchase wireless personal communications services
spectrum from Sprint PCS and other wireless personal communications services
licensees as a supplement or alternative to the existing management
arrangements.
WIRELESS FACILITIES SITING
States and localities are not permitted to regulate the placement of
wireless facilities so as to "prohibit" the provision of wireless services or to
"discriminate" among providers of those services. In addition, so long as a
wireless system complies with the Federal Communications Commission's rules,
states and localities are prohibited from using radio frequency health effects
as a basis to regulate the placement, construction or operation of wireless
facilities. These rules are designed to make it possible for us, Sprint PCS and
other wireless entities to acquire necessary tower sites in the face of local
zoning opposition and delays. The Federal Communications Commission is
considering numerous requests for preemption of local actions affecting wireless
facilities siting.
EQUAL ACCESS
Wireless providers are not required to provide equal access to common
service providers for toll services. This enables us and Sprint PCS to generate
additional revenues by reselling the toll services of Sprint PCS and other
interexchange carriers from whom we can obtain favorable volume discounts.
However, the FCC is authorized to require unblocked access to toll service
providers subject to certain conditions.
STATE REGULATION OF WIRELESS SERVICE
Section 332 of the Communications Act preempts states from regulating the
rates and entry of commercial mobile radio service providers. Section 332 does
not prohibit a state from regulating the other terms and conditions of
commercial mobile services, including consumer billing information and
practices, billing disputes and other consumer protection matters. However,
states may petition the Federal Communications Commission to regulate those
providers and the Federal Communications Commission may grant that petition if
the state demonstrates that:
- market conditions fail to protect subscribers from unjust and
unreasonable rates or rates that are unjustly or unreasonably
discriminatory; or
- when commercial mobile radio service is a replacement for landline
telephone service within the state.
To date, the Federal Communications Commission has granted no such petition. To
the extent we provide fixed wireless service, we may be subject to additional
state regulation. These standards and rulings have prevented states from
delaying the entry of wireless personal communications services and other
wireless carriers into their jurisdictions via certification and similar
requirements, and from delaying or inhibiting aggressive or flexible wireless
price competition after entry.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The following summarizes all of the material terms and provisions of our
capital stock as they are contemplated to be as of the closing of this offering.
We have 300,000,000 shares of authorized capital stock, including 290,000,000
shares of common stock, par value $0.01 per share and 10,000,000 shares of
preferred stock, par value $0.01 per share. As of December 10, 1999, assuming
the reorganization of our business form into a holding company structure, and
the simultaneous exchange of limited liability company membership interests into
shares of common stock, there were 48,500,000 shares of common stock and no
shares of preferred stock issued and outstanding. As of that date, there would
have been approximately 29 holders of record of the outstanding shares of common
stock.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders and do not have any
cumulative rights. Subject to the rights of the holders of any series of
preferred stock, holders of common stock are entitled to receive ratably those
dividends as may be declared by the board of directors out of legally available
funds. However, our credit agreement with Nortel prohibits the payment of
dividends of common stock. Holders of shares of common stock have no preemptive,
conversion, redemption, subscription or similar rights. All shares of common
stock, when validly issued and fully paid, will be non-assessable. If we
liquidate, dissolve or wind up, the holders of shares of common stock are
entitled to share ratably in the assets which are legally available for
distribution, if any, remaining after the payment or provision for the payment
of all debts and other liabilities and the payment and setting aside for payment
of any preferential amount due to the holders of shares of any series of
preferred stock.
PREFERRED STOCK
Under our certificate of incorporation, the board of directors is
authorized, subject to limitations prescribed by law, without further
stockholder approval, from time to time to issue up to an aggregate of
10,000,000 shares of preferred stock. The preferred stock may be issued in one
or more series. Each series may have different rights, preferences and
designations and qualifications, limitations and restrictions that may be
established by our board of directors without approval from the stockholders.
These rights, designations and preferences include:
- number of shares to be issued;
- dividend rights;
- dividend rates;
- conversion rights;
- voting rights;
- liquidation preferences; and
- terms of redemption.
If our board of directors decides to issue any preferred stock, it may
discourage or make more difficult a merger, tender offer, business combination
or proxy contest, assumption of control by a holder of a large block of our
securities or the removal of incumbent management, even if these events were
favorable to the interests of stockholders. The board of directors, without
stockholder approval, may issue preferred stock with voting and conversion
rights and dividend and liquidation preferences which may adversely affect the
holders of common stock.
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The Series A preferred stock described under "Stockholder Rights Plan"
below is a series of preferred stock that will be authorized by our board of
directors in connection with a stockholder rights plan.
WARRANTS
As additional consideration to Nortel for its financing commitment, we are
required to issue to Nortel warrants for 2% of our total equity as of the
closing date, on a fully-diluted basis. The warrants will spring into existence
and be exercisable by Nortel on the second anniversary of the closing date,
unless, among other options, we contribute $75.0 million of equity to Alamosa
PCS, Inc. and prepay indebtedness outstanding under the Nortel facility. We
intend to use a portion of the proceeds from our offering of senior discount
notes to prepay enough of the Nortel financing to prevent the exercise of the
warrants. However, we cannot assure you that we will choose to complete our
notes offering or that we will prepay any portion of the Nortel financing. Other
options to terminate the warrants include:
- the assignment of a portion of the loans by Nortel to unrelated lenders;
- a minimum combination of loan prepayments and assignment of the loans; or
- a maximum ratio of senior debt to total capitalization as of the second
anniversary of the closing date and for the two consecutive calendar
quarters immediately prior to the second anniversary of the closing date.
However, if we do not complete an additional offering of equity or debt, we do
not anticipate that the warrants will be terminated. The exercise price for the
warrants will be the price paid for our common stock in this offering. Nortel
may not transfer any of its rights with respect to the warrants before the first
anniversary of the closing date, and any warrants transferred before the second
anniversary of the closing date will be subject to the provisions preventing
exercise of the warrants. In no event may the warrants be exercised after the
eighth anniversary of the closing date.
Nortel is entitled to multiple demand registration rights and unlimited
piggyback registration rights of the common stock warrants.
DELAWARE LAW
The acquisition of Alamosa by means of a tender offer, a proxy contest or
otherwise and the removal of incumbent officers and directors may be more
difficult due to provisions of Delaware law. These provisions are expected to
discourage types of coercive takeover practices and inadequate takeover bids and
to encourage persons seeking to acquire control of Alamosa to first negotiate
with us. We believe the increased protection of our potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to acquire
or restructure Alamosa outweighs the disadvantages of discouraging these
proposals because, among other things, negotiation of these proposals could
result in an improvement of the terms of any of these proposals.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date that the person became an interested stockholder, unless:
- prior to the date that the person became an interested stockholder, the
transaction or business combination that resulted in the person becoming
an interested stockholder is approved by the board of directors;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at
least 85% of our outstanding voting stock; or
- on or after that date, the business combination is approved by our board
of directors and by the affirmative vote of at least 66 2/3% of our
outstanding voting stock that is not owned by the interested stockholder.
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Generally, a "business combination" includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the stockholder. Subject
to certain exceptions, an "interested stockholder" is a person who, together
with that person's affiliates and associates, owns or within the previous three
years, did own 15% or more of our voting stock.
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS THAT MAY PREVENT
TAKEOVERS
Our certificate of incorporation contains provisions that may delay, defer
or prevent a change in control of Alamosa and make removal of our management
more difficult.
Our certificate of incorporation provides for the division of the board of
directors into three classes, as nearly equal in size as possible, with each
class beginning its three year term in a different year. Our certificate of
incorporation also provides that only the board of directors may fix the number
of directors. Our bylaws provide that a stockholder may nominate directors only
if the stockholder delivers written notice to us not less than 45 days or more
than 75 days before the first anniversary of the date on which we first mailed
our proxy materials for the preceding year's annual meeting. If the date of the
annual meeting is advanced more than 30 days before or delayed more than 30 days
after the anniversary of the preceding year's annual meeting, then we must
receive the stockholder's notice not after the later of the ninetieth day before
the annual meeting or the tenth day after the day the public announcement of the
date of the annual meeting is made.
Our certificate of incorporation provides that any newly created
directorship resulting from an increase in the number of directors or a vacancy
on the board of directors may be filled only by vote of a majority of the
remaining directors then in office, even if less than a quorum. Under no
circumstances will our stockholders fill any newly created directorships.
Directors elected to fill a vacancy or by reason of an increase in the number of
directors will hold office until the annual meeting of stockholders at which the
term of office of the class to which they have been elected expires. Directors
may be removed from office only for cause and only by the affirmative vote of
80% of the then outstanding shares of stock entitled to vote on the matter.
Our certificate of incorporation provides that any action required or
permitted to be taken by our stockholders may be taken only at a duly called
annual or special meeting of the stockholders, and may not be taken by written
consent of the stockholders. Special meetings may be called only by the Chairman
of the board of directors, if there is one, the President, the board of
directors or the holders of not less than a majority of the then outstanding
shares entitled to vote generally in an election of directors. These provisions
could have the effect of delaying until the next annual stockholders meeting
stockholder actions that are favored by the holders of a majority of the
outstanding voting securities. These provisions may also discourage another
person or entity from making an offer to stockholders for the common stock. This
is because the person or entity making the offer, even if it acquired a majority
of our outstanding voting securities, would be unable to call a special meeting
of the stockholders and would further be unable in most situations to obtain
unanimous written consent of the stockholders. As a result, any meeting as to
matters they endorse, including the election of new directors or the approval of
a merger, would have to wait for the next duly called stockholders meeting.
Our certificate of incorporation also contains fair price provisions
designed to provide safeguards for stockholders when a stockholder owning 20% or
more of our voting stock, referred to as an interested stockholder, or that
interested stockholder's affiliates or associates, attempts to effect a business
combination with Alamosa.
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Events that are deemed business combinations include:
- any merger or consolidation of Alamosa involving an interested
stockholder;
- specified dispositions of assets, cash flow or earning power of Alamosa
to an interested stockholder, any issuance of our securities to an
interested stockholder or our entering into loans or other arrangements
involving an interested stockholder, in each case, meeting specified
threshold amounts;
- the adoption of any plan of liquidation or dissolution of Alamosa; and
- any issuance or reclassification of our securities having the effect of
increasing the proportionate share of ownership of an interested
stockholder.
Regarding the 20% threshold for the definition of interested stockholder,
persons who were stockholders in our company before the date of this sale of our
common stock may enter into voting agreements with each other, without being
deemed the beneficial owner of securities owned by the other parties to the
voting agreements, only if the voting agreements:
- were approved by our board of directors prior to the time they were
entered into;
- do not govern the voting of our common stock in matters other than the
election of members of our board of directors; and
- do not govern the voting of our common stock held by persons other than
persons who were stockholders in our company before the date of this sale
of our common stock.
In general, a business combination between Alamosa and an interested stockholder
must be approved by the affirmative vote of the holders of 80% of our
outstanding voting stock, excluding voting stock owned by such interested
stockholder, unless the transaction is approved by a majority of the members of
the board of directors who are not interested stockholders and who are not
affiliated with the interested stockholder. Minimum price and form consideration
requirements must also be satisfied. See also "-- Delaware Law."
Delaware Law provides that the affirmative vote of a majority of the shares
entitled to vote on any matter is required to amend a corporation's certificate
of incorporation or bylaws, unless the corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage. Our
certificate of incorporation requires the affirmative vote of the holders of at
least 80% of the outstanding voting stock to amend or repeal any of the
provisions of the certificate of incorporation or bylaws described above. Except
as otherwise provided by law, holders of our common stock are not entitled to
vote on any amendment to our certificate of incorporation that changes the
powers, preferences, rights or other terms of an outstanding series of our
preferred stock, if the holders of the affected series of preferred stock are
entitled to vote on the proposed amendment. The bylaws may be amended or
repealed by the board of directors, except if the bylaw provisions affect
provisions of the certificate of incorporation or bylaws described above, then
the affirmative vote of the holders of at least 80% of the outstanding voting
stock is required. The 80% stockholder vote would be in addition to any separate
vote that each class of preferred stock is entitled to that might in the future
be required in accordance with the terms of any preferred stock that might be
outstanding at the time any amendments are submitted to stockholders.
The foregoing provisions, together with the ability of the board of
directors to issue preferred stock without further stockholder action, may delay
or frustrate the removal of incumbent directors or the completion of
transactions that would be beneficial, in the short term, to our stockholders.
The provisions may also discourage or make more difficult a merger, tender
offer, other business combination or proxy contest, the assumption of control by
a holder of a large block of our securities or the removal of incumbent
management, even if these events would be favorable to the interests of our
stockholders.
The certificate of incorporation requires us to indemnify our directors and
officers to the fullest extent permitted by law. In addition, as permitted by
Delaware law, the certificate of incorporation provides that no director will be
liable to us or our stockholders for monetary damages for breach of certain
fiduciary
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duties as a director. The effect of this provision is to restrict our rights and
the rights of our stockholders in derivative suits to recover monetary damages
against a director for breach of certain fiduciary duties as a director, except
that a director will be personally liable for:
- acts or omissions not in good faith for which involve intentional
misconduct or a knowing violation of law;
- the payment of dividends or the redemption or purchase of stock in
violation of Delaware law;
- any breach of the duty of loyalty to Alamosa or our stockholders; or
- any transaction from which the director derived an improper personal
benefit.
CERTAIN PROVISIONS OF THE SPRINT PCS AGREEMENTS
Pursuant to our affiliation agreements with the Sprint PCS, under specific
circumstances and without further stockholder approval, Sprint PCS may purchase
our operating assets or capital stock for 72% or 80% of the "entire business
value" of Alamosa, which includes the value of the spectrum licenses, business
operations and other assets more fully described in "Our Affiliation Agreements
with Sprint PCS -- The Management Agreement -- Determination of Entire Business
Value." In addition, Sprint PCS must approve any change of control of our
ownership and consent to any assignment of our affiliation agreements with
Sprint PCS. Sprint PCS has a right of first refusal if we decide to sell our
operating assets to a third party. We are also subject to a number of
restrictions on the transfer of our business including a prohibition on the sale
of Alamosa or our operating assets to competitors of Sprint or Sprint PCS. These
restrictions and other restrictions in our affiliation agreements with Sprint
PCS may limit our ability to sell the business and may have a substantial
anti-takeover effect.
STOCKHOLDER RIGHTS PLAN
Rights and rights certificates
Our board of directors currently expects to adopt a stockholder rights plan
at or prior to the closing of this offering. On the date the stockholder rights
plan is adopted, we will declare a dividend of one right for each share of
common stock outstanding. A right will also attach to each share of common stock
issued at the closing of the offering and each share of common stock issued
subsequent to the closing of the offering. Each right, when exercisable,
entitles the holder to purchase from us one one-thousandth of a share of Series
A Preferred Stock at a purchase price of $ per one one-thousandth of a
share, subject to adjustment. Each fractional share of the Series A Preferred
Stock will essentially be the economic equivalent of one share of common stock.
A stockholder rights plan is designed to deter coercive takeover tactics
and to otherwise encourage third parties interested in acquiring us to negotiate
with our board of directors. The stockholder rights plan achieves these goals by
significantly diluting the ownership interest of a person who acquires a
specified percentage of common stock.
Initially, the rights will be attached to all certificates representing
outstanding shares of common stock and will be transferred with and only with
such certificates. The rights will separate from the common stock and become
exercisable upon the earlier to occur of:
- the close of business on the tenth business day after the public
announcement that a person or group of persons has acquired 20% or more
of our outstanding common stock, except in connection with an offer
approved by our board of directors; or
- the close of business on the tenth business day after the commencement
of, or announcement of an intention to commence a tender offer or
exchange offer that would result in a person or group of persons
acquiring 20% or more of our outstanding common stock.
A person or group of persons will be considered to have acquired beneficial
ownership of common stock if they have the power to vote or direct the voting of
the common stock. Stockholders in existence
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prior to the date of this sale of our common stock may enter into voting
agreements with each other only, at any time, without being deemed the
beneficial owner of securities owned by the other parties to the voting
agreements, if the voting agreements:
- were approved by our board of directors prior to the time they were
entered into;
- do not govern the voting of our common stock regarding matters other than
the election of members of our board of directors; and
- do not govern the voting of our common stock held by persons other than
stockholders in existence prior to the date of this sale of our common
stock.
Expiration of rights
The rights will expire at the close of business on the tenth anniversary of
the date of issuance, unless we redeem or exchange the rights before that date
or amend the stockholder rights plan to extend the term of the rights.
Flip-in right
If any person or group of persons acquires 20% or more of our outstanding
common stock, each holder of a right, other than the acquiring person, will have
the right to receive the number of shares of common stock, or in certain
circumstances, cash, property or other securities of Alamosa, having a value
equal to two times the purchase price of the right. The acquiring person's
rights will automatically become null and void in that event. In other words,
the stockholders other than the acquiring person will be able to buy common
stock at half price.
Flip-over right
If at any time after a person or group of persons acquires 20% or more of
our outstanding common stock and the following occurs:
- we effect a merger or other business combination in which we are not the
surviving corporation;
- we are the surviving corporation in a consolidation, merger or similar
transaction in which our shares of common stock are changed into or
exchanged for other securities; or
- we sell or otherwise transfer more than 50% of our assets, cash flow or
earning power,
then each holder of a right, except a person who has acquired beneficial
ownership of 20% or more of the outstanding common stock, may purchase, upon the
exercise of each right at the then-current purchase price, that number of shares
of common stock of the acquiring company with a market value equal to two times
the purchase price of the right. In other words, the stockholders other than the
acquiring person will be able to buy common stock of the acquiring company at
half price.
Adjustments
The purchase price and the number of shares of Series A preferred stock or
other securities issuable upon exercise of the rights may be adjusted to prevent
dilution upon:
- stock dividends, subdivisions, combinations or reclassifications of the
Series A preferred stock;
- below market issuances of rights or warrants to subscribe for or convert
into Series A preferred stock; or
- distributions to holders of the Series A preferred stock of evidence of
indebtedness, cash, excluding regular quarterly cash dividends, assets,
excluding dividends payable in Series A preferred stock, or subscription
rights or warrants.
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Exchange of rights
After a person or group of persons acquires 20% of our outstanding common
stock but before that person or group beneficially owns 50% or more of our
common stock, we may, at our option, exchange the rights at an exchange ratio of
one-half the number of shares of common stock, Series A preferred stock, or
other property for which a right is exercisable immediately prior to our
decision to exchange the rights, subject to adjustment. Rights held by an
acquiring person are not entitled to these exchange rights. In that event, the
stockholders other than the acquiring person would receive common stock in
exchange for their rights.
Redemption of rights
At any time before a person or group of persons acquires 20% or more of our
outstanding common stock, we may redeem the rights at a price of $0.001 per
right. Upon the effective date of the redemption of the rights, the rights will
terminate and the rights holders will only be entitled to receive the $0.001
redemption price.
Rights as a stockholder
Until a right is exercised, the rights will not entitle the holder to the
rights as an Alamosa stockholder, including, without limitation, the right to
vote or to receive dividends.
The preferred stock
The terms of the Series A preferred stock will be contained in a
Certificate of Designations, Rights and Preferences filed with the Delaware
Secretary of State and attached as an exhibit to the Stockholder Rights Plan,
which is filed as an exhibit to the registration statement.
Anti-takeover effects
The rights will have certain anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to acquire us without
the approval of our board of directors. As a result, the overall effect of the
rights may be to make more difficult a merger, tender offer, other business
combination or proxy contest, even if such event would be favorable to the
interest of stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services, Dallas, Texas.
LISTING
Application will be made to list the shares of common stock on the Nasdaq
National Market under the symbol "APCS."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect market prices of the common stock prevailing from time to time.
Furthermore, because only a limited number of shares will be available for sale
shortly after the consummation of this offering due to contractual and legal
restrictions on resale, as described below, sales of substantial amounts of
common stock in the public market after the restrictions lapse could adversely
affect the prevailing market price of the common stock and our ability to raise
equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
59,214,000 shares of common stock, assuming no exercise of the underwriters'
over-allotment option. Of these shares, all of the
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shares sold in this offering will be freely tradeable without restriction or
further registration under the Securities Act, except that any shares purchased
by our affiliates may generally only be sold in compliance with the limitations
of Rule 144 described below.
SALES OF RESTRICTED SHARES; OPTIONS
All of the shares of common stock sold in this offering will be freely
tradeable under the Securities Act, unless purchased by our "affiliates," as the
Securities Act defines that term. In general, under Rule 144 as currently in
effect, a person or persons whose shares are aggregated, including an affiliate,
who has beneficially owned restricted stock for at least one year is entitled to
sell, within any three-month period, a number of shares of stock that does not
exceed the greater of:
- one percent of the then outstanding shares of common stock, or
- the average weekly trading volume in the common stock during the four
calendar weeks preceding the date on which notice of that sale is filed.
In addition, under Rule 144(k), a person who is not an affiliate and has
not been an affiliate for at least three months prior to the sale and who has
beneficially owned shares of restricted stock for at least two years may resell
those shares without compliance with the foregoing requirements. In meeting the
one and two year holding periods described above, a holder of restricted stock
can include the holding periods of prior owners who were not an affiliate.
Additional shares of common stock are available for future grants under our
1999 Long Term Incentive Plan. See "Management -- Benefit Plans -- 1999 Long
Term Incentive Plan." We intend to file one or more registration statements on
Form S-8 under the Securities Act to register all shares of common stock subject
to outstanding stock options and common stock issuable pursuant to our benefit
plans that do not qualify for an exemption under Rule 701 from the registration
requirements of the Securities Act. We expect to file these registration
statements as soon as practicable following the closing of this offering, and
these registration statements are expected to become effective upon filing.
Shares covered by these registration statements will be eligible for sale in the
public markets subject to the lock-up agreements, to the extent applicable.
LOCK-UP AGREEMENTS
We, our members of senior management and directors, and some of our current
stockholders have agreed, pursuant to the lock-up agreements that, during the
period beginning from the date of this prospectus and continuing and including
the date 180 days after the date of this prospectus, they will not, directly or
indirectly, offer, pledge, sell, or otherwise dispose of any shares of capital
stock, including but not limited to the filing, or participation in the filing,
of a registration statement with the Securities and Exchange Commission in
respect of, or establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder with respect to,
any shares of capital stock or any securities convertible into, or exercisable
or exchangeable for such capital stock, or publicly announce an intention to
effect any such a transaction, without the prior written consent of Salomon
Smith Barney Inc. Salomon Smith Barney Inc. has informed the Company that it has
no current intentions of releasing any shares subject to the lock-up agreements.
Any determination by Salomon Smith Barney Inc. to release any shares subject to
the lock-up agreements would be based on a number of factors at the time of
determination, including the market price of the common stock, the liquidity of
the trading market for the common stock, general market conditions, the number
of shares proposed to be sold, and the timing, purpose and terms of the proposed
sale. There are no exceptions to the lock-up, except for shares disposed of as
bona fide gifts to persons who also enter into lock-up agreements which
terminate 180 days after the date of this prospectus.
Following the lock-up period, approximately 48,500,000 shares of common
stock, excluding shares underlying options immediately exercisable upon
completion of this offering, will become eligible for sale, subject to
compliance with Rule 144 of the Securities Act as described above.
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IMPORTANT UNITED STATES FEDERAL TAX CONSEQUENCES
OF OUR COMMON STOCK TO NON-U.S. HOLDERS
This is a general discussion of United States federal tax consequences of
the acquisition, ownership, and disposition of our common stock by a holder
that, for U.S. federal income tax purposes, is not a U.S. person as we define
that term below. A holder of our common stock who is not a U.S. person is a
non-U.S. holder. We assume in the discussion that you will hold our common stock
issued pursuant to the offering as a capital asset, which generally, is property
held for investment. We do not discuss all aspects of U.S. federal taxation that
may be important to you in light of your individual investment circumstances,
such as special tax rules that would apply to you, for example, if you are a
dealer in securities, financial institution, bank, insurance company, tax-exempt
organization, partnership or owner of more than 5% of our common stock. Our
discussion is based on current provisions of the Internal Revenue Code of 1986,
as amended, Treasury regulations, judicial opinions, published positions of the
U.S. Internal Revenue Service and other applicable authorities, all as in effect
on the date of this prospectus and all of which are subject to differing
interpretations or change, possibly with retroactive effect. We have not sought,
and shall not seek, any ruling from the IRS with respect to the tax consequences
discussed in this prospectus, and there can be no assurance that the IRS will
not take a position contrary to the tax consequences discussed below or that any
position taken by the IRS would not be sustained. We urge you to consult your
tax advisor about the U.S. federal tax consequences of acquiring, holding, and
disposing of our common stock, as well as any tax consequences that may arise
under the laws of any foreign, state, local, or other taxing jurisdiction.
For purposes of this discussion, a U.S. person means any one of the
following:
- a citizen or resident of the U.S.
- a corporation, partnership, or other entity created or organized in the
U.S. or under the laws of the U.S. or of any political subdivision of the
U.S.
- an estate, the income of which is includable in gross income for U.S.
federal income tax purposes regardless of its source
- a trust, the administration of which is subject to the primary
supervision of a U.S. court and that has one or more U.S. persons who
have the authority to control all substantial decisions of the trust
DIVIDENDS
Dividends paid to a non-U.S., holder will generally be subject to
withholding of U.S. federal income tax at the rate of 30%. If, however, the
dividend is effectively connected with the conduct of a trade or business in the
U.S. by the non-U.S. holder, the dividend will be subject to U.S. federal income
tax imposed on net income on the same basis that applies to U.S. persons
generally, and, for corporate holders under certain circumstances, the branch
profits tax. Non-U.S. holders should consult any applicable income tax treaties
that may provide for a reduction of, or exemption from, withholding taxes. For
purposes of determining whether tax is to be withheld at a reduced rate as
specified by a treaty, we generally will presume that dividends we pay on or
before December 31, 2000, to an address in a foreign country are paid to a
resident of that country.
Under recently finalized Treasury regulations, which in general apply to
dividends that we pay after December 31, 2000, to obtain a reduced rate of
withholding under a treaty, a non-U.S. holder generally will be required to
provide certification as to that non-U.S. holder's entitlement to treaty
benefits. These regulations also provide special rules to determine whether, for
purposes of applying a treaty, dividends that we pay to a non-U.S. holder that
is an entity should be treated as paid to holders of interests in that entity.
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GAIN ON DISPOSITION
A non-U.S. holder will generally not be subject to United States federal
income tax, including by way of withholding, on gain recognized on a sale or
other disposition of our common stock unless any one of the following is true:
- the gain is effectively connected with the conduct of a trade or business
in the U.S. by the non-U.S. holder;
- the non-U.S. holder is a nonresident alien individual present in the U.S.
for 183 or more days in the taxable year of the disposition and other
requirements are met;
- the non-U.S. holder is subject to tax pursuant to provisions of the U.S.
federal income tax law applicable to certain U.S. expatriates; and
- we are or have been during certain periods a "United States real property
holding corporation" for U.S. federal income tax purposes.
If we are or have been a United States real property holding corporation, a
non-U.S. holder will generally not be subject to U.S. federal income tax on gain
recognized on a sale or other disposition of our common stock provided that:
- the non-U.S. holder does not hold, and has not held during certain
periods, directly or indirectly, more than 5% of our outstanding common
stock; and
- our common stock is and continues to be traded on an established
securities market for U.S. federal income tax purposes.
We believe that our common stock will be traded on an established securities
market for this purpose in any quarter during which it is included for quotation
on the Nasdaq National Market.
If we are or have been during certain periods a U.S. real property holding
corporation and the above exception does not apply, a non-U.S. holder will be
subject to U.S. federal income tax with respect to gain realized on any sale or
other disposition of our common stock as well as to a withholding tax, generally
at a rate of 10% of the proceeds. Any amount withheld pursuant to a withholding
tax will be creditable against a non-U.S. holder's federal income tax liability.
Gain that is effectively connected with the conduct of a trade or business
in the U.S. by the non-U.S. holder will be subject to the U.S. federal income
tax imposed on net income on the same basis that applies to U.S. persons
generally, and, for corporate holders under certain circumstances, the branch
profits tax, but will generally not be subject to withholding. Non-U.S. holders
should consult any applicable income tax treaties that may provide for different
rules.
UNITED STATES FEDERAL ESTATE TAXES
Our common stock that is owned or treated as owned by an individual who is
not a citizen or resident of the U.S., as specially defined for U.S. federal
estate tax purposes, on the date of that person's death will be included in his
or her estate for U.S. federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, we must report annually to the IRS and to each non-U.S. holder
the amount of dividends that we paid to a holder, and the amount of tax that we
withheld on those dividends. This information may also be made available to the
tax authorities of a country in which the non-U.S. holder resides.
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Under current U.S. Treasury regulations, U.S. information reporting
requirements and backup withholding tax will generally not apply to dividends
that we pay on our common stock to a non-U.S. holder at an address outside the
U.S. Payments of the proceeds of a sale or other taxable disposition of our
common stock by a U.S. office or a broker are subject to both backup withholding
at a rate of 31% and information reporting, unless the holder certifies as to
its non-reporting requirements. Information reporting, but not backup
withholding tax, will also apply to payments of the proceeds of a sale or other
taxable disposition of our common stock by foreign offices of U.S. brokers or
foreign brokers with certain types of relationships to the U.S., unless the
broker has documentary evidence in its records that the holder is a non-U.S.
holder and certain other conditions are met or the holder otherwise established
an exemption.
Backup withholding is not an additional tax. Any amounts that we withhold
under the backup withholding rules will be refunded or credited against the
non-U.S. holder's U.S. federal income tax liability if certain required
information is furnished to the IRS.
The U.S. Treasury Department has promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general,
those regulations do not significantly alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. The final regulations are generally
effective for payments made after December 31, 2000, subject to transition
rules.
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UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and Alamosa has agreed to sell to the underwriter, the number of
shares set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ---- ----------
<S> <C>
Salomon Smith Barney Inc....................................
Lehman Brothers Inc. .......................................
Credit Suisse First Boston Corporation......................
Deutsche Bank Securities Inc................................
----------
Total............................................. 10,714,000
==========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares, other than those
covered by the over-allotment option described below, if they purchase any of
the shares.
The underwriters, for whom Salomon Smith Barney Inc., Lehman Brothers Inc.,
Credit Suisse First Boston Corporation and Deutsche Bank Securities Inc. are
acting as representatives, propose to offer some of the shares directly to the
public at the public offering price set forth on the cover page of this
prospectus and some of the shares to selected dealers at the public offering
price less a concession not in excess of $ per share. The underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share on sales to other dealers. If all of the shares are not sold at the
initial offering price, the representatives may change the public offering price
and the other selling terms. The representatives have advised Alamosa that the
underwriters do not intend to confirm any sales to any accounts over which they
exercise discretionary authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 1,607,100 additional shares of
common stock at the public offering price less the underwriting discount. The
underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent the
option is exercised, each underwriter will be obligated, subject to specified
conditions, to purchase a number of additional shares approximately
proportionate to that underwriter's initial purchase commitment.
We, our officers and directors, and some of our other stockholders have
agreed that, for a period of 180 days from the date of this prospectus, we and
they will not, without the prior written consent of Salomon Smith Barney Inc.,
offer, sell, contract to sell, pledge, assign or otherwise dispose of or hedge
any shares of common stock of Alamosa or any securities convertible into or
exchangeable for common stock. Salomon Smith Barney Inc. in its sole discretion
may release any of the securities subject to these lock-up agreements at any
time without notice.
As part of this sale of our common stock, the underwriters have agreed to
reserve a maximum of 10% of the shares of our common stock to be sold in this
offering for sale to our current stockholders at a price per share equal to the
public offering price less the underwriting discount. The underwriters will not
be entitled to any discount or commission on these shares and the proceeds to us
will be the same as if the shares were sold to the general public. However, the
number of shares of common stock available for sale to the general public will
be reduced to the extent of sales of shares to our current stockholders.
At our request, Salomon Smith Barney Inc. reserved up to approximately five
percent of the shares being offered as directed shares for sale at the initial
public offering price to persons who are directors, officers or our employees,
or who are otherwise associated with us and our affiliates or employees, and who
have advised us of their desire to purchase these shares. The number of shares
of common stock available for sale to the general public will be reduced to the
extent of sales of directed shares to any of the persons for whom they have been
reserved. Any shares not so purchased will be offered by the underwriters on the
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same basis as all other shares of common stock offered hereby. We have agreed to
indemnify the underwriters against specified liabilities and expenses, including
liabilities under the Securities Act of 1933, in connection with the sales of
the directed shares.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the shares was
determined by negotiations among us and the representatives. Among the factors
considered in determining the initial public offering price were our record of
operations, our current financial condition, our future prospects, our markets,
the economic conditions in and future prospects for the industry in which we
compete, our management, and currently prevailing general conditions in the
equity securities markets, including current market valuations of publicly
traded companies considered comparable to us. There can be no assurance,
however, that the prices at which the shares will sell in the public market
after this offering will not be lower than the price at which they are sold by
the underwriters or that an active trading market in the common stock will
develop and continue after this offering.
We will apply to have the common stock included for quotation on the Nasdaq
National Market under the symbol "APCS."
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY ALAMOSA
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Share................................................... $ $
Total............................................. $ $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell shares of common stock in the open
market. These transactions may include over-allotment, syndicate covering
transactions and stabilizing transactions. Over-allotment involves syndicate
sales of common stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of common stock made for the purpose of preventing or retarding a
decline in the market price of the common stock while the offering is in
progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.
Any of these activities may cause the price of the common stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on the Nasdaq
National Market or in the over-the-counter market, or otherwise and, if
commenced, may be discontinued at any time.
We estimate that the total expenses of this offering will be $ .
The representatives may, from time to time, engage in transactions with and
perform services for us in the ordinary course of their business. In particular,
Salomon Smith Barney Inc., Credit Suisse First Boston Corporation and Lehman
Brothers Inc. are also acting as underwriters in the offering of our senior
discount notes.
We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
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LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of common
stock offered hereby will be passed upon for Alamosa by Haynes and Boone, LLP,
Dallas, Texas and for the underwriters by Cravath, Swaine & Moore.
EXPERTS
The financial statements of Alamosa PCS, LLC as of December 31, 1998 and
September 30, 1999, and for the period from inception, July 16, 1998 to December
31, 1998, the nine-month period ended September 30, 1999 and the period from
inception, July 16, 1998 to September 30, 1999, have been included herein and in
the registration statement in reliance upon the report of PricewaterhouseCoopers
LLP, independent accountants, appearing elsewhere herein, given on authority of
said firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The prospectus constitutes a part of the registration statement on Form
S-1, together with all amendments, supplements, schedules and exhibits to the
registration statement, referred to as the registration statement, which we have
filed with the Securities and Exchange Commission with respect to the common
stock offered in this prospectus. This prospectus does not contain all of the
information in the registration statement. For further information about us and
our securities, see the registration statement and its exhibits. This prospectus
contains a description of the material terms and features of some material
contracts, reports or exhibits to the registration statement required to be
disclosed. However, as the descriptions are summaries of the contracts, reports
or exhibits, we urge you to refer to the copy of each material contract, report
and exhibit attached to the registration statement. Copies of the registration
statement and the exhibits to the registration statement, as well as the
periodic reports, proxy statements and other information we will file with the
Securities and Exchange Commission, may be examined without charge in the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W. Room 1024, Washington, DC 20549, and the Securities and Exchange
Commission's regional offices located at 500 West Madison Street, Suite 1400,
Chicago, IL 60661, and 7 World Trade Center, 13th Floor, New York, NY 10048 or
on the Internet at http://www.sec.gov. You can get information about the
operation of the Public Reference Room by calling the Securities and Exchange
Commission at 1-800-SEC-0330. Copies of all or a portion of the registration
statement can be obtained from the Public Reference Section of the Securities
and Exchange Commission upon payment of prescribed fees. In addition, the
Securities and Exchange Commission maintains a Web site which provides online
access to periodic reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission at the address http://www.sec.gov.
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and will be
required to file periodic reports, proxy statements and other information with
the Securities and Exchange Commission. We will send an annual report to
shareholders and any additional reports or statements required by the Securities
and Exchange Commission. The annual report to shareholders will contain
financial information that has been examined and reported on, with an opinion
expressed by an independent public accountant.
107
<PAGE> 112
ALAMOSA PCS LLC
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets as of December 31, 1998, September 30, 1999,
and as adjusted September 30, 1999 (unaudited)............ F-3
Statements of Operations for the period July 16, 1998,
(inception), through December 31, 1998, for the period
July 16, 1998, (inception), through September 30, 1998
(unaudited), for the nine-month period ended September 30,
1999, and for the period July 16, 1998, (inception),
through September 30, 1999................................ F-4
Statements of Members' Equity for the period July 16, 1998,
(inception), through December 31, 1998, and the nine-month
period ended September 30, 1999........................... F-5
Statements of Cash Flows for the period July 16, 1998,
(inception), through December 31, 1998, for the period
July 16, 1998, (inception), through September 30, 1998
(unaudited), for the nine-month period ended September 30,
1999, and for the period July 16, 1998, (inception),
through September 30, 1999................................ F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 113
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and
Members of Alamosa PCS LLC:
In our opinion, the accompanying balance sheets and the related statements
of operations, members' equity and cash flows present fairly, in all material
respects, the financial position of Alamosa PCS LLC (a development stage
enterprise) at December 31, 1998 and September 30, 1999, and the results of its
operations and its cash flows for the period from July 16, 1998 (inception)
through December 31, 1998, the nine-month period ended September 30, 1999 and
the period from July 16, 1998 (inception) through September 30, 1999, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
December 5, 1999, except as to Note 11 which is as of December 31, 1999
F-2
<PAGE> 114
ALAMOSA PCS LLC
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS ADJUSTED
SEPTEMBER 30, 1999
DECEMBER 31, 1998 SEPTEMBER 30, 1999 (UNAUDITED)
----------------- ------------------ ------------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................. $13,529,077 $ 7,454,309 $ 7,454,309
Accounts receivable, net of allowance for
doubtful accounts of $24,355 at
September 30, 1999..................... -- 832,827 832,827
Inventory................................. -- 4,989,500 4,989,500
Prepaid expenses and other assets......... 52,046 686,102 686,102
Interest receivable....................... -- 19,255 19,255
----------- ------------ ------------
Total current assets.............. 13,581,123 $ 13,981,993 $ 13,981,993
----------- ------------ ------------
Notes receivable from related party......... -- 100,000 100,000
Debt issuance costs......................... -- 3,892,678 3,892,678
Restricted cash............................. -- 1,000,000 1,000,000
Construction in progress.................... 1,978,770 28,940,359 28,940,359
Property and equipment, net................. 113,992 36,929,808 36,929,808
Microwave relocations, net.................. -- 3,333,189 3,333,189
Other non-current assets.................... -- 233,700 233,700
----------- ------------ ------------
Total assets...................... $15,673,885 $ 88,411,727 $ 88,411,727
=========== ============ ============
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses..... $ 395,355 $ 9,656,578 $ 9,656,578
Payable to related parties................ 450,496 1,043,259 1,043,259
Current installments of capital leases.... 20,145 21,281 21,281
Notes payable............................. 23,637 143,690 143,690
Microwave relocation obligation........... -- 3,372,484 3,372,484
Other current liabilities................. -- 244,369 244,369
----------- ------------ ------------
Total current liabilities......... $ 889,633 $ 14,481,661 $ 14,481,661
Capital lease obligations, noncurrent....... 708,074 832,684 832,684
Long-term debt, excluding current
maturities................................ -- 59,887,586 59,887,586
----------- ------------ ------------
Total liabilities................. 1,597,707 75,201,931 75,201,931
Commitments and contingencies
Equity:
Contributed capital....................... $15,000,000 $ 25,000,000 $ --
Deficit accumulated during the development
stage.................................. (923,822) (18,612,241) (18,612,241)
Preferred stock, par value $.01 per share;
10,000,000 shares authorized; no shares
issued and outstanding.................
Common stock, $.01 par value; 290,000,000
shares authorized, 48,500,000 issued
and outstanding........................ -- -- 485,000
Additional paid-in capital................ -- 11,193,751 35,708,751
Unearned compensation..................... -- (4,371,714) (4,371,714)
----------- ------------ ------------
Total Equity...................... 14,076,178 13,209,796 13,209,796
Total liabilities and members'
equity.......................... $15,673,885 $ 88,411,727 $ 88,411,727
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
F-3
<PAGE> 115
ALAMOSA PCS LLC
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE FOR THE
FOR THE PERIOD FOR THE PERIOD PERIOD
JULY 16, 1998 JULY 16, 1998 FOR THE NINE-MONTH JULY 16, 1998
(INCEPTION) THROUGH (INCEPTION) THROUGH PERIOD ENDED (INCEPTION) THROUGH
DECEMBER 31, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------- ------------------- ------------------ -------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Service revenues................ $ -- $ -- $ 1,187,008 1,187,008
Product sales................... -- -- 813,052 813,052
---------- --------- ------------ ------------
Total revenue........... -- -- 2,000,060 2,000,060
Cost of services.................. -- -- 818,678 818,678
Cost of products sold............. -- -- 794,963 794,963
---------- --------- ------------ ------------
Gross profit............ -- -- 386,419 386,419
Operating expenses:
Selling, general and
administrative expenses
(excluding equity
participation compensation
expense)..................... 949,445 400,631 9,194,937 10,144,382
Equity participation
compensation expense......... -- -- 6,822,037 6,822,037
General and administrative
expenses -- related
parties...................... 6,886 -- 680,006 686,892
Depreciation and amortization... 2,063 -- 936,736 938,799
---------- --------- ------------ ------------
Loss from operations.... (958,394) (400,631) (17,247,297) (18,205,691)
Interest and other income......... 34,589 170 444,746 479,335
Interest expense.................. (17) -- (885,868) (885,885)
---------- --------- ------------ ------------
Net loss................ (923,822) (400,461) (17,688,419) (18,612,241)
Pro forma basic and diluted
weighted average common shares
outstanding (unaudited)......... 48,500,000 48,500,000 48,500,000 48,500,000
Pro forma information (unaudited):
Net loss........................ (923,822) (400,461) (17,688,419) (18,612,241)
Pro forma income tax adjustment:
Income tax benefit........... 317,592 137,671 6,014,062 6,331,558
Deferred tax valuation
allowance.................. (317,592) (137,671) (6,014,062) (6,331,558)
---------- --------- ------------ ------------
Pro forma net loss........... (923,822) (400,461) (17,688,419) (18,612,241)
Basic and diluted pro forma net
loss per common share........ $ (0.02) $ (0.01) $ (0.36) $ (0.38)
========== ========= ============ ============
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
F-4
<PAGE> 116
ALAMOSA PCS LLC
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF MEMBERS' EQUITY
FOR THE PERIOD JULY 16, 1998 (INCEPTION) THROUGH
DECEMBER 31, 1998 AND THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
YELLOW
ALAMO IV ROSEWOOD WEST TX TREGAN LONGMONT ROCK TOTAL
----------- ----------- ----------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 16, 1998
(inception).................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Members' contributions....... 8,443,944 3,007,732 2,187,500 927,835 309,278 123,711 15,000,000
Net loss..................... (520,047) (185,240) (134,724) (57,144) (19,048) (7,619) (923,822)
----------- ----------- ----------- ----------- --------- --------- ------------
Balance, December 31, 1998..... $ 7,923,897 $ 2,822,492 $ 2,052,776 $ 870,691 $ 290,230 $ 116,092 $ 14,076,178
----------- ----------- ----------- ----------- --------- --------- ------------
Members' contributions....... 5,629,300 2,005,150 1,458,330 618,560 206,190 82,470 10,000,000
Net loss..................... (9,957,342) (3,546,793) (2,579,555) (1,094,135) (364,718) (145,876) (17,688,419)
Additional paid in capital... 11,193,751
Unearned compensation........ (4,371,714)
----------- ----------- ----------- ----------- --------- --------- ------------
Balance, September 30, 1999.... $ 3,595,855 $ 1,280,849 $ 931,551 $ 395,116 $ 131,702 $ 52,686 $ 13,209,796
=========== =========== =========== =========== ========= ========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 117
ALAMOSA PCS LLC
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD CUMULATIVE FOR THE
JULY 16, 1998 JULY 16, 1998 FOR THE PERIOD
(INCEPTION) (INCEPTION) THROUGH NINE-MONTH JULY 16, 1998
THROUGH SEPTEMBER 30, 1998 PERIOD ENDED (INCEPTION) THROUGH
DECEMBER 31, 1998 (UNAUDITED) SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
----------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss..................................... $ (923,822) $(400,461) $(17,688,419) $(18,612,241)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity participation compensation
expense.................................. -- -- 6,822,037 6,822,037
Depreciation and amortization.............. 2,063 -- 936,736 938,799
Amortization of debt issuance costs........ -- -- 178,264 178,264
Deferred interest expense.................. -- -- 544,055 544,055
(Increase) decrease in:
Accounts receivable...................... -- -- (832,827) (832,827)
Inventory................................ -- -- (4,989,500) (4,989,500)
Prepaid expenses and other assets........ (52,046) -- (634,056) (686,102)
Interest receivable...................... -- -- (19,255) (19,255)
Increase (decrease) in:
Accounts payable and accrued expenses.... 845,851 403,744 6,344,077 7,189,928
----------- --------- ------------ ------------
Net cash provided (used) by
operating activities.............. (127,954) 3,283 (9,338,888) (9,466,842)
----------- --------- ------------ ------------
Cash flows from investing activities:
Issuance of notes receivable............... -- -- (100,000) (100,000)
Increase in restricted cash................ -- -- (1,000,000) (1,000,000)
Additions to construction in progress...... (1,250,551) (396,812) (8,225,571) (9,476,122)
Additions to property and equipment........ (92,418) -- (9,459,029) (9,551,447)
----------- --------- ------------ ------------
Net cash used investing
activities........................ (1,342,969) (396,812) (18,784,600) (20,127,569)
----------- --------- ------------ ------------
Cash flows from financing activities:
Debt issuance cost......................... -- -- (230,942) (230,942)
Capital contribution....................... 15,000,000 500,000 10,000,000 25,000,000
Increase in notes payable.................. 12,289,626 12,289,626
Payments on capital leases................. -- -- (20,633) (20,633)
Interest rate cap premiums................. -- -- (233,700) (233,700)
Bank overdraft............................. -- -- 244,369 244,369
----------- --------- ------------ ------------
Net cash provided by financing
activities........................ 15,000,000 500,000 22,048,720 37,048,720
----------- --------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents.................. 13,529,077 106,471 (6,074,768) 7,454,309
Cash and cash equivalents at beginning of
period..................................... -- -- 13,529,077 --
----------- --------- ------------ ------------
Cash and cash equivalents at end of period... $13,529,077 $ 106,471 $ 7,454,309 $ 7,454,309
=========== ========= ============ ============
Supplemental disclosure -- cash paid for
interest................................... $ -- $ -- $ 60,093 $ 60,093
=========== ========= ============ ============
Supplemental disclosure of noncash
activities:
Capitalized lease obligations incurred..... $ 728,219 $ -- $ 146,379 $ 874,598
Liabilities assumed in connection with
acquisition of construction in progress
and property and equipment............... 23,637 -- 46,843,867 46,867,504
Liabilities assumed in connection with debt
issuance cost............................ -- -- 3,840,000 3,840,000
Liabilities assumed in connection with
microwave relocations.................... -- -- 3,372,484 3,372,484
----------- --------- ------------ ------------
$ 751,856 $ -- $ 54,202,730 $ 54,954,586
=========== ========= ============ ============
</TABLE>
The accompanying notes are integral part of the unaudited financial statements.
F-6
<PAGE> 118
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS
Alamosa PCS LLC, referred to in these financial statements as the Company
or Alamosa, was formed in July 1998 as a Texas limited liability company. In
July, 1998, Alamosa entered into affiliation agreements with Sprint PCS, the PCS
Group of Sprint Corporation. These affiliation agreements provide Alamosa with
the exclusive right to build, own and manage a wireless voice and data services
network in markets with over 5.2 million residents located in Texas, New Mexico,
Arizona, and Colorado under the Sprint PCS brand. As described in Note 11,
Alamosa has signed a letter of intent to amend its affiliation agreements with
Sprint PCS to expand its services network so that it will include 8.4 million
residents. Alamosa is required to build out the wireless network according to
Sprint PCS specifications. The affiliation agreements are in effect for a term
of 20 years with three 10-year renewal options unless terminated by either party
under provisions outlined in the affiliation agreements. The affiliation
agreements include indemnification clauses between Alamosa and Sprint PCS to
indemnify each other against claims arising from violations of laws or the
affiliation agreements, other than liabilities resulting from negligence or
willful misconduct of the party seeking to be indemnified.
As described in Note 11, Alamosa PCS Holdings Inc. was formed in October
1999 in anticipation of an initial public offering. Immediately prior to the
offering, shares of Alamosa PCS Holdings Inc., the registrant, will be exchanged
for the Company's membership interests. The Company will be wholly owned by
Alamosa PCS Holdings Inc.
Alamosa is currently in the development stage. This stage is characterized
by significant expenditures for the design and construction of the wireless
network. Management estimates total network build-out expenditures related to
the markets included in the affiliation agreements with Sprint PCS, of
approximately $272 million, including site acquisition, design, construction and
equipment through 2002. These expenditures will be funded through member
contributions of $37 million, a financing agreement with Nortel Networks Inc. of
$250 million and proceeds of the initial public offering described in Note 11.
From inception through September 30, 1999, the Company has commenced operations
in seven markets. Since inception, the Company has incurred revenues and
expenses of $2,000,060 and $20,612,301 resulting in a deficit accumulated during
the development stage of $18,612,241 at September 30, 1999. Alamosa has signed
an agreement with a related party for the provision of engineering services
related to the network build-out. Once the initial build-out is completed within
a market, the Company's focus will be the development of the Sprint PCS
subscriber base within that market.
The Regulations of the Company, as amended, provide for the governance and
administration of the Company's business, allocation of profits and losses, tax
allocations, transactions with partners, disposition of ownership interest and
other matters. The Regulations establish two classes of membership interests.
Class I members have full voting rights and are entitled to full benefits of
ownership of their share of the Company. Class II members consist of additional
non-voting share interests of the Company which the Board of Managers may
authorize to be distributed to employees of the Company under an incentive bonus
plan.
The Regulations generally provide for the allocation of profits and losses
pro-rata based on the proportion that a percentage interest of a member bears to
the aggregate percentage interests of all members, as defined in the
Regulations.
F-7
<PAGE> 119
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The members of the Company have the following class I ownership interests
as of December 31, 1998 and September 30, 1999:
<TABLE>
<S> <C>
Alamo IV, LLC............................................. 56.2930%
Rosewood Telecommunications, L.L.C........................ 20.0515%
West Texas PCS, LLC....................................... 14.5833%
Tregan International Corp................................. 6.1856%
Longmont PCS, LLC......................................... 2.0619%
Yellow Rock PCS, L.P...................................... 0.8247%
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
Cash and cash equivalents
Cash and cash equivalents include cash, money market funds, and commercial
paper with minimal interest rate risk and original maturities of three months or
less at the date of acquisition. The carrying amount approximates fair value.
As of September 30, 1999, other liabilities consist of a bank overdraft of
$244,369. This overdraft was mainly due to the timing of transfers between
Alamosa's operating and investment accounts.
Inventory
Inventory consists of handsets and related accessories. Inventories
purchased for resale will be carried at the lower of cost, determined using
weighted average, or market. Market will be determined using replacement cost in
accordance with industry standards.
Microwave relocation
Microwave relocation includes costs and the related obligation incurred to
relocate incumbent microwave frequencies in Alamosa's service area. Microwave
relocation costs are amortized on a straight-line basis over 20 years beginning
upon commencement of services in respective markets. The amortization of
microwave relocation costs was insignificant in 1998 and totaled $39,295 for the
nine-month period ended September 30, 1999.
Property, equipment, and construction in progress
Property and equipment are reported at cost less accumulated depreciation.
Cost incurred to design and construct the wireless network in a market are
classified as construction in progress. When the wireless network for a
particular market is completed and placed into service, the related costs are
transferred from construction in progress to property and equipment. Repair and
maintenance costs are charged to expense as incurred; significant renewals and
betterments are capitalized.
When depreciable assets are retired or otherwise disposed of, the related
costs and accumulated depreciation are removed from the respective accounts, and
any gains or losses on disposition are recognized in income. If facts or
circumstances support the possibility of impairment, the Company will prepare a
projection of future operating cash flows, undiscounted and without interest. If
based on this projection, the Company does not expect to recover its carrying
cost, an impairment loss equal to the difference between the fair value of the
asset and its carrying value will be recognized in operating income. No such
losses have been recognized to date.
Property and equipment are depreciated using the straight-line method based
on estimated useful lives of the assets.
F-8
<PAGE> 120
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Asset lives are as follows:
<TABLE>
<S> <C>
Buildings............................................... 20 years
Network equipment....................................... 5-10 years
Vehicles................................................ 5 years
Furniture and office equipment.......................... 5-7 years
</TABLE>
Leasehold improvements are depreciated over the shorter of the remaining
term of the lease or the estimated useful life of the improvement.
Interest will be capitalized in connection with the construction of the
wireless network. The capitalized interest will be recorded as part of the asset
to which it relates and will be amortized over the asset's estimated useful
life. No interest was capitalized in 1998. Total interest capitalized is
$656,800 as of September 30, 1999.
Software costs
Initial operating systems software is capitalized and amortized using the
straight-line method, generally over a period of five years. Capitalized
software of approximately $11,500 and $323,000 at December 31, 1998 and
September 30, 1999 are recorded in property and equipment. The Company amortized
computer software costs of approximately $800 and $12,200 during 1998 and for
the nine month period ended September 30, 1999.
Start-up costs
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities." This statement is effective January 1, 1999 and requires that costs
of start up activities and organization costs be expensed as incurred.
The Company has expensed start-up and organization costs as incurred. The
adoption of this statement will have no effect on the Company's financial
position or results of operations.
Advertising costs
Advertising costs are expensed as incurred. Advertising expenses totaled
approximately $2,100 and $2,282,000 during 1998 and for the nine-month period
ended September 30, 1999 respectively. Advertising costs include handset subsidy
expenses representing the excess of the cost of handsets over the retail sales
price. There was no handset subsidy expense during 1998. Handset subsidy expense
was approximately $1,194,000 for the nine-month period ended September 30, 1999.
Income taxes
At December 31, 1998 and September 30, 1999, Alamosa is organized as a
Texas limited liability company. Therefore, the results of operations of the
Company are included in the income tax returns of its members. Accordingly, no
provision for income taxes is recorded in the accompanying financial statements.
Revenue recognition
The Company will recognize revenue as services are performed. Sprint PCS
will handle Alamosa's billings and collections and will retain 8% of collected
service revenues from Sprint PCS subscribers based in Alamosa's territory and
from non-Sprint PCS subscribers who roam onto Alamosa's network. The amount
retained by Sprint PCS will be recorded as an operating expense. Revenues
generated from the sale of handsets and accessories and from roaming services
provided to Sprint PCS customers who are not based in Alamosa's territory are
not subject to the 8% retainage.
F-9
<PAGE> 121
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Sprint PCS will pay Alamosa a Sprint PCS roaming fee for each minute that a
Sprint PCS subscriber based outside of Alamosa's territory roams on Alamosa's
portion of the Sprint PCS network. Revenue from these services will be
recognized as the services are performed. Similarly, Alamosa will pay Sprint PCS
roaming fees to Sprint PCS, when a Sprint PCS subscriber based in Alamosa's
territory roams on the Sprint PCS network outside of Alamosa's territory. These
costs will be included as cost of sales when incurred.
Product revenues consisting of proceeds from sales of handsets and
accessories will be recorded net of an allowance for sales returns. The
allowance will be estimated based on Sprint PCS's handset return policy which
allows customers to return handsets for a full refund within 30 days of
purchase. When handsets are returned to the Company, the Company may be able to
reissue the handsets to customers at little additional cost. However, when
handsets are returned to Sprint PCS for refurbishing, the Company will receive a
credit from Sprint PCS, which will be less than the amount the Company
originally paid for the handset. For the nine-month period ended September 30,
1999 product revenue was $818,678. The cost of these products was $1,991,963;
$797,633 of this cost has been classified as cost of products sold and
$1,194,000 of the cost which represents the excess of the cost of handsets over
the retail sales price of handsets has been included in advertising costs. The
basis for inclusion of the excess handset cost in advertising expense is to
reflect the promotional nature of these transactions. Alamosa sells handsets
solely as a means to attract wireless subscribers. There were no product
revenues or related costs for the period from inception to December 31, 1998.
Stock based compensation
The Company has elected to follow Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its employee stock options. Under APB 25, the Company recorded no
compensation expense related to stock options at December 31, 1998. At September
30, 1999, the Company recorded compensation expense of $6,822,037 which is
presented as equity participation compensation expense in the Company's
Statement of Operations. The equity participation compensation expense relates
to two employees whose normal compensation is recorded in selling, general and
administrative expenses. The Company has implemented the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock Based Compensation."
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 on the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.
Risks and uncertainties
Emergence from the development stage is dependent upon successful
implementation of the Company's business strategy and development of a
sufficient subscriber base. The Company will continue to incur significant
expenditures in connection with expanding and improving its operations.
Concentration of risk
The Company maintains cash and cash equivalents in accounts with a
financial institution in excess of the amount insured by the Federal Deposit
Insurance Corporation. The Company monitors the financial stability of this
institution regularly and management does not believe there is significant
credit risk associated with deposits in excess of federally insured amounts.
F-10
<PAGE> 122
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Effects of recent accounting pronouncements
In June 1998 and June 1999, the Financial Accounting Standards Board,
commonly referred to as FASB, issued Statement of Financial Accounting
Standards, or SFAS, No. 133, "Accounting for Derivative Instruments and Hedging
Activities" and SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133." These
statements require companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedging accounting. SFAS
No. 133 will be effective for Alamosa's fiscal year ending December 31, 2001.
Management believes that the adoption of these statements will not have a
significant impact on the Company's financial results.
The American Institute of Certified Public Accountants issued Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities," in April 1998.
Effective for financial statements for fiscal years beginning after December 15,
1998, this statement requires costs of start-up activities and organization
costs to be expensed as incurred. Start-up activities are defined as those
one-time activities related to opening a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer or beneficiary, initiating a new process in an existing
facility, or commencing some new operation. The Company has not capitalized any
expenses with such characteristics for financial reporting purposes. Therefore,
the Company believes adoption of this statement will not materially impact the
financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement requires that all items required to be recognized under accounting
standards as components of comprehensive income, be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 is effective for financial statement periods beginning
after December 31, 1997. However, in the current year, no items represent
comprehensive income as defined in SFAS No. 130.
3. UNAUDITED PRO FORMA AND AS ADJUSTED INFORMATION
The unaudited pro forma and as adjusted information reflects certain
assumptions regarding transactions and their effects that would occur as a
result of the initial public offering described in Note 11.
Unaudited pro forma income information
The unaudited pro forma information as shown on the statement of operations
is presented to show the effects of income taxes related to the Company's
anticipated termination of its limited liability company status. The unaudited
pro forma income tax adjustment is presented as if the Company had been a C
Corporation subject to federal and state income taxes at an effective tax rate
of 34% for the period from inception through December 31, 1998 and the
nine-month period ended September 30, 1999. Application of the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" would have resulted in a deferred tax asset primarily from temporary
differences related to the treatment of start-up costs and from net operating
loss carryforwards. The deferred tax asset would have been offset by a full
valuation allowance as there is not currently sufficient positive evidence as
required by SFAS No. 109 to substantiate recognition of the asset.
The pro forma information is presented for informational purposes only and
is not necessarily indicative of operating results that would have occurred had
the Company elected to terminate its limited liability company status as of the
beginning of each of the periods presented, nor are they necessarily indicative
of future operating results.
F-11
<PAGE> 123
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited pro forma net loss per share
Pro forma net loss per share is calculated by dividing pro forma net loss
by the weighted average number of shares of common stock which would have been
outstanding before the initial public offering after giving effect to the
reorganization of the Company described in Note 11.
Unaudited pro forma weighted average shares outstanding
Unaudited pro forma weighted average shares outstanding is computed after
giving effect to the reorganization of the Company described in Note 11. The
calculation was made in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." Diluted weighted average shares
outstanding at September 30, 1999 exclude 487,288 incremental potential common
shares from stock options because inclusion would have been antidilutive.
4. PROPERTY, EQUIPMENT AND CONSTRUCTION IN PROGRESS
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Vehicles.................................. $ 23,637 $ 430,753
Furniture and office equipment............ 92,418 1,679,017
Network equipment......................... -- 33,635,587
Land and building......................... -- 2,080,526
---------- -----------
116,055 37,825,883
Accumulated depreciation.................. (2,063) (896,075)
---------- -----------
Total........................... $ 113,992 $36,929,808
========== ===========
</TABLE>
Construction in progress consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Network equipment......................... $1,628,271 $23,009,205
Leasehold improvements.................... 350,499 5,931,154
---------- -----------
Total........................... $1,978,770 $28,940,359
========== ===========
</TABLE>
F-12
<PAGE> 124
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LEASES
Operating leases
The Company has various operating leases, primarily related to rentals of
towers sites and offices. Rental expense was $15,208 and $664,622 for the period
ended December 31, 1998 and for the nine-month period ended September 30, 1999
respectively. At September 30, 1999, the aggregate minimum rental commitments
under noncancelable operating leases for the periods shown are as follows:
<TABLE>
<S> <C>
YEARS:
1999.................................................. $ 684,167
2000.................................................. 2,965,083
2001.................................................. 2,978,702
2002.................................................. 2,997,820
2003.................................................. 3,030,731
2004.................................................. 3,086,337
Thereafter............................................ 15,633,791
-----------
Total......................................... $31,376,631
===========
</TABLE>
Included in total minimum rental commitments is $16,049,515 which will be
paid to related parties.
Capital leases
Capital leases consist of leases for rental of retail space and switch
usage. The net present value of the leases was $728,219 and $853,965 at December
31, 1998 and September 30, 1999, respectively, and was included in construction
in progress and property and equipment. Amortization recorded under these leases
was minimal during 1998 and was $20,661 for the nine-month period ended
September 30, 1999.
At September 30, 1999, the future payments under capital lease obligations,
less imputed interest, are as follows:
<TABLE>
<S> <C>
YEARS:
1999................................................... $ 26,430
2000................................................... 105,720
2001................................................... 105,720
2002................................................... 105,720
2003................................................... 105,720
2004................................................... 113,970
Thereafter............................................. 1,085,480
----------
Total minimum lease payments............................. 1,648,760
Less: imputed interest................................... 794,795
----------
Present value of minimum lease payments.................. 853,965
Less: current installments............................... 21,281
----------
Long-term capital lease obligations at September 30,
1999................................................... $ 832,684
==========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Alamosa has a $500,000 revolving line of credit with Norwest Bank that
expires December 9, 1999. The line of credit has a variable interest rate, 9.0%
at September 30, 1999. Proceeds from this line of credit are used to purchase
vehicles for service representatives. As of September 30, 1999, $147,012
remained available on the line of credit. The vehicles purchased under this line
of credit and all of Alamosa's cash and cash equivalents held at Norwest Bank
are pledged as collateral under the terms of the Agreement. No interest amounts
were paid during the period ended December 31, 1998. A total of $8,686 was paid
during the nine-month period ended September 30, 1999.
F-13
<PAGE> 125
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On December 21, 1998, Alamosa entered into a three-year agreement with
Nortel for network equipment and infrastructure. Pursuant to the agreement,
Nortel will also provide installation and optimization services, such as network
engineering and radio frequency engineering, for the equipment and grant Alamosa
a nonexclusive license to use the software associated with the Nortel equipment.
As described in Note 10, Alamosa has committed to purchase $82.0 million worth
of equipment and services from Nortel. Nortel will finance these purchases
pursuant to the Nortel credit facility. Under the agreement, Alamosa will
receive a discount on the network equipment and services because of the
Company's affiliation with Sprint PCS, but must pay a premium on any equipment
and services financed by Nortel. If Alamosa's affiliation with Sprint PCS ends,
Nortel has the right to either terminate the agreement or, with Alamosa's
consent modify the agreement to establish new prices, terms and conditions.
7. RELATED PARTY TRANSACTIONS
Note receivable
On April 23, 1999, the Company entered into a $100,000 loan agreement with
an officer of the Company. The loan matures on April 2014 and accrues interest
at an annual rate of 7.75%.
Agreements with CHR Solutions, Inc.
Alamosa has entered into a number of agreements with CHR Solutions as
described in more detail below. CHR Solutions resulted from a merger between
Hicks & Ragland Engineering Co., Inc., and Cathey, Hutton & Associates, Inc.
effective as of November 1, 1999. David Sharbutt, Alamosa's Chairman and Chief
Executive Officer, was at the time the agreements were executed the President
and Chief Executive Officer of Hicks & Ragland. Mr. Sharbutt is currently
employed as a senior consultant by CHR Solutions. Hicks & Ragland is also
affiliated with a membership interest holder of Alamosa.
On July 27, 1998, Alamosa entered into an engineering services contract
with Hicks & Ragland for design and construction inspection services in
connection with the network deployment. The term of the contract covers three
periods through August 2001, though either party may terminate the agreement for
cause before August 2001. A guaranteed maximum fee amount has been set for each
period of the contract, and those fees aggregate to approximately $7.0 million,
excluding taxes. If the total billing for the project is less than the
guaranteed maximum fee, Alamosa will pay an incentive bonus equal to 50% of the
difference. Alamosa paid $902,243 and $1,834,853 for these services during 1998
and for the nine-month period ended September 30, 1999 respectively. Engineering
fees under this agreement are recorded in construction in progress and property
and equipment and comprise approximately 72% and 3% of fixed asset purchases
during 1998 and 1999 respectively. At December 31, 1998 and September 30, 1999,
amounts payable under these agreements amounted to $443,610 and $737,753.
Effective September 20, 1998, Alamosa entered into a special services
contract with Hicks & Ragland, to provide marketing and operations consulting
services for a maximum amount of $100,000. Subsequent contracts for marketing,
consulting, business planning and radio frequency "drive testing" were approved
in October 1999, in an aggregate amount of approximately $500,000. Alamosa paid
$235,550 for these services for the nine-month period ended September 30, 1999.
The amounts payable under these agreements was $189,444 at September 30, 1999.
On April 9, 1999, Alamosa entered into a data communications services
contract with H&R Data Com, an affiliate of Hicks & Ragland, to perform design
and implementation services in connection with corporate enterprise wide area
network and local area networks for a maximum fee of $262,040. Alamosa paid
$88,486 for these services for the nine-month period ended September 30, 1999.
F-14
<PAGE> 126
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As of April 6, 1999, Alamosa entered into a telecommunications service
agreement with Tech Telephone Company Limited Partnership, an affiliate of Hicks
& Ragland, to install and provide DS1 telecommunications lines between Sprint
PCS and Alamosa's Lubbock-based operations and between Alamosa's Lubbock based
operations and other markets for an estimated annual cost of $567,000. The
original term of the agreement is three years, but the agreement automatically
renews upon expiration for additional successive 30-day terms by either party.
As of August 13, 1999, Alamosa entered into a distribution agreement with
TechTel Communications Corporation, an affiliate of Hicks & Ragland, authorizing
it to become a third party distributor of Sprint PCS products and services for
Alamosa in Lubbock.
Agreement with American Tower Corporation
In August 1998, Alamosa entered into a master site development and lease
agreement with Specialty, now a subsidiary of American Tower Corporation.
Pursuant to the agreement, Specialty arranges for collocation of equipment or
constructs new facilities in areas identified for build-out. Specialty provides
site acquisitions, leasing and construction services, and secures zoning,
permitting and surveying approvals and licenses for each base station. This
initial term master agreement expires in August 2003, with automatic renewal for
three additional terms of five years each. The agreement provides for monthly
payments subject to an annual adjustment based on the Consumer Price Index.
Prior to becoming a subsidiary of American Tower Corporation, Specialty was
related to Alamosa through one of Alamosa's directors who owned interests in
both Alamosa and Specialty and was an employee and officer of Specialty and
Specialty's then parent company. In addition, another individual who was one of
Alamosa's directors at the time the agreement was entered into, is a manager of
Longmont PCS, LLC, one of Alamosa's members. This individual is also a
stockholder of Specialty Teleconstructors, Inc. and acts as a vice president of
American Tower Corporation. No amounts were paid or outstanding under this
agreement during 1998. As of September 30, 1999, $165,300 had been paid under
this agreement.
Other related party transactions
In November 1998, the Company entered into an agreement to lease space for
telephone switching equipment in Albuquerque with SASR Limited Partnership, 50%
owned by one of Alamosa's directors and a manager of West Texas PCS, LLC, one of
Alamosa's interest holders. The lease has a term of five years with two optional
five year terms. The lease provides for monthly payments aggregating to $18,720
a year, as well as a pro rata portion of real estate taxes on the property, and
subject to adjustment.
In connection with Alamosa's distribution and sales of Sprint PCS wireless
communications equipment, on December 28, 1998, Alamosa entered into a long-term
agreement to lease space for a retail store in Lubbock, Texas with Lubbock HLH,
Ltd., principally owned by one of Alamosa's directors and the general manager of
South Plains Advance Communications & Electronics, Inc. South Plains holds an
ownership interest in Alamosa. This lease has a term of 15 years and provides
for monthly payments aggregating to approximately $110,000 a year, subject to
adjustment based on the Consumer Price Index on the first day of the sixth lease
year and on the first day of the eleventh lease year. No amounts were paid or
outstanding under this lease at December 31, 1998. As of September 30, 1999,
$27,501 had been paid under this lease.
During 1998, certain members paid costs on behalf of the Company, which
were subsequently reimbursed. Such payments amounted to approximately $101,000
during 1998 and were minimal during 1999. No amounts payable to members were
outstanding at December 31, 1998 and September 30, 1999.
F-15
<PAGE> 127
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. EMPLOYEE BENEFITS
Effective November 13, 1998, the Company elected to participate in the NTCA
Savings Plan, a defined contribution employee savings plan sponsored by the
National Telephone Cooperative Association under Section 401(k) of the Internal
Revenue Code. No employer contributions were made to this plan for the period
ended December 31, 1998 and the nine-month period ended September 30, 1999.
On October 2, 1998, the Company entered into an employee agreement with its
Chief Operating Officer. The agreement provides for the granting of stock
options in three series. The initial exercise price will be determined based on
the following formula: $48,500,000, committed capital at September 30, 1998,
multiplied by the percentage interest represented by the option exercised. The
exercise price for each series will increase by an annual rate of 8%, 15% or 25%
compounded monthly beginning at the date of grant as specified by the agreement.
Options may be exercised any time from January 1, 2004 to January 5, 2008. The
options vest over a three year period. During 1998, one option from each series
was granted under this agreement. The options to acquire membership interests
described above will be exchanged for options to acquire an equivalent number of
common shares: 242,500 at $1.08 per share, 242,500 at $1.15 per share and
242,500 at $1.25 per share.
On October 14, 1998, the Board of Members approved an Incentive Ownership
Plan. The plan consists of 3,500 units comprised of 1200 Series 8, 1150 Series
15 and 1150 Series 25 units. The exercise price for each series is based on a
pre-defined strike price which increases by an annual rate of 8%, 15% or 25%
compounded monthly beginning July 1, 2000. The initial exercise prices are
$564.79, $623.84 and $711.88 for the Series 8, Series 15 and Series 25 options,
respectively. Each unit provides the holder an option to purchase an interest in
the Company. Vested units may be exercised any time from July 1, 2000 to
December 31, 2006. On October 29, 1998, under an employment agreement with the
company's Chief Technology Officer, 300 units were granted under this plan. The
options to acquire membership interests described above will be exchanged for
options to acquire an equivalent number of common shares: 48,500 at $1.13 per
share, 48,500 at $1.25 per share and 48,500 at $1.42 per share.
The Company applies Accounting Principals Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations, in accounting for
its plans. Under opinion no. 25, no compensation expense or deferred
compensation was recorded as of December 31, 1998. As of September 30, 1999, the
Company has recorded unearned compensation of $11,193,751. This amount is being
amortized in accordance with FASB Interpretation No. 28 over the vesting periods
of the individual options. For the nine-month period ended September 30, 1999,
equity participation compensation expense of $6,822,037 has been recognized.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" provides the Company the option of recognizing the cost of options
granted based on fair values of the options at the time of the grant. Due to the
floating exercise price of the options granted through September 30, 1999, the
accounting provisions of opinion no. 25 for variable plans have been followed.
The Company has subsequently amended the options outstanding at September 30,
1999 to establish a fixed exercise price creating a new measurement date.
Following this amendment, the provisions of opinion no. 25 for fixed plans will
be followed. The Company has decided not to elect the cost-recognition
provisions of SFAS No. 123.
The fair value of each stock option is estimated at December 31, 1998 using
the Black-Scholes option pricing model: dividend yield of 0%; risk free interest
of 5.5%; expected lives of the options equal to 8.5 years; and a volatility rate
of 70%.
F-16
<PAGE> 128
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Had the compensation expense for the options granted during 1998 been based
on the fair value pricing model described above, additional compensation expense
of $73,709 would have been recognized at December 31, 1998. This additional
compensation expense would have resulted in net loss of $997,531 and net loss
per share of $.02 at December 31, 1998. There would have been no additional
compensation expense for the nine-month period ended September 30, 1999. The
effects of applying SFAS No. 123 in this proforma disclosure are not indicative
of future amounts. The company anticipates making awards in the future under its
Incentive Ownership Plan.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts payable, and accrued expenses
approximate fair value because of the short maturity of these items.
The carrying amount of the debt issued pursuant to the Company's credit
agreement with Nortel is expected to approximate fair value because the interest
rate changes with market interest rates.
Alamosa utilizes interest rate cap agreements to limit the impact of
increases in interest rates on its floating rate debt. The interest rate cap
agreements require premium payments to counterparties based upon a notional
principal amount. Interest rate cap agreements entitle the Company to receive
from the counterparties the amounts, if any, by which the selected market
interest rates exceed the strike rates stated in the agreements. The fair value
of the interest rate cap agreements is estimated by obtaining quotes from
brokers and represents the cash requirement if the existing contracts had been
settled at the balance sheet dates.
Selected information related to the Company's interest rate cap agreements
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Notional amount........................................... $-- $ 28,750,000
Fair value................................................ -- 71,094
Carrying amount........................................... -- 233,700
--- ------------
Net unrecognized gain (loss).............................. $-- $ (162,606)
=== ============
</TABLE>
These fair value estimates are subjective in nature and involve
uncertainties and matters of considerable judgement and therefore, cannot be
determined with precision. Changes in assumptions could significantly affect
these estimates.
10. FINANCING AGREEMENTS
On February 3, 1999, the Company issued a letter of credit for $7,500,000
in favor of Nortel. The letter of credit expired in June 1999.
On June 10, 1999, the Company entered into a credit agreement with Nortel.
The proceeds are used to purchase equipment and to fund the construction of the
Company's portion of the Sprint PCS network. The financing terms permit Alamosa
to borrow $123 million through three commitment tranches through February 18,
2002, and will require minimum equipment purchases.
The credit facility is collateralized by all of the Company's assets and
capital stock including future issues under the terms of the agreement. The
Company is required to maintain certain financial ratios and other financial
conditions including minimum levels of revenue and wireless subscribers. In
addition, the Company is required to maintain a $1,000,000 cash balance as
security against the facility. This balance is recorded as a noncurrent asset.
F-17
<PAGE> 129
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the credit agreement with Nortel, each of the members
pledged its ownership interest in Alamosa to Nortel to collateralize the
Company's obligations under the credit agreement. The members were required to
secure their unfunded contributions with either a letter of credit or a
marketable securities pledge agreement. Each letter of credit or marketable
securities pledge agreement will be terminated prior to the closing of the
initial public offering described in Note 11. In addition, Nortel required the
members to execute capital contribution agreements to confirm their collective
obligations to make capital contributions of at least $48.5 million.
Alamosa may borrow money as either a base rate loan with an interest rate
of prime plus 2.5%, or a Eurodollar loan with an interest rate of the London
interbank offered rate, commonly referred to as LIBOR, plus 3.5%. This interest
rate was 9.4% at September 30, 1999. In addition, an annual unused facility fee
of 0.75% will be charged beginning six months after the closing date. Interest
accrued through the two year anniversary from the closing date is added to the
principal amount of the loan. Thereafter, interest is payable monthly in the
case of base rate loans and at end of the interest period, not to exceed three
months, in the case of Eurodollar loans. Interest expense for the period ended
September 30, 1999 totaled $544,055. Principal is payable in 20 quarterly
installments beginning February 18, 2002. Alamosa may voluntarily prepay any of
the loans at any time, but any amount repaid may not be reborrowed since there
are no revolving credit features. Alamosa must make mandatory prepayments under
certain circumstances, equal to 50% of the excess cash flow as computed under
the credit agreement, after March 31, 2002; and any amount in excess of $250,000
received for asset sales outside the ordinary course of business or insurance
proceeds, to the extent not reinvested in property or assets within a stated
period of time. All prepayments are applied to the outstanding loan balances pro
rata in the inverse order of maturity, except where there is a borrowing base
shortage, in which case prepayments are first applied there, and then pro rata
among all three commitment tranches.
At September 30, 1999, the Company borrowed $59,678,288 against this
facility.
As a condition of the financing, Sprint PCS has entered into a consent and
agreement with Nortel that modifies Sprint PCS's rights and remedies under its
affiliation agreements with Alamosa. Among other things Sprint PCS consented to
the pledge substantially all of Alamosa's assets, including the affiliation
agreements to Nortel. In addition, Sprint PCS may not terminate the affiliation
agreements with Alamosa and must maintain 10 MHz of PCS spectrum in Alamosa's
markets until the Nortel financing is satisfied or Alamosa's assets are sold
pursuant to the terms of the consent and assignment with Nortel.
The Company incurred approximately $4,074,000 of costs associated with
obtaining the Nortel financing. These costs consist of a loan origination fee
and debt issue costs which have been capitalized and are being amortized to
interest expense using the effective interest method over the term of the credit
facility.
11. OTHER SUBSEQUENT EVENTS
In October 1999, the Company entered into a letter of intent to amend the
affiliation agreement with Sprint PCS to expand its service networks to include
markets located in Wisconsin. As a result, Alamosa formed its 99% owned
subsidiary, Alamosa Wisconsin LP, to perform Alamosa's obligations under the
affiliation agreements with Sprint PCS.
The Company intends to file a registration statement for equity financing
through an initial public offering. Immediately prior to the closing of initial
public offering, the Company will reorganize the business into a holding company
structure. In connection with the reorganization, the members of Alamosa PCS,
LLC will receive 48,500,000 shares of common stock of Alamosa PCS Holdings, Inc.
in exchange for their membership interests in the limited liability company. The
ownership percentages among the Company's shareholders following the
reorganization will remain consistent with the ownership percentages described
in Note 1. The Company plans to utilize the proceeds from the aforementioned
offerings to fund the build-out of its expanded network.
F-18
<PAGE> 130
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In addition to the initial public offering described above, the Company
expects to offer senior discount notes through a public offering. The senior
discount notes will be unsecured obligations and will rank equally with all
future senior debt and senior to all future subordinated debt. The senior
discount notes will be fully and unconditionally, jointly and severally
guaranteed on a senior subordinated, unsecured basis, by all the existing and
any future restricted subsidiaries of Alamosa PCS Holdings, Inc. Therefore,
financial statements of guarantor subsidiaries have been omitted.
Alamosa may redeem some or all of the senior discount notes beginning in
2005, and until 2003 may redeem a portion of the senior discount notes with the
net proceeds of an equity offering.
The senior discount notes will be issued at a discount to their principal
amount and will accrete in value until 2005, at which time their accreted value
will equal their principal amount. Interest will begin to accrue at this time
and will be payable semi-annually. The senior discount notes will contain
covenants limiting Alamosa PCS Holding, Inc.'s ability and the ability of its
subsidiaries to:
- incur additional debt or issue preferred stock;
- pay dividends, redeem capital stock or make other restricted payments or
investments;
- create liens on assets;
- merge, consolidate or dispose of assets;
- enter into transactions with affiliates; and
- change lines of business.
Holders of the senior discount notes will have the right to require Alamosa
PCS Holdings, Inc. to repurchase all or any part of their senior discount notes,
at 101% of the accreted value, if before 2005, or 101% of the aggregate
principal amount thereafter, together with accrued and unpaid interest, upon a
change of control of Alamosa.
Events of default in respect of the senior discount notes include, among
others, failure to pay interest or principal on the senior discount notes when
due, failure to perform covenants, acceleration of the maturity of other debt,
events of bankruptcy, certain judgments against Alamosa and the occurrence of
any event of default pursuant to the affiliation agreements with Sprint PCS.
In October 1999, the Company entered into a commitment letter to amend its
Nortel financing which increased the facility from $123 million to $250 million
and increased the Company's commitment to purchase equipment from Nortel. As of
December 31, 1999, Alamosa had remaining commitments of $117.6 million to
purchase equipment and infrastructure under the amended agreement. As
consideration for the amendment, the Company is required to issue to Nortel
warrants for 2% of the total equity as of the closing of the initial public
offering, on a fully diluted basis. The warrants will be issued and will be
exercisable by Nortel on the second anniversary of the closing date, unless
among other options, Alamosa raises an additional $75.0 million of capital and
uses the proceeds to prepay any loans under the Nortel facility prior to that
date. The exercise price for the warrants will be the price paid for the common
stock in the initial public offering. Subsequent to the closing of the amended
Nortel agreement, the interest rates charged by Nortel will increase on the base
rate loans from prime plus 2.5% to prime plus 2.75% and on the Eurodollar loans
from LIBOR plus 3.5% to LIBOR plus 3.75%. In addition, subsequent to the closing
of the amended Nortel agreement, Alamosa will no longer be required to pay a
premium on any equipment and services financed by Nortel.
F-19
<PAGE> 131
ALAMOSA PCS LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Effective October 1, 1999, Alamosa entered into a three-year employment
agreement with David Sharbutt, Alamosa's chairman, who was named Chief Executive
Officer. In addition, Alamosa granted options to Mr. Sharbutt to acquire 242,500
common shares at an exercise price of $1.15 per share which vest immediately
upon completion of the initial public offering and 1,455,000 shares at an
exercise price equal to the initial public offering price which vest 25% per
year beginning September 1, 2000. The options expire December 9, 2009. Based on
the expected offering price, the Company will recognize compensation expense of
$3,358,625 related to the 242,500 options issued with an exercise price below
the initial public offering price over the options vesting period.
In October 1999, Alamosa amended the Chief Operating Officer's options,
described in Note 8, such that each of his three series of original options to
purchase 242,500 shares of common stock at exercise prices which increased by an
annual rate of 8%, 15% and 25%, compounded monthly beginning at the date of
grant, and that vested over three years will be exchanged for options to acquire
a total of 1,697,500 shares of common stock. The first option to acquire 242,500
shares of common stock has a fixed exercise price of $1.15 per share and vests
immediately upon completion of the initial public offering. The second option to
acquire 1,455,000 shares of common stock has an exercise price equal to the
initial public offering price and vests 25% per year beginning September 1,
2000. The expiration date of all of the Chief Operating Officer's options was
extended from January 5, 2008 to December 9, 2000. These amendments will result
in a new measurement date, and compensation expense of $973,682 will be
recognized upon completion of the initial public offering. The remaining
unearned compensation totaling $1,947,363 will be recognized over the amended
vesting period.
In addition, in October 1999, Alamosa amended the Chief Technology
Officer's options, described in Note 8, such that his original options with
exercise prices which increased by an annual rate of 8%, 15%, or 25% (compounded
monthly beginning July 1, 2000) will be exchanged for options to purchase an
equivalent number of common shares at fixed exercise prices equal to $1.13,
$1.25 and $1.42 per share which will not increase over the term of the options.
In addition, the three-year vesting period will be amended such that one-third
of each option series will be fully vested and exercisable upon completion of
the initial public offering, and another one-third of each series will vest on
each of October 29, 2000 and October 29, 2001. These amendments will result in a
new measurement date and recognition of compensation expense of $197,741 at the
completion of the initial public offering. The remaining unearned compensation
totaling $395,482 will be recognized over the amended vesting period.
Effective December 1, 1999, the Company entered into an employment
agreement with its Chief Financial Officer, Kendall W. Cowan, which has a
five-year term and includes options to purchase 1,455,000 shares at the initial
public offering price and that will expire December 9, 2009. There is no
compensation cost related to these options.
F-20
<PAGE> 132
A Sprint PCS Network Partner
[ALAMOSA LOGO]
<PAGE> 133
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10,714,000 SHARES
ALAMOSA PCS HOLDINGS, INC.
COMMON STOCK
[ALAMOSA LOGO]
------------------
PROSPECTUS
, 2000
------------------
SALOMON SMITH BARNEY LEHMAN BROTHERS
------------------
CREDIT SUISSE FIRST BOSTON DEUTSCHE BANC ALEX. BROWN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 2000, all dealers that buy, sell or trade the common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE> 134
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses and costs (other than
underwriting discounts and commissions) expected to be incurred in connection
with the issuance and distribution of the securities to be registered. All of
the amounts shown are estimated except for 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......... $ 51,430
NASD filing fee............................................. 19,000
Nasdaq National Market listing fees......................... 95,000
Printing and engraving expenses............................. 125,000
Legal fees and expenses..................................... 425,000
Accounting fees and expenses................................ 292,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous expenses...................................... 2,570
----------
Total.................................................. $1,020,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificate of Incorporation of Alamosa PCS Holdings, Inc. ("Alamosa")
provides that the liability of the directors of Alamosa to Alamosa or any of its
stockholders for monetary damages arising from acts or omissions occurring in
their capacity as directors shall be limited to the fullest extent permitted by
the laws of Delaware or any other applicable law. This limitation does not apply
with respect to any action in which a director would be liable under Section 174
of the General Corporation Law of the State of Delaware nor does it apply with
respect to any liability in which a director:
- breached his duty of loyalty to Alamosa or its stockholders;
- did not act in good faith or, in failing to act, did not act in good
faith;
- acted in a manner involving intentional misconduct or a knowing violation
of law or, in failing to act, shall have acted in a manner involving
intentional misconduct or a knowing violation of law; or
- derived an improper personal benefit.
Alamosa's Certificate of Incorporation provides that Alamosa shall
indemnify its directors, officers and employees and former directors, officers
and employees to the fullest extent permitted by the laws of Delaware or any
other applicable law. Pursuant to the provisions of Section 145 of the General
Corporation Law of the State of Delaware, Alamosa has the power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding (other than an
action by or in the right of Alamosa) by reason of the fact that he is or was a
director, officer, employee, or agent of Alamosa, against any and all expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit, or proceeding. The power to indemnify
applies only if such person acted in good faith and in a manner he reasonably
believed to be in the best interest, or not opposed to the best interest, of
Alamosa and with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of
Alamosa as well, but only to the extent of defense and settlement expenses and
not to any satisfaction of a judgment or settlement of the claim itself and with
the further limitation that in such actions no indemnification shall be made in
the event of any adjudication of negligence or misconduct unless the court, in
its discretion, believes that in light of all the circumstances indemnification
should apply.
II-1
<PAGE> 135
The statute further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements, vote
of stockholders or disinterested directors, or otherwise.
Reference is made to the Form of Underwriting Agreement, to be filed as
Exhibit 1.1 to this registration statement, which provides for indemnification
by the Underwriters under certain circumstances of the directors and officers of
Alamosa signing the registration statement and certain controlling persons of
Alamosa against certain liabilities, including those arising under the
Securities Act.
Alamosa has directors' and officers' liability insurance covering its
directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Alamosa pursuant
to the foregoing provisions, Alamosa 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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Alamosa PCS Holdings, Inc., a Delaware corporation ("Alamosa") was formed
on October 19, 1999. It has no assets and has issued no capital stock.
Immediately prior to the closing of this initial public offering, we will
reorganize as described in the prospectus. In connection with the
reorganization, Alamosa will merge with Alamosa PCS Holdings, Inc., a Texas
corporation ("Texas Holdings"). To effectuate the merger, Alamosa will issue 100
shares of common stock to Texas Holdings. Alamosa will then merge into Texas
Holdings, with Alamosa as the surviving corporation. In the merger, Alamosa will
issue unregistered shares of Alamosa common stock to the stockholders of Texas
Holdings.
Alamosa will also grant stock options to directors, officers, employees and
consultants before the closing of this initial public offering. These are the
only unregistered issuances of securities that Alamosa currently contemplates.
Texas Holdings will be the successor to the current operating company,
Alamosa PCS, LLC, by virtue of a conversion of the LLC to a corporation.
The persons to receive Alamosa common stock in connection with the
reorganization, their owners, the consideration to be received by Alamosa for
such common stock and the number of shares of common stock to be received are
set forth in the tables below.
1. COMMENCEMENT OF THE REORGANIZATION
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF MEMBERSHIP INTEREST
SHARES OF OUR RECEIVED IN
NATURE OF COMMON STOCK EXCHANGE FOR OUR
ENTITY RECEIVING SECURITIES OWNER, IF AN ENTITY CONSIDERATION TO BE ISSUED COMMON STOCK(1)
- --------------------------- ------------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C>
Alamosa PCS Holdings, Inc.
(Texas)............................. Persons listed in $100 100 100%
Item 2
</TABLE>
II-2
<PAGE> 136
2. COMMON STOCK TO BE ISSUED PURSUANT TO REINCORPORATION MERGER
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF MEMBERSHIP INTEREST
SHARES OF OUR RECEIVED IN
NATURE OF COMMON STOCK EXCHANGE FOR OUR
ENTITY RECEIVING SECURITIES OWNER, IF AN ENTITY CONSIDERATION TO BE ISSUED COMMON STOCK(1)
- --------------------------- ------------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C>
Rosewood Telecommunications,
L.L.C. ............................... Caroline Hunt Trust Membership 9,725,000 20.05%
Estate Interest
South Plains Advanced Communications &
Electronics, Inc. .................... Rural telephone Membership 8,652,085 17.84
cooperative; Interest
members are
subscribers for
phone service
West Texas PCS, LLC................... Michael R. Budagher Membership 7,072,915 14.58
Interest
Taylor Telecommunications, Inc. ...... Rural telephone Membership 5,100,000 10.52
cooperative; Interest
members are
subscribers for
phone service
Plateau Telecommunications,
Incorporated.......................... Rural telephone Membership 3,000,000 6.19
cooperative; Interest
members are
subscribers for
phone service
Tregan International Corp. ........... Regan Silber and Membership 3,000,000 6.19
Trevar Pearlman Interest
XIT Telecommunication & Technology,
Inc. ................................. Rural telephone Membership 2,750,000 5.67
cooperative; Interest
members are
subscribers for
phone service
LEC Development, Inc. ................ Rural telephone Membership 2,500,000 5.15
cooperative; Interest
members are
subscribers for
phone service
Wes-Tex Telecommunications, Inc. ..... Rural telephone Membership 2,500,000 5.15
cooperative; Interest
members are
subscribers for
phone service
Longmont PCS, LLC..................... Jeffrey P. Howard Membership 1,000,000 2.06
Interest
J&M Family Partnership Ltd............ James R. and Mary Membership 666,435 1.37
Underwood and their Interest
three children
Five S, Ltd. ......................... David and Patsy Membership 593,200 1.22
Sharbutt and their Interest
three children
Yellow Rock PCS, L.P. ................ Adam Lampert Membership 400,000 0.82
Interest
John St. Clair........................ -- Membership 292,938 0.60
Interest
Harness, Ltd.......................... -- Membership 292,938 0.60
Interest
Tony Bliss............................ -- Membership 288,056 0.59
Interest
Rick Overman.......................... -- Membership 178,205 0.37
Interest
</TABLE>
II-3
<PAGE> 137
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF MEMBERSHIP INTEREST
SHARES OF OUR RECEIVED IN
NATURE OF COMMON STOCK EXCHANGE FOR OUR
ENTITY RECEIVING SECURITIES OWNER, IF AN ENTITY CONSIDERATION TO BE ISSUED COMMON STOCK(1)
- --------------------------- ------------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C>
W. Don Stull.......................... -- Membership 97,647 0.20
Interest
Frank Eldridge........................ -- Membership 73,235 0.15
Interest
David E. Sharbutt..................... -- Membership 48,823 0.10
Interest
Barry Moore........................... -- Membership 48,823 0.10
Interest
Randy Yeisley......................... -- Membership 48,824 0.10
Interest
Addie Lee Hicks....................... -- Membership 24,412 0.05
Interest
Steven Steele......................... -- Membership 24,412 0.05
Interest
Paula Sexton.......................... -- Membership 24,412 0.05
Interest
Will Payne............................ -- Membership 24,412 0.05
Interest
Gail McVicker......................... -- Membership 24,412 0.05
Interest
Gaylord Ellerman...................... -- Membership 24,412 0.05
Interest
Jim McDuff............................ -- Membership 24,412 0.05
Interest
W. Don Stull.......................... -- Options(3) 145,500(2) (3)
</TABLE>
The persons to receive options to purchase Alamosa common stock, the nature
of consideration for these options and number of shares that may be purchased
pursuant to these options are set forth in the table below.
3. OPTIONS TO BE GRANTED
<TABLE>
<CAPTION>
NATURE OF NUMBER OF
OWNER CONSIDERATION OPTIONS
- ----- ------------- ------------
<S> <C> <C>
David E. Sharbutt........................................... Employment 1,697,500(2)
Jerry W. Brantley........................................... Employment 1,697,500(2)
Kendall Cowan............................................... Employment 1,455,000(2)
Michael R. Budagher......................................... Director 28,000(2)
Services
Ray M. Clapp, Jr. .......................................... Director 43,000(2)
Services
Scotty Hart................................................. Director 28,000(2)
Services
</TABLE>
II-4
<PAGE> 138
<TABLE>
<CAPTION>
NATURE OF NUMBER OF
OWNER CONSIDERATION OPTIONS
- ----- ------------- ------------
<S> <C> <C>
Thomas Hyde................................................. Director 28,000(2)
Services
Schuyler B. Marshall........................................ Director 28,000(2)
Services
Tom M. Phelps............................................... Director 28,000(2)
Services
Reagan W. Silber............................................ Director 28,000(2)
Services
Jimmy R. White.............................................. Director 28,000(2)
Services
Adam Lampert................................................ Consulting 15,000(2)
Services
Jeff Howard................................................. Consulting 12,500(2)
Services
Wilton J. Payne............................................. Consulting 10,000(2)
Services
J.R. Wilson................................................. Consulting 10,000(2)
Services
Other Employees............................................. Employment 891,500(2)
</TABLE>
- ---------------
(1) All percentages of membership interests, except options, are calculated on a
non-fully diluted basis. Percentages for options to purchase membership
interests are calculated on a fully diluted basis.
(2) Represents options to acquire securities, not issued securities.
(3) The consideration for these stock options is an option to purchase a 0.3%
membership interest in Alamosa PCS, LLC as well as his employment with us.
None of the foregoing transactions will involve any public offering, and
issuances of securities in connection with such transactions will be made
pursuant to valid exemptions under the Securities Act of 1933 (the "Act"). The
following are the exemptions relied on for each issuance of securities pursuant
to our reorganization.
First, our issuance of 100 shares to Holdings Texas is exempt under Section
4(2) of the Act. This issuance of 100 shares is a transaction involving one
offeree, involving no general solicitation.
Second, our issuance of 48,500,000 shares to the twenty-nine stockholders
of Texas Holdings, pursuant to the merger of Texas Holdings with and into
Alamosa, is exempt under Section 4(2). The merger will take place through direct
communication with the offerees, with no general solicitation or advertising.
Since Alamosa will be a subsidiary of Texas Holdings, these offerees will have a
pre-existing and substantial relationship with us.
II-5
<PAGE> 139
The options to purchase a total of 6,173,500 shares will be granted
pursuant to a written compensatory benefit plan or written compensation contract
to the directors, employees and consultants, and will be exempt pursuant to Rule
701. 48,500,000 shares will be outstanding prior to the grant of these options.
The 6,173,500 shares is under the maximum of 15% of 48,500,000, or 7,275,000
provided in Rule 701(d)(2).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
The exhibits are as set forth in the Exhibit Index.
(b) Financial Statement Schedules:
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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 Alamosa pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be 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 of 1933, 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Alamosa
pursuant to the foregoing provisions, or otherwise, Alamosa 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 Alamosa of expenses incurred
or paid by a director, officer or controlling person of Alamosa 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, Alamosa will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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.
II-6
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Alamosa has
duly caused this second amendment to the registration statement to be signed on
its behalf by the undersigned, hereunto duly authorized, in the City of Dallas,
State of Texas, on the 19th day of January, 2000.
ALAMOSA PCS HOLDINGS, INC.
By: /s/ DAVID E. SHARBUTT
----------------------------------
David E. Sharbutt
Chairman of the Board of Directors
and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this second
amendment to the registration statement has been signed by the following persons
in the capacities indicated on the 19th day of January, 2000.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ DAVID E. SHARBUTT Chairman of the Board of January 19, 2000
- ----------------------------------------------------- Directors and Chief Executive
David E. Sharbutt Officer
/s/ KENDALL W. COWAN Chief Financial Officer January 19, 2000
- -----------------------------------------------------
Kendall W. Cowan
MICHAEL R. BUDAGHER* Director January 19, 2000
- -----------------------------------------------------
Michael R. Budagher
RAY M. CLAPP, JR.* Director January 19, 2000
- -----------------------------------------------------
Ray M. Clapp, Jr.
SCOTTY HART* Director January 19, 2000
- -----------------------------------------------------
Scotty Hart
THOMAS HYDE* Director January 19, 2000
- -----------------------------------------------------
Thomas Hyde
Director January 19, 2000
- -----------------------------------------------------
Schuyler B. Marshall
TOM M. PHELPS* Director January 19, 2000
- -----------------------------------------------------
Tom M. Phelps
REAGAN W. SILBER* Director January 19, 2000
- -----------------------------------------------------
Reagan W. Silber
JIMMY R. WHITE* Director January 19, 2000
- -----------------------------------------------------
Jimmy R. White
</TABLE>
David E. Sharbutt, by signing his name hereto, does sign and execute this
second amendment to the registration statement on behalf of each of the
above-named officers and directors of the registrant on this 19th day of
January, 2000, pursuant to powers of attorneys executed on behalf of each of
such officers and directors and previously filed with the Securities and
Exchange Commission.
*By: /s/ DAVID E. SHARBUTT
-------------------------------
David E. Sharbutt
Attorney-in-Fact
II-7
<PAGE> 141
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.1* -- Form of Underwriting Agreement.
2.1 -- Form of Agreement and Plan of Merger of Alamosa PCS
Holdings, Inc., a Texas corporation, with and into
Alamosa PCS Holdings, Inc., a Delaware corporation.
2.2 -- Form of Agreement and Plan of Conversion of Alamosa PCS
LLC, a Texas limited liability company into Alamosa PCS
Holdings, Inc., a Texas corporation.
3.1 -- Form of Amended and Restated Certificate of Incorporation
of Alamosa.
3.2 -- Form of Amended and Restated Bylaws of Alamosa.
4.1 -- Specimen Common Stock Certificate.
4.2* -- Form of Rights Agreement between Alamosa PCS Holdings,
Inc. and ChaseMellon Shareholder Services, L.L.C., as
rights agent.
5.1 -- Form of opinion of Haynes and Boone, LLP, regarding
legality of the Common Stock being issued.
10.1+* -- CDMA 1900 SprintCom Additional Affiliate Agreement dated
as of December 21, 1998 by and between Alamosa PCS, LLC
and Northern Telecom, Inc.
10.2+* -- Amendment No. 1 to DMS-MTX Cellular Supply Agreement
dated as of January 12, 1999 by and between Alamosa PCS,
LLC and Nortel Networks Inc. as an amendment to Exhibit
10.1 described above.
10.3+* -- Amendment No. 2 to DMS-MTX Cellular Supply Agreement
dated as of March 1, 1999 by and between Alamosa PCS, LLC
and Nortel Networks Inc. as an amendment to Exhibits 10.1
and 10.2 described above.
10.4* -- Amendment No. 3 to DMS-MTX Cellular Supply Agreement
dated as of August 11, 1999 by and between Alamosa PCS,
LLC and Nortel Networks Inc. as an amendment to Exhibits
10.1, 10.2 and 10.3 described above.
10.5* -- Sprint PCS Management Agreement, as amended, dated as of
July 17, 1998 by and between Sprint Spectrum, LP,
SprintCom, Inc., WirelessCo, LP and Alamosa PCS, LLC,
superceded by Exhibit 10.22.
10.6* -- Sprint PCS Services Agreement dated as of July 17, 1998
by and between Sprint Spectrum, LP and Alamosa PCS, LLC
superceded by Exhibit 10.23.
10.7* -- Sprint Trademark and Service Mark License Agreement dated
as of July 17, 1998 by and between Sprint Communications
Company, LP and Alamosa PCS, LLP superceded by Exhibit
10.24.
10.8* -- Sprint Spectrum Trademark and Service Mark License
Agreement dated as of July 17, 1998 by and between Sprint
Spectrum, LP and Alamosa PCS, LLP superceded by Exhibit
10.25.
10.9* -- Consent and Agreement dated as of June 10, 1999 by and
between Nortel Networks, Inc., Sprint Spectrum, LP,
Sprint Communications Company, LP, WirelessCo, LP, and
SprintCom, Inc.
10.10+* -- Sprint PCS Management Agreement (Wisconsin), as amended,
dated as of December 6, 1999 by and between Sprint
Spectrum, LP, WirelessCo, LP and Alamosa Wisconsin
Limited Partnership.
10.11* -- Sprint PCS Services Agreement (Wisconsin) dated as of
December 6, 1999 by and between Sprint Spectrum, LP and
Alamosa Wisconsin Limited Partnership.
10.12* -- Sprint Trademark and Service Mark License Agreement
(Wisconsin) dated as of December 6, 1999 by and between
Sprint Communications Company, LP and Alamosa Wisconsin
Limited Partnership.
</TABLE>
<PAGE> 142
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.13* -- Sprint Spectrum Trademark and Service Mark License
Agreement (Wisconsin) dated as of December 6, 1999 by and
between Sprint Spectrum, LP and Alamosa Wisconsin Limited
Partnership.
10.14* -- Engineering Service Contract, System Design and
Construction Inspection, dated as of July 27, 1998, as
amended, by and between Alamosa PCS, LLC and Hicks &
Ragland Engineering Co., Inc.
10.15* -- Master Site Development and Lease Agreement, as amended,
dated as of August 1998 by and between Alamosa PCS, LLC
and Specialty Capital Services, Inc.
10.16+ -- Form of Credit Agreement by and between Alamosa PCS,
Inc., as borrower, Alamosa PCS Holdings, Inc., Texas
Telecommunications, LP and Alamosa Wisconsin Limited
Partnership, as guarantors and Nortel Networks Inc., as
administrative agent, for a $250,000,000 credit facility,
to be executed prior to the closing of this offering.
10.17 -- Form of Alamosa PCS Holdings, Inc. 1999 Long Term
Incentive Plan.
10.18* -- Employment Agreement effective as of October 1, 1998 by
and between Alamosa PCS, LLC and Jerry Brantley,
superceded by Exhibit 10.29.
10.19* -- Employment Agreement effective as of October 29, 1998 by
and between Alamosa PCS, LLC and Don Stull.
10.20 -- Employment Agreement effective as of October 1, 1999 by
and between Alamosa PCS LLC and David Sharbutt.
10.21 -- Employment Agreement effective as of December 1, 1999 by
and between Alamosa PCS, LLC and Kendall W. Cowan.
10.22+ -- Sprint PCS Management Agreement, as amended, dated as of
December 23, 1999 by and between Sprint Spectrum, LP,
WirelessCo, LP, Cox Communications PCS, L.P., Cox CPS
License, LLC, SprintCom, Inc. and Alamosa PCS, LLC.
10.23 -- Sprint PCS Services Agreement dated as of December 23,
1999 by and between Sprint Spectrum, LP and Alamosa PCS,
LLC.
10.24 -- Sprint Trademark and Service Mark License Agreement dated
as of December 23, 1999 by and between Sprint
Communications Company, LP and Alamosa PCS, LLC.
10.25 -- Sprint Spectrum Trademark and Service Mark Agreement
dated as of December 23, 1999 by and between Sprint
Spectrum, LP and Alamosa PCS, LLC.
10.26+ -- Form of Amendment No. 4 to DMS-MTX Cellular Supply
Agreement by and between Alamosa PCS, LLC and Nortel
Networks Inc. as an amendment to Exhibits 10.1, 10.2,
10.3 and 10.4 described above, to be executed prior to
the closing of this offering.
10.27 -- Form of Registration Rights Agreement by and between
Nortel Networks Inc. and Alamosa PCS Holdings, Inc., to
be executed prior to the closing of this offering.
10.28 -- Form of Warrant Agreement by and between Nortel Networks
Inc. and Alamosa PCS Holdings, Inc., to be executed prior
to the closing of this offering.
10.29 -- Amended and Restated Employment Agreement effective as of
October 1, 1999 by and between Alamosa PCS, LLC and Jerry
Brantley.
</TABLE>
<PAGE> 143
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
21.1* -- Subsidiaries of Alamosa.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Haynes and Boone, LLP (contained in legal
opinion filed as Exhibit 5.1).
24.1* -- Powers of Attorney.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
+ Confidential treatment requested.
<PAGE> 1
EXHIBIT 2.1
FORM OF
AGREEMENT AND PLAN OF MERGER
OF
ALAMOSA PCS HOLDINGS, INC.,
A TEXAS CORPORATION
WITH AND INTO
ALAMOSA PCS HOLDINGS, INC.,
A DELAWARE CORPORATION
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT"), is entered into by
and among Alamosa PCS Holdings, Inc., a Texas corporation ("ALAMOSA-TX") and
Alamosa PCS Holdings, a Delaware corporation and wholly-owned subsidiary of
Alamosa-TX ("ALAMOSA-DE").
RECITALS
WHEREAS, Alamosa-TX desires to remove its corporate charter from the
Texas to Delaware;
WHEREAS, the respective Boards of Directors of Alamosa-TX and
Alamosa-DE have approved the business combination transaction provided for
herein in which Alamosa-TX would merge with and into Alamosa-DE, its
wholly-owned subsidiary (the "MERGER"), with Alamosa-DE surviving the Merger, on
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, at least two-thirds (2/3rds) of the shareholders of Alamosa-TX
have approved the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE").
AGREEMENT OF MERGER
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article I or elsewhere in this Agreement.
"ALAMOSA-DE STOCK" means shares of the Alamosa-DE's Common Stock, $0.01
par value.
Agreement and Plan of Merger
ALAMOSA PCS HOLDINGS, INC.
<PAGE> 2
"ALAMOSA-TX STOCK" means Alamosa-TX's Common Stock, $0.01 par value.
"CLOSING" has the meaning set forth in Section 2.03.
"CLOSING DATE" has the meaning set forth in Section 2.03.
"DGCL" means the Delaware General Corporation Law, as amended.
"EFFECTIVE TIME" has the meaning set forth in Section 2.04.
"MERGER CONSIDERATION" means, in respect of each share of Alamosa-TX
Stock the right to receive one (1) fully-paid and nonassessable share of
Alamosa-DE Stock.
"TBCA" means the Texas Business Corporation Act, as amended.
ARTICLE II - THE MERGER
2.01 SHAREHOLDER & DIRECTOR APPROVAL. At least two-thirds (2/3rds) of
the shareholders of Alamosa-TX approved the Merger at a duly called meeting of
the shareholders that has been documented by a certified copy of the minutes of
the meeting of the shareholders dated _________, 2000. In addition, the
respective Boards of Directors of Alamosa-TX and Alamosa-DE each approved the
Merger at a duly called meeting of the Board of Directors, and both meetings
have been documented by a certified copy of minutes of the meeting of the Board
of Directors of Alamosa-TX and Alamosa-DE dated __________, 2000.
2.02 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, Alamosa-TX shall be merged with and into Alamosa-DE at the
Effective Time of the Merger. Following the Merger, the separate corporate
existence of Alamosa-TX shall cease and Alamosa-DE shall continue as the
surviving corporation and shall succeed to and assume all the rights and
obligations of Alamosa-TX in accordance with the DGCL and TBCA. Alamosa-DE, the
surviving corporation, will be responsible for, and obligated to pay, all
applicable Texas franchise tax and related fees of Alamosa-TX, if the same are
not timely paid.
2.03 CLOSING. The Closing of the Merger (the "CLOSING") will take place
at Alamosa-DE's principal office at a date to be mutually agreed upon between
the parties (the date of the Closing being referred to herein as the "CLOSING
DATE"). At the Closing, (i) the Certificates required by Article III shall be
delivered, (ii) the appropriate officers of Alamosa-TX and Alamosa-DE shall
execute and acknowledge the Articles of Merger, and the Certificate of Merger
and (iii) the parties shall take such further action as is required to
consummate the transactions described in this Agreement, the Articles of Merger
and the Certificate of Merger.
2.04 EFFECTIVE TIME. As soon as practicable on or after the Closing
Date, the parties shall file Articles of Merger and a Certificate of Merger
executed in accordance with the relevant provisions of the TBCA and DGCL,
respectively, and shall make all other filings or recordings required under the
laws of the TBCA and DGCL. The Merger shall become effective upon the later of
the filing of the Articles of Merger with the Texas Secretary of State or
Certificate of Merger with the Delaware Secretary of State (the time the Merger
becomes effective being the "EFFECTIVE TIME" of the Merger).
Agreement and Plan of Merger
ALAMOSA PCS HOLDINGS, INC.
2
<PAGE> 3
2.05 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in the laws of the DGCL and TBCA.
2.06 CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The Amended and Restated Certificate of Incorporation of
Alamosa-DE as in effect at the Effective Time shall be the Certificate of
Incorporation of Alamosa-DE, the surviving corporation, until thereafter changed
or amended as provided therein or by applicable law.
(b) The Amended and Restated Bylaws of Alamosa-DE as in effect at
the Effective Time of the Merger shall be the Bylaws of Alamosa-DE, the
surviving corporation, until thereafter changed or amended as provided therein
or by applicable law.
2.07 DIRECTORS. The directors of Alamosa-DE at the Effective Time of
the Merger shall be the directors of Alamosa-DE, the surviving corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
2.08 OFFICERS. The officers of Alamosa-DE at the Effective Time of the
Merger shall be the officers of Alamosa-DE, the surviving corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
2.09 COPY OF THE AGREEMENT. An executed copy of this Agreement will be
kept on file at the offices of Alamosa-DE, the surviving corporation. A copy of
the Agreement will be furnished by Alamosa-DE, on written request and without
cost, to any holder of capital stock of Alamosa-DE (or former holder of capital
stock of Alamosa-TX) and to any creditor or obligee of Alamosa-DE or Alamosa-TX
at the time of the Merger if such obligation is then outstanding.
ARTICLE III - EFFECT OF MERGER ON CAPITAL STOCK
OF THE PARTIES; EXCHANGE OF CERTIFICATES
3.01 EFFECT ON CAPITAL STOCK. As of the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the holder of any
shares of Alamosa-TX Common Stock or any shares of capital stock of Alamosa-DE:
(a) CONVERSION OF ALAMOSA-TX STOCK. Each share of Alamosa-TX Stock
issued and outstanding as of the Effective Time of the Merger shall be converted
into the right to receive the Merger Consideration. As of the Effective Time of
the Merger, all shares of Alamosa-TX Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any shares of Alamosa-TX Stock shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration in exchange therefor.
(b) CANCELLATION OF TREASURY STOCK. All shares of Alamosa-TX
Stock, if any, that are owned as treasury stock as of the Effective Time of the
Merger shall be canceled and retired and shall cease to exist and no capital
stock of Alamosa-DE or other consideration shall be delivered in exchange
therefor.
Agreement and Plan of Merger
ALAMOSA PCS HOLDINGS, INC.
3
<PAGE> 4
3.02 EXCHANGE OF CERTIFICATES; PAYMENT OF MERGER CONSIDERATION. Each
holder of record of a certificate or certificates that immediately prior to the
Effective Time of the Merger represented issued and outstanding shares of
Alamosa-TX Stock (the "CERTIFICATES") whose shares were converted into the right
to receive the Merger Consideration pursuant to Section 3.01 shall surrender
such Certificates for cancellation to Alamosa-DE, duly executed, and immediately
following the Effective Time. Alamosa-DE shall issue to such holder in exchange
therefor a certificate representing the number of shares of Alamosa-DE Stock
that such holder has the right to receive pursuant to the provisions of Section
3.01. Upon payment of the Merger Consideration, the Certificates so surrendered
shall forthwith be canceled.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE(S) TO FOLLOW.
Agreement and Plan of Merger
ALAMOSA PCS HOLDINGS, INC.
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned corporations have executed this
Agreement as of the __________ day of ___________, 2000.
ALAMOSA PCS HOLDINGS, INC.,
a Texas corporation
By:
---------------------------
David E. Sharbutt,
President
ALAMOSA PCS HOLDINGS, INC.,
a Delaware corporation
By:
---------------------------
David E. Sharbutt,
President
Agreement and Plan of Merger
ALAMOSA PCS HOLDINGS, INC.
5
<PAGE> 1
EXHIBIT 2.2
FORM OF
AGREEMENT AND PLAN OF CONVERSION
OF
ALAMOSA PCS LLC,
A TEXAS LIMITED LIABILITY COMPANY
INTO
ALAMOSA PCS HOLDINGS, INC.,
A TEXAS CORPORATION
THIS AGREEMENT AND PLAN OF CONVERSION dated as of __________, 2000 (the
dated as of "AGREEMENT"), is entered into by the Members of Alamosa PCS LLC, a
Texas limited liability company.
RECITALS
WHEREAS, the Members of Alamosa PCS LLC, a Texas limited liability
company, desire to convert the entity to Alamosa PCS Holdings, Inc., a Texas
corporation;
WHEREAS, following the conversion, Alamosa PCS LLC, will continue its
existence in the organizational form of Alamosa PCS Holdings, Inc., a Texas
corporation;
WHEREAS, pursuant to Section 3.1 of the Regulations of Alamosa PCS LLC,
this Agreement has been approved by the Members by Super-Majority Approval
(i.e., the approval of Members holding at least seventy-six percent (76%) of
the percentage interests of all Members).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereby agree as follows:
A. Pursuant to Section 3.1 of the Regulations of Alamosa PCS LLC, this
Agreement was approved by the Members by Super-Majority Approval (i.e, the
approval of Members holding at least seventy-six percent (76%) of the percentage
interests of all Members) at a duly called meeting of the Members on
___________, 2000. A certified copy of the minutes of the meeting of the Members
will be on file at the offices of Alamosa PCS LLC (prior to the conversion) and
Alamosa PCS Holdings, Inc. (after the conversion).
B. The conversion of Alamosa PCS LLC to Alamosa PCS Holdings, Inc. is
to occur upon the filing of Articles of Conversion of Alamosa PCS LLC and
Articles of Incorporation of Alamosa PCS Holdings, Inc. with the Secretary of
State of the State of Texas. A copy of the Articles of Conversion of Alamosa PCS
LLC and a copy of the Articles of Incorporation of Alamosa PCS Holdings, Inc.
will be on file at the offices of Alamosa PCS LLC (before the conversion) and
Alamosa PCS Holdings, Inc. (after the conversion).
Agreement and Plan of Conversion
ALAMOSA PCS LLC
<PAGE> 2
C. After the conversion, Alamosa PCS Holdings, Inc. will continue the
business of Alamosa PCS LLC and assume all liabilities and obligations of
Alamosa PCS LLC. Alamosa PCS Holdings, Inc. will be responsible for, and
obligated to pay, all applicable Texas franchise tax and related fees of Alamosa
PCS LLC, if the same are not timely paid.
D. Upon the conversion of Alamosa PCS LLC, the Members will exchange
their membership interests in Alamosa PCS LLC for shares of common stock in
Alamosa PCS Holdings, Inc. There will be a total of 48,500,008 shares of common
stock issued to the Members upon the conversion, and each Member will receive
the number of shares of common stock equal to the product of (i) such Member's
percentage interest in Alamosa PCS LLC as of the date hereof, multiplied by (ii)
48,500,008 shares of common stock to be issued upon conversion. Therefore, each
Member will own the following number of shares of stock in Alamosa PCS Holdings,
Inc.:
<TABLE>
<CAPTION>
Member/Shareholder Number of Shares of Common Stock
------------------ --------------------------------
<S> <C>
Rosewood Telecommunications, L.L.C. 9,725,000
South Plains Advanced Communications &
Electronics, Inc. 8,652,085
West Texas PCS, LLC 7,072,915
Taylor Telecommunications, Inc. 5,100,000
Plateau Telecommunications, Incorporated 3,000,000
Tregan International Corp. 3,000,000
XIT Telecommunication & Technology, Inc. 2,750,000
LEC Development, Inc. 2,500,000
Wes-Tex Telecommunications, Inc. 2,500,000
Longmont PCS, LLC 1,000,000
J&M Family Partnership Ltd. 666,435
Five S, Ltd. 593,200
Yellow Rock PCS, L.P. 400,000
John St. Clair 292,938
Harness, Ltd. 292,938
Tony Bliss 288,056
Rick Overman 178,205
W. Don Stull 97,647
Frank Eldridge 73,235
</TABLE>
Agreement and Plan of Conversion
ALAMOSA PCS LLC
2
<PAGE> 3
<TABLE>
<S> <C>
David E. Sharbutt 48,823
Barry Moore 48,823
Randy Yeisley 48,824
Addie Lee Hicks 24,412
Steven Steele 24,412
Paula Sexton 24,412
Will Payne 24,412
Gail McVicker 24,412
Gaylord Ellerman 24,412
Jim McDuff 24,412
</TABLE>
E. A copy of this Agreement will be kept on file at the offices of
Alamosa PCS Holdings, Inc. and any shareholder (or former Member of Alamosa PCS
LLC) may request a copy at no charge at any time.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE(S) TO FOLLOW.
Agreement and Plan of Conversion
ALAMOSA PCS LLC
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned Manager certifies that this
Agreement has been adopted by the Members at a meeting of the Members as of the
date first written above.
ALAMOSA PCS LLC,
a Texas limited liability company
By:
--------------------------------
David E. Sharbutt,
Manager
Agreement and Plan of Conversion
ALAMOSA PCS LLC
<PAGE> 1
EXHIBIT 3.1
FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ALAMOSA PCS HOLDINGS, INC.
The undersigned certifies that he is the Chairman of the Board of
Alamosa PCS Holdings, Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), and does hereby further certify as
follows:
(1) The name of the corporation is Alamosa PCS Holdings, Inc.
(2) The Corporation was originally incorporated under the same
name. The original Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on October 19, 1999.
(3) As of the date hereof, the Corporation has not received
any payment for any of its stock.
(4) This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Sections 241 and 245 of the
General Corporation Law of the State of Delaware (the "DGCL").
(5) Pursuant to Sections 241 and 245 of the DGCL, this Amended
and Restated Certificate of Incorporation restates and integrates previous
provisions and also amends certain provisions of the Corporation's Certificate
of Incorporation.
(6) This Amended and Restated Certificate of Incorporation of
the Corporation shall become effective immediately upon the filing thereof with
the Secretary of State of the State of Delaware (the "Effective Time").
(7) The text of the Certificate of Incorporation of the
Corporation, as amended hereby, is restated to read in its entirety as follows:
ARTICLE 1. Name. The name of the Corporation is Alamosa PCS Holdings,
Inc.
ARTICLE 2. Address. The address of its registered office in the state
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, Delaware 19801. The name of the registered agent of the Corporation
at such address is The Corporation Trust Company.
ARTICLE 3. Purpose. The purpose for which the Corporation is organized
is to engage in any lawful act or activity for which a corporation may be
organized under the DGCL.
1
<PAGE> 2
ARTICLE 4. Description and Authorization of Stock.
(a) Stock Authorization. The aggregate number of shares of
capital stock that the Corporation shall have the authority to issue is
100,000,000 shares, which shall consist of (i) 95,000,000 shares of Common
Stock, par value $0.01 per share (the "Common Stock") and (ii) 5,000,000 shares
of Preferred Stock, $0.01 par value per share (the "Preferred Stock").
(b) Common Stock.
(i) Voting Rights. The holders of Common Stock will be
entitled to one vote per share on all matters to be voted on by the stockholders
of the Corporation, including the election of directors. The holders of Common
Stock shall not have cumulative voting rights.
(ii) Dividends. Subject to the prior rights of any
Preferred Stock issued by the Corporation, as and if dividends are declared
thereon by the Board of Directors of the Corporation out of funds legally
available therefor, whether payable in cash, property or securities of the
Corporation, the holders of Common Stock will be entitled to share equally, on a
share-for-share basis, in all such dividends.
(iii) Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, after all amounts due and owing to the holders of
any Preferred Stock of the Corporation have been paid or the payment has been
fully provided for, the holders of Common Stock shall be entitled to receive all
of the remaining assets of the Corporation available for distribution to holders
of Common Stock and will be entitled to share equally, on a share-for-share
basis, in such distribution. Neither the merger or consolidation of the
Corporation with or into another corporation or corporations, nor the sale or
transfer by the Corporation of all or part of its assets, nor the reduction of
its capital stock, will be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of this paragraph.
(c) Preferred Stock.
(i) Issuance. The Board of Directors is authorized,
subject to any limitations prescribed by law, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof.
(A) The number of authorized shares of Preferred
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
Common Stock, without a vote of the holders of the Preferred Stock, or of any
series thereof, unless a vote of any such holders is required pursuant to the
certificate or certificates establishing the series of Preferred Stock.
2
<PAGE> 3
(B) Except as otherwise required by law, holders of
Common Stock, as such, shall not be entitled to vote on any amendment to this
Amended and Restated Certificate of Incorporation (including a certificate
establishing a series of Preferred Stock) that alters or changes the powers,
preferences, rights or other terms of one or more outstanding series of
Preferred Stock if the holders of such affected series are entitled to vote,
either separately or together with the holders of one or more other such series,
on such amendment pursuant to this Amended and Restated Certificate of
Incorporation (including a certificate establishing a series of Preferred Stock)
or pursuant to the DGCL.
(ii) Increases and Decreases in Series. The Board of Directors
of the Corporation may increase the number of shares (but not above the total
number of authorized shares of the class) of the Preferred Stock designated for
any existing series by a resolution adding to such series authorized and
unissued shares of the Preferred Stock not designated for any other series. The
Board of Directors of the Corporation may decrease the number of shares of the
Preferred Stock (but not below the number of shares thereof then outstanding)
designated for any existing series by a resolution, subtracting from such series
unissued shares of the Preferred Stock designated for such series, and the
shares so subtracted shall become authorized, unissued, and undesignated shares
of the Preferred Stock.
ARTICLE 5. Rights of Stockholders. No holder of shares of stock of the
Corporation shall have any preemptive or other similar right, except as such
rights are expressly provided by contract, or by resolution creating a series of
Preferred Stock, to purchase or subscribe for or receive any shares of any
class, or series thereof, of stock of the Corporation, whether now or hereafter
authorized, or any warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any shares
of any class of stock, or series thereof; but such additional shares of stock
and such warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any shares of any class
of stock, or series thereof, may be issued or disposed of by the Board of
Directors to such persons, and on such terms and for such lawful consideration,
as in its discretion it shall deem advisable or as to which the Corporation
shall have by binding contract agreed.
ARTICLE 6. Meetings of Stockholders.
Effective immediately following the consummation of the
initial public offering of the Corporation's Common Stock pursuant to a
registration statement declared effective under the Securities Act of 1933, as
amended and including any successor provisions thereto (the "1933 Act"), any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders of
the Corporation and may not be effected by any consent in writing by such
stockholders. Special meetings of stockholders of the Corporation may be called
only by the Chairman of the Board, if there is one, by the President, by the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time such resolution is presented to
the Board of Directors for adoption), or by holders of not less than a
3
<PAGE> 4
majority of the voting power of the Voting Stock (as defined in ARTICLE 13 (Fair
Price)) that would be entitled to vote at such meeting.
ARTICLE 7. Duration of Existence. The Corporation is to have perpetual
existence.
ARTICLE 8. Amendments to the Bylaws. In furtherance of, and not in
limitation of, the powers conferred by statute, the Board of Directors is
expressly authorized to adopt, amend or repeal the Bylaws of the Corporation or
adopt new Bylaws, without any action on the part of the stockholders; provided,
however, adoption, amendment or repeal of the Bylaws in a manner that would make
them inconsistent with ARTICLE 4(c) (Description and Authorization of Stock --
Preferred Stock), ARTICLE 6 (Meetings of Stockholders), this ARTICLE 8
(Amendments to the Bylaws), ARTICLE 9 (Board of Directors), ARTICLE 10
(Amendments to the Certificate) or ARTICLE 13 (Fair Price), shall be made only
by the affirmative vote of the holders of at least 80% of the voting power of
the Voting Stock, voting together as a single class. In the event that any term
or provision of the Bylaws is inconsistent, or conflicts, with the terms or
provisions of this Amended and Restated Certificate of Incorporation, this
Amended and Restated Certificate of Incorporation shall control.
ARTICLE 9. Board of Directors.
(a) Number. Except as otherwise fixed by the provisions of a
resolution adopted pursuant to ARTICLE 4(c) (Description and Authorization of
Stock -- Preferred Stock) relating to the rights of the holders of the Preferred
Stock to elect additional directors under specified circumstances, the number of
directors which shall constitute the whole Board of Directors shall be not less
than three and shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in the previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption).
(b) Staggered Board of Directors. At the Meeting of
Stockholders (or consent in lieu thereof) at which this Amended and Restated
Certificate of Incorporation is adopted or ratified, the directors shall be
divided into three classes, designated Class I, Class II and Class III (which at
all times shall be as nearly equal in number as possible), with the term of
office of Class I directors to expire at the 2001 Annual Meeting of
Stockholders, the term of office of Class II directors to expire at the 2002
Annual Meeting of Stockholders, and the term of office of Class III directors to
expire at the 2003 Annual Meeting of Stockholders, upon election and
qualification of their successors. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, upon election and qualification of their successors.
(c) Removal of Directors. Subject to the right of the holders
of any class or series of Preferred Stock then outstanding, any director, or the
entire Board of Directors, may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of at least
4
<PAGE> 5
80% of the voting power of the Voting Stock, voting together as a single class.
Except as may otherwise be provided by law, cause for removal shall exist only
if the director whose removal is proposed:
(i) has been convicted of a felony by a court of
competent jurisdiction and such conviction is no longer subject to direct
appeal;
(ii) has been adjudged by a court of competent
jurisdiction to be liable for gross negligence or misconduct in the performance
of such director's duties to the Corporation in a matter of substantial
importance to the Corporation, and such adjudication has become final and
non-appealable; or
(iii) has missed six consecutive meetings of the
Board of Directors.
(d) Vacancies. Subject to the rights of the holders of any
class or series of Preferred Stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies of the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other reason shall be
solely filled by a majority vote of the directors then in office, though less
than a quorum, or by a sole remaining director. Directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been elected expires, upon
election and qualification of their successors. No decrease in the number of
authorized directors constituting the entire Board of Directors shall shorten
the term of any incumbent director. Under no circumstances shall the
Corporation's stockholders fill any newly created directorships.
(e) Ballots, Cumulative Voting. Election of directors need not
be by written ballot unless the Bylaws shall so provide. No holders of shares of
capital stock of the Corporation shall have any rights to cumulate votes in the
election of directors.
(f) Preferred Stock, Directors. Notwithstanding the foregoing,
whenever the holders of Preferred Stock shall have the right to elect directors
at an annual or special meeting of stockholders, the election, term of office,
filling of vacancies, and other features of such directorships shall be governed
by the terms of any resolution adopted pursuant to ARTICLE 4 (Description and
Authorization of Stock) of this Amended and Restated Certificate of
Incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this ARTICLE 9 (Board of Directors) unless
expressly provided by such terms.
ARTICLE 10. Amendments to the Certificate. The Corporation shall have
the right, subject to any express provisions or restrictions contained in this
Amended and Restated Certificate of Incorporation of the Corporation, from time
to time, to amend this Amended and Restated Certificate of Incorporation or any
provision thereof in any manner now or hereafter provided by law.
Notwithstanding the foregoing or any other provisions of this Amended and
Restated Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any vote required
by law or this Amended and Restated Certificate of Incorporation, the
5
<PAGE> 6
affirmative vote of the holders of at least 80% of the voting power of the
Voting Stock, voting together as a single class, shall be required to adopt any
provision inconsistent with, or to amend or repeal ARTICLE 4(c) (Description and
Authorization of Stock -- Preferred Stock), ARTICLE 6 (Meetings of
Stockholders), ARTICLE 8 (Amendments to the Bylaws), ARTICLE 9 (Board of
Directors), this ARTICLE 10 (Amendments to the Certificate) or ARTICLE 13 (Fair
Price). The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
and all rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE 11. Indemnification.
(a) The Corporation shall indemnify any person who was, is or
is threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of any
foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the DGCL, as the same exists or may hereafter be
amended. Notwithstanding the foregoing, except as provided in (c) below, the
Corporation shall indemnify any such person in connection with a proceeding (or
part thereof) initiated by such person only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation.
(b) Such rights shall be contract rights and as such shall run
to the benefit of any director or officer who is elected and accepts the
position of the director or officer of the Corporation or elects to continue to
serve as a director or officer of the Corporation while this ARTICLE 11
(Indemnification) is in effect. Any repeal or amendment of this ARTICLE 11
(Indemnification) shall be prospective only and shall not limit the rights of
any such director or officer or the obligations of the Corporation with respect
to any claim arising from or related to the services of such director or officer
in any of the foregoing capacities prior to any such repeal or amendment to this
ARTICLE 11 (Indemnification). Such right shall include the right to be paid by
the Corporation expenses incurred in defending any such proceeding in advance of
its final disposition to the maximum extent permitted under the DGCL.
(c) If a claim for indemnification or advancement of expenses
hereunder is not paid in full by the Corporation within 60 days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification or advancement of costs of
defense are not permitted under the DGCL, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
the Board of Directors or any Committee thereof, independent legal counsel, or
stockholders) to have made its determination prior to the commencement of such
action that indemnification of, or advancement of costs of defense to, the
claimant, is permissible in the circumstances nor an actual determination by the
Corporation (including the Board of Directors or
6
<PAGE> 7
any Committee thereof, independent legal counsel, or stockholders) that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification by the Corporation is
not permissible.
(d) In the event of the death of any person having rights of
indemnification under the foregoing provisions, such rights shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement or otherwise. The Corporation
may additionally indemnify any employee or agent of the Corporation to the
fullest extent permitted by law.
(e) As used herein, the term "proceeding" means any threatened
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit, or proceeding, and any inquiry or investigation that could lead to such an
action, suit, or proceeding.
ARTICLE 12. Limitation on Liability. No director of the Corporation
shall be liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (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 that involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit. If
the DGCL hereafter is amended to authorize the further elimination or limitation
of the liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended DGCL.
Any repeal or modification of this ARTICLE 12 (Limitation on Liability) by the
stockholders of the Corporation shall be prospective only and shall not
adversely affect any limitation of the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE 13. Fair Price.
(a) Special Vote Required For Certain Business Combinations.
In addition to any affirmative vote required by law or this Amended and Restated
Certificate of Incorporation or the Bylaws of the Corporation, and except as
otherwise expressly provided in Section (b) of this ARTICLE 13 (Fair Price --
When Special Vote Not Required), a Business Combination (as hereinafter defined)
with, or proposed by or on behalf of any Interested Stockholder (as hereinafter
defined) or any Affiliate or Associate (as hereinafter defined) of any
Interested Stockholder or any person who after such Business Combination would
be an Affiliate or Associate of such Interested Stockholder shall require the
affirmative vote of the holders of not less than 80% of the voting power of the
Voting Stock, voting together as a single class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law, by any other
provision of this Amended and Restated Certificate of Incorporation or the
Bylaws of the Corporation, by any agreement with any national securities
exchange or otherwise.
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<PAGE> 8
(b) When Special Vote Not Required. The provisions of Section
(a) of this ARTICLE 13 (Fair Price -- Special Vote Required for Certain Business
Combinations) shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such affirmative vote, if any,
as is required by law, by any other provision of this Amended and Restated
Certificate of Incorporation or the Bylaws of the Corporation, by any agreement
with any national securities exchange or otherwise if, in the case of a Business
Combination involving the receipt of consideration by the holders of the
Corporation's outstanding Capital Stock (as hereinafter defined), the condition
specified in paragraph (i) below is met or all of the conditions specified in
paragraph (ii) below are met or if, in the case of a Business Combination not
involving the receipt of consideration by the holders of the Corporation's
outstanding Capital Stock, the condition specified in paragraph (i) below is
met:
(i) Approval by Disinterested Directors. The Business
Combination (either specifically or as a transaction which is within an approved
category of transactions) shall have been approved by a majority of the
Disinterested Directors (as hereinafter defined) prior to the stockholder
becoming an Interested Stockholder, it being understood that this condition
shall not be capable of satisfaction unless there are at least three
Disinterested Directors.
(ii) Minimum Price, Form of Consideration and Other
Requirements. All of the following conditions shall have been met:
(A) Minimum Price Requirements. With respect
to every class or series of outstanding Capital Stock of the Corporation,
whether or not the Interested Stockholder has previously acquired beneficial
ownership of any shares of such class or series of Capital Stock:
(1) The aggregate amount of cash
plus the Fair Market Value (as hereinafter defined), as of the date of the
consummation of the Business Combination, of consideration other than cash to be
received per share by holders of Common Stock in such Business Combination shall
be at least equal to the higher of the amounts determined pursuant to clauses
(aa) and (bb) below:
(aa) the highest per-share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for any share of Common
Stock in connection with the acquisition by the Interested Stockholder of
beneficial ownership of shares of Common Stock (x) within the two-year period
immediately prior to the Announcement Date (as hereinafter defined) or (y) in
the transaction or series of related transactions in which it became an
Interested Stockholder, whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification with
respect to Common Stock; and
(bb) the Fair Market Value per share of
Common Stock (x) on the Announcement Date or (y) on the Determination Date (as
hereinafter defined), whichever is higher, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with respect to Common
Stock.
8
<PAGE> 9
(2) The aggregate amount of cash plus the Fair
Market Value, as of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock, other than Common, shall be at
least equal to the highest of the amounts determined pursuant to clauses (aa),
(bb) and (cc) below:
(aa) the highest per-share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
or on behalf of the Interested Stockholder for any share of such class or series
of Capital Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of such class or series of Capital
Stock (x) within the two-year period immediately prior to the Announcement Date
or (y) in the transaction or series of related transactions in which it became
an Interested Stockholder, whichever is higher, in either case as adjusted for
any subsequent stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock;
(bb) the Fair Market Value per share of such
class or series of Capital Stock (x) on the Announcement Date or (y) on the
Determination Date, whichever is higher, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock; and
(cc) the highest preferential amount per
share, if any, to which the holders of shares of such class or series of Capital
Stock would be entitled to in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation
regardless of whether the Business Combination to be consummated constitutes
such an event.
(B) Form of Consideration and Other Requirements.
(1) The consideration to be received by holders
of a particular class or series of outstanding Capital Stock shall be in cash or
in the same form as previously has been paid by or on behalf of the Interested
Stockholder in connection with its direct or indirect acquisition of beneficial
ownership of shares of such class or series of Capital Stock. If the
consideration so paid for shares of any class or series of Capital Stock varies
as to form, the form of consideration of such class or series of Capital Stock
shall be in cash or the form paid by or on behalf of the Interested Stockholder
in connection with its direct or indirect acquisition of beneficial ownership of
the largest number of shares of such class or series of Capital Stock.
(2) After the Determination Date and prior to the
consummation of such Business Combination:
(aa) there shall have been no failure to
declare and pay at the regular date therefor any full regular dividends (whether
or not cumulative) payable in accordance with the terms of any outstanding
Capital Stock, other than the Common Stock, except as approved by a majority of
the Disinterested Directors;
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<PAGE> 10
(bb) there shall have been no reduction in
the amount, or change in the frequency of payment, of any dividends regularly
paid on the Common Stock (except as necessary to reflect any stock split, stock
dividend, subdivision or reclassification of the Common Stock), except as
approved by a majority of the Disinterested Directors; and
(cc) there shall have been an increase in the
amount of any dividends regularly paid on the Common Stock as necessary to
reflect any reverse stock split or reclassification of the Common Stock, or any
split, recapitalization, reorganization or any similar transaction that has the
effect of reducing the number of outstanding shares of Common Stock, unless the
failure so to increase the amount of such dividends is approved by a majority of
the Disinterested Directors.
(3) such Interested Stockholder shall not have
become the beneficial owner of any additional shares of Capital Stock except as
part of or otherwise in connection with the transaction or series of related
transactions that resulted in such Interested Stockholder becoming an Interested
Stockholder.
(4) After the Determination Date and prior to the
consummation of such Business Combination, such Interested Stockholder shall not
have received the benefit, directly or indirectly (except proportionately as a
stockholder of the Corporation), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax advantages provided
by the Corporation, whether in anticipation of or in connection with such
Business Combinations or otherwise.
(5) After the Determination Date and prior to the
consummation of such Business Combination, such Interested Stockholder shall not
have made any major change in the Corporation's business or capital structure
without the approval of a majority of the Disinterested Directors.
(6) A proxy or information statement describing
the proposed Business Combination and complying with the requirements of the
1934 Act shall be mailed to all stockholders of the Corporation at least 30 days
prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to the 1934
Act). Such proxy or information statement shall contain, in a prominent place,
any statement as to the advisability (or inadvisability) of the Business
Combination that the Disinterested Directors, or any of them, may choose to make
and, if deemed advisable by a majority of the Disinterested Directors, the
opinion of an investment banking firm selected by a majority of the
Disinterested Directors as to the fairness (or not) of the terms of the Business
Combination from a financial point of view to the holders of the outstanding
shares of Capital Stock other than the Interested stockholder and its Affiliates
or Associates, such investment banking firm to be paid a reasonable fee for its
services by the Corporation.
(c) Certain Definitions. The following definitions shall apply
with respect to this ARTICLE 13 (Fair Price):
10
<PAGE> 11
(i) The term "Business Combination" shall mean:
(A) any merger or consolidation of the
Corporation or any Subsidiary (as hereinafter defined) with (1) any Interested
Stockholder or (2) any other company (whether or not itself an Interested
Stockholder) that is or after such merger or consolidation would be an Affiliate
or Associate of an Interested Stockholder; or
(B) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition, or any security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement, in one transaction or
in a series of transactions, with or for the benefit of any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder
involving any assets, cash flow, earning power, securities or commitments of the
Corporation, any Subsidiary, any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder that, together with all other such
arrangements, has an aggregate Fair Market Value or involves aggregate
commitments equal to 10% or more of the assets, cash flow or earning power (in
the case of transactions involving assets or commitments other than capital
stock) or 10% or more of the stockholders' equity (in the case of transactions
in capital stock) of the entity in question (the "Substantial Part"), as
reflected in the most recent fiscal year-end consolidated balance sheet of such
entity existing at the time the stockholders of the Corporation would be
required to approve or authorize the Business Combination involving the assets,
cash flow, earning power, securities or commitments constituting any Substantial
Part; or
(C) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation; or
(D) any issuance or reclassification of
securities (including any stock dividend, split or reverse split or any other
distribution of securities in respect of stock), any recapitalization of the
Corporation, any merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not with or otherwise
involving an Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class or series of
Capital Stock, or any securities convertible into or rights, options or warrants
to acquire Capital Stock, or equity securities of any Subsidiary, that is
beneficially owned by any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder; or
(E) any agreement, arrangement or other
understanding providing for any one or more of the actions specified in the
foregoing clauses (A) to (D).
(ii) The term "Capital Stock" shall mean the capital
stock of the Corporation authorized to be issued from time to time under ARTICLE
4 (Description and Authorization of Stock), and the term "Voting Stock" shall
mean all issued and outstanding shares of Capital Stock entitled to vote
generally in the election of directors or that otherwise are entitled to vote
with such stock on the specific matter in question.
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<PAGE> 12
(iii) The term "person" shall mean any individual,
firm, company or other entity and shall include any group composed of any person
and any other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or indirectly,
for the purpose of acquiring, holding, voting or disposing of Capital Stock.
(iv) The term "Interested Stockholder" shall mean any
person (other than the Corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or fiduciary with respect to any
such plan when acting in such capacity) who or which:
(A) is the beneficial owner, directly or
indirectly, of Voting Stock representing 20% or more of the voting power of all
Voting Stock; provided, however, that for purposes of this Article 13(c)(iv)(A),
that if any of Rosewood Telecommunications, L.L.C., South Plains Advanced
Communications & Electronics, Inc., West Texas PCS, LLC, Taylor
Telecommunications, Inc., Tregan International Corp., Plateau
Telecommunications, Incorporated, XIT Telecommunication & Technology, Inc., LEC
Development, Inc., Wes-Tex Telecommunications, Inc., Longmont PCS, L.L.C. and
Yellow Rock PCS, LP is a party to an agreement that governs the voting of shares
of Common Stock, which agreement (x) has been approved by the Board of Directors
prior to the time it was entered into by such parties, (y) does not govern the
voting of Common Stock with respect to matters other than the election of
members of the Board of Directors and (z) does not govern the voting of Common
Stock held by persons other than those entities named above in this proviso,
then for purposes of this Article 13(c)(iv)(A), such voting agreement shall not
cause any such Person (or any of such Person's Affiliates or Associates) or all
of such Persons acting together to be the "beneficial owner" of, or to
"beneficially own," any securities owned by any other entity named above in this
proviso that are subject to such voting agreement; or
(B) is an Affiliate or Associate of the
Corporation and at any time within the two-year period immediately prior to the
date in question was the beneficial owner, directly or indirectly, of Voting
Stock representing 20% or more of the voting power of all Voting Stock; or
(C) is an assignee of or has otherwise succeeded
to any shares of Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an Interested
Stockholder, if such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public offering
within the meaning of the 1933 Act.
(v) A person shall be a "beneficial owner" of, shall
"beneficially own" and shall have "beneficial ownership" of any Capital Stock
(1) that such person or any of its Affiliates or Associates owns, directly or
indirectly; (2) that such person or any of its Affiliates or Associates has,
directly or indirectly, (x) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or
12
<PAGE> 13
upon the exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (y) the right to vote pursuant to any agreement, arrangement or
understanding; or (3) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Capital Stock. For the purposes of
determining whether a person is an Interested Stockholder pursuant to paragraph
(iv) above, the number of shares of Capital Stock deemed to be outstanding shall
include shares deemed beneficially owned by such person through application of
this paragraph (v), but shall not include any other shares of Capital Stock that
may be issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
(vi) The terms "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the 1934 Act in effect on the date that this ARTICLE
13 (Fair Price) is approved by the Board of Directors of the Corporation (the
term "registrant" in Rule 12b-2 meaning in this case the Corporation).
(vii) The term "Subsidiary" means with reference to
any person, any corporation or other entity of which a majority of the voting
power of equity securities or majority of the equity interest is beneficially
owned, directly or indirectly, by such person, or otherwise controlled by such
person; provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph (iv) above, the term "Subsidiary" shall mean
only a corporation or other entity of which a majority of each class of equity
securities is beneficially owned by the Corporation.
(viii) "Common Stock" shall mean the common stock,
par value $0.01 per share, of the Corporation, except that "Common Stock" when
used with reference to any person other than the Corporation shall mean the
capital stock of such person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such person.
(ix) The term "Disinterested Director," with respect
to any particular Business Combination with, or proposed by or on behalf of, any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder or any person who thereafter would be an Affiliate or Associate of
any Interested Stockholder, means (1) any member of the Board of Directors of
the Corporation, while such person is a member of the Board of Directors, who is
not an Interested Stockholder, an Affiliate or Associate of an Interested
Stockholder, or a representative of an Interested Stockholder or of any such
Affiliate or Associate, and was a member of the Board of Directors prior to the
Effective Time, or (2) any person who subsequently becomes a member of the Board
of Directors, while such person is a member of the Board of Directors, who is
not an Interested Stockholder, an Affiliate or Associate of an Interested
Stockholder, or a representative of an Interested Stockholder or of any such
Affiliate or Associate, if such person's nomination for election or election to
the Board of Directors is recommended or approved by a majority of the
Disinterested Directors then in office.
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<PAGE> 14
(x) The term "Fair Market Value" means (1) in the
case of cash, the amount of such cash; (2) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-listed stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
exchange, on the principal United States securities exchange registered under
the 1934 Act on which such stock is listed, or, if such stock is not listed on
any such exchange, the highest closing sale price with respect to a share of
such stock during the 30-day period immediately preceding the date in question
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or any similar system then in use, or if no such sale prices
are available, the highest of the means between the last reported bid and asked
price with respect to a share of such stock on each day during the 30-day period
immediately preceding the date in question as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System, or if not so
reported, as determined by a member firm of the National Association of
Securities Dealers, Inc. selected by a majority of the Disinterested Directors,
or if no such bid and asked prices are available, the fair market value you on
the date in question of a share of such stock as determined in good faith by a
majority of the Disinterested Directors; and (3) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined in good faith by a majority of the Disinterested
Directors.
(xi) In the event of any Business Combination in
which the Corporation survives, the phrase "consideration other than cash to be
received" as used in paragraphs (1) and (2) of Section (b)(ii)(A) of this
ARTICLE 13 (Fair Price -- Minimum Price Requirements) shall include the shares
of Common Stock and/or the shares of any other class or series of Capital Stock
retained by the holders of such shares.
(xii) The term "Announcement Date" means the date on
which the proposed Business Combination is first publicly announced, disclosed
or reported.
(xiii) The term "Determination Date" means with
respect to any Interested Stockholder, the date on which such Interested
Stockholder became an Interested Stockholder.
(xiv) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of Texas
are authorized or obligated by law or executive order to close.
(d) Powers of Directors. For the purpose of this ARTICLE 13
(Fair Price), a majority of the Disinterested Directors (whether or not any
vacancies then exist on the Board of Directors) shall exercise the powers of the
Disinterested Directors hereunder, and shall have the power and duty to
determine in good faith, on the basis of information known to them after
reasonable inquiry, all questions arising under this ARTICLE 13 (Fair Price),
including, without limitation, (1) whether a person is an Interested
Stockholder, (2) the number of shares of Capital Stock beneficially owned by any
person, (3) whether a person is an Affiliate or Associate of another, (4)
whether a Business Combination is with, or proposed by or on behalf of, an
Interested
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Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would be an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder, and (5) whether any transaction
specified in paragraph (i)(B) of Section (c) of this ARTICLE 13 (Fair Price --
Certain Definitions) meets the Substantial Part test set forth therein. Any such
determination made in good faith shall be binding and conclusive on all parties.
(e) No Effect On Fiduciary Obligations.
(i) Nothing contained in this ARTICLE 13 (Fair Price)
shall be construed to relieve any Interested Stockholder from any fiduciary
obligation imposed by law.
(ii) The fact that any Business Combination complies with
the provisions of Section (b) of this ARTICLE 13 (Fair Price -- When Special
Vote Not Required) shall not be construed to impose any fiduciary duty,
obligation or responsibility on the Board of Directors, or any member thereof,
to approve such Business Combination or recommend its adoption or approval to
the stockholders of the Corporation, nor shall such compliance limit, prohibit
or otherwise restrict in any manner the Board of Directors, or any member
thereof, with respect to evaluations of or actions and responses taken with
respect to such Business Combination.
* * * * *
15
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IN WITNESS WHEREOF, Alamosa PCS Holdings, Inc. has caused this Amended
and Restated Certificate of Incorporation to be signed by David E. Sharbutt, its
Chairman of the Board and Chief Executive Officer, as of _________________,
2000.
ALAMOSA PCS HOLDINGS, INC.
By:
-----------------------------------------------
David E. Sharbutt
Chairman of the Board and Chief Executive
Officer
16
<PAGE> 1
EXHIBIT 3.2
FORM OF
AMENDED AND RESTATED BYLAWS
OF
ALAMOSA PCS HOLDINGS, INC.
A DELAWARE CORPORATION
____________________, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE ONE: OFFICES..............................................................................................1
1.1 Registered Office and Agent............................................................1
1.2 Other Offices..........................................................................1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS.............................................................................1
2.1 Annual Meeting.........................................................................1
2.2 Special Meeting........................................................................1
2.3 Place of Meetings......................................................................1
2.4 Notice.................................................................................2
2.5 Conduct of Business....................................................................2
2.6 Voting List............................................................................6
2.7 Quorum.................................................................................6
2.8 Required Vote; Withdrawal of Quorum....................................................6
2.9 Method of Voting; Proxies..............................................................6
2.10 Record Date............................................................................7
2.11 Conduct of Meeting.....................................................................7
2.12 Inspectors.............................................................................7
ARTICLE THREE: DIRECTORS..........................................................................................8
3.1 Management.............................................................................8
3.2 Number; Qualification; Election; Term..................................................8
3.3 Meetings of Directors..................................................................8
3.4 First Meeting..........................................................................8
3.5 Election of Officers...................................................................8
3.6 Regular Meetings.......................................................................8
3.7 Special Meetings.......................................................................8
3.8 Notice.................................................................................9
3.9 Quorum; Majority Vote..................................................................9
3.10 Procedure..............................................................................9
3.11 Presumption of Assent..................................................................9
3.12 Compensation...........................................................................9
ARTICLE FOUR: COMMITTEES.........................................................................................10
4.1 Designation...........................................................................10
4.2 Number; Qualification; Term...........................................................10
4.3 Authority.............................................................................10
4.4 Committee Changes.....................................................................10
4.5 Alternate Members of Committees.......................................................10
4.6 Regular Meetings......................................................................10
4.7 Special Meetings......................................................................10
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
4.8 Quorum; Majority Vote.................................................................10
4.9 Minutes...............................................................................11
4.10 Compensation..........................................................................11
4.11 Responsibility........................................................................11
ARTICLE FIVE: NOTICE.............................................................................................11
5.1 Method................................................................................11
5.2 Waiver................................................................................11
ARTICLE SIX: OFFICERS............................................................................................12
6.1 Number; Titles; Term of Office........................................................12
6.2 Removal...............................................................................12
6.3 Vacancies.............................................................................12
6.4 Authority.............................................................................12
6.5 Compensation..........................................................................12
6.6 Chairman of the Board and Chief Executive Officer.....................................12
6.7 President.............................................................................12
6.8 Vice Presidents.......................................................................13
6.9 Treasurer.............................................................................13
6.10 Assistant Treasurers..................................................................13
6.11 Secretary.............................................................................13
6.12 Assistant Secretaries.................................................................13
6.13 Vice Chairman of the Board............................................................14
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS.....................................................................14
7.1 Certificates for Shares...............................................................14
7.2 Replacement of Lost or Destroyed Certificates.........................................14
7.3 Transfer of Shares....................................................................14
7.4 Registered Stockholders...............................................................14
7.5 Regulations...........................................................................15
7.6 Legends...............................................................................15
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS..........................................................................15
8.1 Dividends.............................................................................15
8.2 Reserves..............................................................................15
8.3 Books and Records.....................................................................15
8.4 Fiscal Year...........................................................................15
8.5 Seal..................................................................................15
8.6 Resignations..........................................................................15
8.7 Securities of Other Corporations......................................................16
8.8 Telephone Meetings....................................................................16
8.9 Action Without a Meeting..............................................................16
8.10 Invalid Provisions....................................................................16
8.11 Mortgages, etc........................................................................16
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
8.12 Headings..............................................................................17
8.13 References............................................................................17
8.14 Amendments............................................................................17
8.15 Ratification..........................................................................17
8.16 Contracts.............................................................................17
</TABLE>
- iii -
<PAGE> 5
AMENDED AND RESTATED BYLAWS
OF
ALAMOSA PCS HOLDINGS, INC.
A DELAWARE CORPORATION
PREAMBLE
These amended and restated bylaws (the "BYLAWS") are subject to, and
governed by, the General Corporation Law of the State of Delaware (the "DELAWARE
CORPORATION LAW") and the amended and restated certificate of incorporation
("CERTIFICATE OF INCORPORATION") of Alamosa PCS Holdings, Inc., a Delaware
corporation (the "CORPORATION"). In the event of a direct conflict between the
provisions of these Bylaws and the mandatory provisions of the Delaware
Corporation Law or the provisions of the Certificate of Incorporation, such
provisions of the Delaware Corporation Law or the Certificate of Incorporation,
as the case may be, will be controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and registered
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State of
the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such other
places, both within and without the State of Delaware, as the Board of Directors
of the Corporation (the "BOARD OF DIRECTORS") may from time to time determine or
as the business of the Corporation may require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may be properly brought before the meeting.
2.2 Special Meeting. A special meeting of the stockholders may be
called and held as provided in the Certificate of Incorporation and these
Bylaws.
2.3 Place of Meetings. An annual meeting of stockholders may be held at
any place within or without the State of Delaware designated by the Board of
Directors. A special meeting of stockholders may be held at any place within or
without the State of Delaware designated in the notice of the meeting or a duly
executed waiver of notice of such meeting. Meetings of stockholders shall be
held at the principal office of the Corporation unless another place is
designated for meetings in the manner provided herein.
<PAGE> 6
2.4 Notice. Written or printed notice stating the place, day, and time
of each meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than 10 nor more than 60 days before the date of the meeting, either personally
or by mail, by or at the direction of the Chairman of the Board and Chief
Executive Officer, the Secretary, or the officer or person(s) calling the
meeting, to each stockholder of record entitled to vote at such meeting. If such
notice is to be sent by mail, it shall be directed to such stockholder at his
address as it appears on the records of the Corporation, unless he shall have
filed with the Secretary of the Corporation a written request that notices to
him be mailed to some other address, in which case it shall be directed to him
at such other address. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall attend such meeting in person
or by proxy and shall not, at the beginning of such meeting, object to the
transaction of any business because the meeting is not lawfully called or
convened, or who shall, either before or after the meeting, submit a signed
waiver of notice, in person or by proxy.
Such notice shall also comply with relevant provisions contained in the
Certificate of Incorporation filed on behalf of the Corporation.
2.5 Conduct of Business. This Section 2.5 of this ARTICLE TWO
((Meetings of Stockholders -- Conduct of Business) shall be effective
immediately following the consummation of the initial public offering of the
Corporation's Common Stock pursuant to a registration statement declared
effective under the Securities Act of 1933, as amended. No business may be
transacted at any meeting of stockholders, other than business that is either
(x) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors (or any duly authorized committee
thereof), (y) otherwise properly brought before the meeting by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (z) otherwise properly brought before the meeting by any stockholder of the
Corporation who is a stockholder of record on the date of such meeting, on the
date of the giving of the notice provided for in this Section 2.5 of this
ARTICLE TWO (Meetings of Stockholders -- Conduct of Business), and on the record
date for the determination of stockholders entitled to vote at such meeting and
who complies with the procedures set forth in this Section 2.5 of this ARTICLE
TWO (Meetings of Stockholders -- Conduct of Business).
Nominations of persons for election to the Board of Directors and the
proposal of business to be transacted by the stockholders may be made at an
annual meeting of stockholders only (a) pursuant to the Corporation's notice
with respect to such meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of record of the Corporation who was a
stockholder of record at the time of the giving of the notice provided for in
the following paragraph, who is entitled to vote at the meeting and who has
complied with the notice procedures set forth in this Section 2.5 of this
ARTICLE TWO (Meetings of Stockholders -- Conduct of Business).
For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of the foregoing
paragraph, (1) the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation, (2) such business must be a proper matter
for stockholder action under the Delaware Corporation Law, (3) if the
stockholder, or
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the beneficial owner on whose behalf any such proposal or nomination is made,
has provided the Corporation with a Solicitation Notice, as that term is defined
in subclause (c)(iii) of this paragraph, such stockholder or beneficial owner
must, in the case of a proposal, have delivered a proxy statement and form of
proxy to holders of at least the percentage of the Corporation's voting shares
required under applicable law to carry any such proposal, or, in the case of a
nomination or nominations, have delivered a proxy statement and form of proxy to
holders of a percentage of the Corporation's voting shares reasonably believed
by such stockholder or beneficial holder to be sufficient to elect the nominee
or nominees proposed to be nominated by such stockholder, and must, in either
case, have included in such materials the Solicitation Notice and (4) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
Section 2.5 of this ARTICLE TWO (Meetings of Stockholders -- Conduct of
Business), the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 2.5 of
this ARTICLE TWO (Meetings of Stockholders -- Conduct of Business). To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than 45 or more than 75
days prior to the first anniversary (the "ANNIVERSARY") of the date on which the
Corporation first mailed its proxy materials for the preceding year's annual
meeting of stockholders; provided, however, that if the date of the annual
meeting is advanced more than 30 days prior to or delayed by more than 30 days
after the anniversary of the preceding year's annual meeting, notice by the
stockholder to be timely must be so delivered not later than the close of
business on the later of (i) the 90th day prior to such annual meeting or (ii)
the 10th day following the day on which public announcement of the date of such
meeting is first made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person as would be required to be
disclosed in solicitations of proxies for the election of such nominees as
directors pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended and including any successor provisions thereto (the "EXCHANGE ACT"),
and such person's written consent to serve as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of such business, the reasons for conducting such business at
the meeting and any material interest in such business of such stockholder and
the beneficial owner, if any, on whose behalf the proposal is made; (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the Corporation that are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii) whether either such stockholder or beneficial owner intends to deliver a
proxy statement and form of proxy to holders of, in the case of a proposal, at
least the percentage of the Corporation's voting shares required under
applicable law to carry the proposal or, in the case of a nomination or
nominations, a sufficient number of holders of the Corporation's voting shares
to elect such nominee or nominees (an affirmative statement of such intent, a
"SOLICITATION NOTICE").
Notwithstanding anything in the second sentence of the third paragraph
of this Section 2.5 of this ARTICLE TWO (Meetings of Stockholders -- Conduct of
Business) to the contrary, in the event that the number of directors to be
elected to the Board of Directors is increased and there is
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no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least 55
days prior to the Anniversary, a stockholder's notice required by this Bylaw
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
Only persons nominated in accordance with the procedures set forth in
this Section 2.5 of this ARTICLE TWO (Meetings of Stockholders -- Conduct of
Business) shall be eligible to serve as directors and only such business shall
be conducted at an annual meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this Section
2.5 of this ARTICLE TWO (Meetings of Stockholders -- Conduct of Business). The
chair of the meeting shall have the power and the duty to determine whether a
nominee or any business proposed to be brought before the meeting has been made
in accordance with the procedures set forth in these Bylaws and, if any proposed
nominee or business is not in compliance with these Bylaws, to declare that such
defective proposed business or nomination shall not be presented for stockholder
action at the meeting and shall be disregarded.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting only
(a) by or at the direction of the Board of Directors or (b) by any stockholder
of record of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this paragraph, who shall be entitled to vote
at the meeting and who complies with the notice procedures set forth in this
Section 2.5 of this ARTICLE TWO (Meetings of Stockholders -- Conduct of
Business). Nominations by stockholders of persons for election to the Board of
Directors may be made at such a special meeting of stockholders if the
stockholder's notice required by the third paragraph of this Section 2.5 of this
ARTICLE TWO (Meetings of Stockholders -- Conduct of Business) shall be delivered
to the Secretary at the principal executive offices of the Corporation not later
than the close of business on the later of (i) the 90th day prior to such
special meeting or (ii) the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
For purposes of this Section 2.5 of this ARTICLE TWO (Meetings of
Stockholders -- Conduct of Business), "PUBLIC ANNOUNCEMENT" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Sections
13, 14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this Section 2.5 of this
ARTICLE TWO (Meetings of Stockholders -- Conduct of Business), a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect
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<PAGE> 9
to matters set forth in this Section 2.5 of this ARTICLE TWO (Meetings of
Stockholders -- Conduct of Business). Nothing in this Section 2.5 of this
ARTICLE TWO (Meetings of Stockholders -- Conduct of Business) shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
In addition, a person providing notice under Section 2.5 of this
ARTICLE TWO (Meetings of Stockholders -- Conduct of Business) shall
supplementally and promptly provide such other information as the Corporation
otherwise reasonably requests.
A majority of the Board of Directors may reject any business proposed
by a stockholder that is not timely made or otherwise not made in accordance
with the terms of Section 2.5 of this ARTICLE TWO (Meetings of Stockholders --
Conduct of Business). If a majority of the Board of Directors reasonably
determines that the information provided in a stockholder's notice does not
satisfy the informational requirements of Section 2.5 of this ARTICLE TWO
(Meetings of Stockholders -- Conduct of Business) in any material respect, then
the Secretary of the Corporation shall promptly notify such stockholder of the
deficiency in writing. The stockholder shall have an opportunity to cure the
deficiency by providing additional information to the Secretary within such
period of time as a majority of the Board of Directors shall reasonably
determine, which period shall not exceed 10 days from the date such deficiency
notice is given to the stockholder. If the deficiency is not cured within such
period, or if a majority of the Board of Directors reasonably determines that
the additional information provided by the stockholder, together with the
information previously provided, does not satisfy the requirements of this
paragraph in any material respect, then a majority of the Board of Directors may
reject such stockholder's proposed business. The Secretary of the Corporation
shall notify a stockholder in writing whether his or her proposal of new
business has been made in accordance with the time and information requirements
of Section 2.5 of this ARTICLE TWO (Meetings of Stockholders -- Conduct of
Business).
Once business has been properly brought before the meeting in
accordance with this Section 2.5 of this ARTICLE TWO (Meetings of Stockholders
- -- Conduct of Business), nothing herein shall be deemed to preclude discussion
by any stockholder of any such business; provided further, however, that if the
stockholder bringing such matter before the meeting withdraws such matter, such
matter shall no longer be properly before the meeting.
The chairman of a meeting of stockholders may, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the procedure prescribed by Section 2.5 of
this ARTICLE TWO (Meetings of Stockholders -- Conduct of Business) and if the
chairman should so determine, he or she shall so declare to the meeting and such
business shall not be transacted.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted, and no person shall be nominated to serve as a director, at
an annual or special meeting of stockholders, unless the requirements of the
Certificate of Incorporation shall have been satisfied.
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<PAGE> 10
2.6 Voting List. At least 10 days before each meeting of stockholders,
the Secretary or other officer of the Corporation who has charge of the
Corporation's stock ledger, either directly or through another officer appointed
by him or through a transfer agent appointed by the Board of Directors, shall
prepare a complete list of stockholders entitled to vote thereat, arranged in
alphabetical order and showing the address of each stockholder and number of
shares of capital stock registered in the name of each stockholder. For a period
of 10 days prior to such meeting, such list shall be kept on file at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of meeting or a duly executed waiver of notice of such meeting or,
if not so specified, at the place where the meeting is to be held and shall be
open to examination by any stockholder, for any purpose germane to the meeting,
during ordinary business hours. Such list shall be produced at such meeting and
kept at the meeting at all times during such meeting and may be inspected by any
stockholder who is present.
2.7 Quorum. The holders of a majority of the outstanding shares of
capital stock entitled to vote on a matter, present in person or by proxy, shall
constitute a quorum at any meeting of stockholders, except as otherwise provided
by law, the Certificate of Incorporation, or these Bylaws. If a quorum shall not
be present, in person or by proxy, at any meeting of stockholders, the chairman
of the meeting or the stockholders entitled to vote thereat who are present, in
person or by proxy, may adjourn the meeting from time to time without notice
other than announcement at the meeting (unless the Board of Directors, after
such adjournment, fixes a new record date for the adjourned meeting), until a
quorum shall be present, in person or by proxy. At any adjourned meeting at
which a quorum shall be present, in person or by proxy, any business may be
transacted which may have been transacted at the original meeting had a quorum
been present; provided that, if the adjournment is for more than 30 days or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the adjourned meeting.
2.8 Required Vote; Withdrawal of Quorum. When a quorum is present at
any meeting, the vote of the holders of at least a majority of the outstanding
shares of capital stock entitled to vote thereat who are present, in person or
by proxy, shall decide any question brought before such meeting, unless the
question is one on which, by express provision of law, the Certificate of
Incorporation, or these Bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question;
provided, however, that the vote of the holders of a plurality of the
outstanding shares of capital stock entitled to vote in the election of
directors who are present, in person or by proxy, shall be required to effect
elections of directors. The stockholders present at a duly constituted meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
2.9 Method of Voting; Proxies. Except as otherwise provided in the
Certificate of Incorporation (including any certificate establishing a series of
Preferred Stock) or by law, each outstanding share of capital stock, regardless
of class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders. Elections of directors need not be by written ballot.
At any meeting of stockholders, every stockholder having the right to vote may
vote either in person or by a proxy executed in writing by the stockholder or by
his duly authorized attorney-in-fact. Each
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such proxy shall be filed with the Secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after three years from the date of
its execution, unless otherwise provided in the proxy. If no date is stated in a
proxy, such proxy shall be presumed to have been executed on the date of the
meeting at which it is to be voted. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.
2.10 Record Date. For the purpose of determining stockholders entitled
(a) to notice of or to vote at any meeting of stockholders or any adjournment
thereof, (b) to receive payment of any dividend or other distribution or
allotment of any rights, or (c) to exercise any rights in respect of any change,
conversion, or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, for any such determination of stockholders, such date in
any case to be not more than 60 days and not less than 10 days prior to such
meeting nor more than 60 days prior to any other action. If no record date is
fixed:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
2.11 Conduct of Meeting. The Chairman of the Board and Chief Executive
Officer, if such office has been filled, and, if such office has not been filled
or if the Chairman of the Board and Chief Executive Officer is absent or
otherwise unable to act, the President shall preside at all meetings of
stockholders and act as the chairman of the meeting. The chairman of the meeting
shall have the power to adjourn the meeting to another place, date, and time.
The chairman of the meeting shall determine the order of business and the
procedure at the meeting, including such regulation of the manner of voting and
the conduct of discussion as seem to him or her in order. The Secretary shall
keep the records of each meeting of stockholders. In the absence or inability to
act of any such officer, such officer's duties shall be performed by the officer
given the authority to act for such absent or non-acting officer under these
Bylaws or by resolution adopted by the Board of Directors, or if no officer has
been given such authority, by some person appointed at the meeting.
2.12 Inspectors. The Board of Directors shall, if required, in advance
of any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If any of the inspectors so appointed shall
fail to appear or act, the chairman of the meeting shall, or
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if inspectors shall not have been appointed, the chairman of the meeting may,
appoint one or more inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath to execute faithfully the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspectors shall determine the number of shares of
capital stock of the Corporation outstanding and the voting power of each, the
number of shares represented at the meeting, the existence of a quorum, and the
validity and effect of proxies and shall receive votes, ballots, or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count, and tabulate all votes, ballots, or consents, determine
the results, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge, request, or matter
determined by them and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as an inspector of an
election of directors. Inspectors need not be stockholders.
ARTICLE THREE: DIRECTORS
3.1 Management. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
3.2 Number; Qualification; Election; Term. The Board of Directors shall
be constituted as set forth in the Certificate of Incorporation.
3.3 Meetings of Directors. The directors may hold their meetings and
may have an office and keep the records of the Corporation, except as otherwise
provided by law, in such place or places within or without the State of Delaware
as the Board of Directors may from time to time determine or as shall be
specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
3.4 First Meeting. Each newly elected Board of Directors may hold its
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of stockholders, and no notice of such meeting shall be necessary.
3.5 Election of Officers. At the first meeting of the Board of
Directors after each annual meeting of stockholders at which a quorum shall be
present, the Board of Directors shall elect the officers of the Corporation.
3.6 Regular Meetings. Regular meetings of the Board of Directors shall
be held at such times and places as shall be designated from time to time by
resolution of the Board of Directors. Notice of such regular meetings shall not
be required.
3.7 Special Meetings. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board and Chief Executive
Officer, or by two or more directors then in office.
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3.8 Notice. The Secretary shall give notice of each special meeting to
each director at least 24 hours before the meeting. Notice of any such meeting
need not be given to any director who, either before or after the meeting,
submits a signed waiver of notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of notice to him. The
purpose of any special meeting shall be specified in the notice or waiver of
notice of such meeting.
3.9 Quorum; Majority Vote. At all meetings of the Board of Directors, a
majority of the directors fixed in the manner provided in the Certificate of
Incorporation shall constitute a quorum for the transaction of business. If at
any meeting of the Board of Directors there is less than a quorum present, a
majority of those present or any director solely present may adjourn the meeting
from time to time without further notice. Unless the act of a greater number is
required by law, the Certificate of Incorporation, or these Bylaws, the act of a
majority of the directors present at a meeting at which a quorum is in
attendance shall be the act of the Board of Directors. At any time that the
Certificate of Incorporation provides that directors elected by the holders of a
class or series of stock shall have more or less than one vote per director on
any matter, every reference in these Bylaws to a majority or other proportion of
directors shall refer to a majority or other proportion of the votes of such
directors.
3.10 Procedure. At meetings of the Board of Directors, business shall
be transacted in such order as from time to time the Board of Directors may
determine. The Chairman of the Board and Chief Executive Officer, if such office
has been filled, and, if such office has not been filled or if the Chairman of
the Board and Chief Executive Officer is absent or otherwise unable to act, the
President shall preside at all meetings of the Board of Directors. In the
absence or inability to act of such officers, a chairman shall be chosen by the
Board of Directors from among the directors present. The Secretary of the
Corporation shall act as the secretary of each meeting of the Board of Directors
unless the Board of Directors appoints another person to act as secretary of the
meeting. The Board of Directors shall keep regular minutes of its proceedings
which shall be placed in the minute book of the Corporation.
3.11 Presumption of Assent. A director of the Corporation who is
present at the meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
3.12 Compensation. The Board of Directors shall have the authority to
fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the Board of
Directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
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ARTICLE FOUR: COMMITTEES
4.1 Designation. The Board of Directors may designate one or more
committees.
4.2 Number; Qualification; Term. Each committee shall consist of one or
more directors appointed by resolution adopted by a majority of the entire Board
of Directors. The number of committee members may be increased or decreased from
time to time by resolution adopted by a majority of the entire Board of
Directors. Each committee member shall serve as such until the earliest of (i)
the expiration of his term as director, (ii) his resignation as a committee
member or as a director, or (iii) his removal as a committee member or as a
director.
4.3 Authority. Each committee, to the extent expressly provided in the
resolution establishing such committee, shall have and may exercise all of the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation except to the extent expressly restricted by law,
the Certificate of Incorporation, or these Bylaws.
4.4 Committee Changes. The Board of Directors shall have the power at
any time to fill vacancies in, to change the membership of, and to discharge any
committee.
4.5 Alternate Members of Committees. The Board of Directors may
designate one or more directors as alternate members of any committee. Any such
alternate member may replace any absent or disqualified member at any meeting of
the committee. If no alternate committee members have been so appointed to a
committee or each such alternate committee member is absent or disqualified, the
member or members of such committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be held
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two days before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.
4.8 Quorum; Majority Vote. At meetings of any committee, a majority of
the number of members designated by the Board of Directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a meeting
of any committee, a majority of the members present may adjourn the meeting from
time to time, without notice other than an announcement at the meeting, until a
quorum is present. The act of a majority of the members present at any meeting
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at which a quorum is in attendance shall be the act of a committee, unless the
act of a greater number is required by law, the Certificate of Incorporation, or
these Bylaws.
4.9 Minutes. Each committee shall cause minutes of its proceedings to
be prepared and shall report the same to the Board of Directors upon the request
of the Board of Directors. The minutes of the proceedings of each committee
shall be delivered to the Secretary of the Corporation for placement in the
minute books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the Board of
Directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors or any director of any responsibility imposed upon it or such director
by law.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the Certificate of Incorporation, or
these Bylaws, notice is required to be given to any committee member, director,
or stockholder and no provision is made as to how such notice shall be given,
personal notice shall not be required and any such notice may be given (a) in
writing, by mail, postage prepaid, addressed to such committee member, director,
or stockholder at his address as it appears on the books or (in the case of a
stockholder) the stock transfer records of the Corporation, or (b) by any other
method permitted by law (including but not limited to overnight courier service,
telegram, telex, or telefax). Any notice required or permitted to be given by
mail shall be deemed to be delivered and given at the time when the same is
deposited in the United States mail as aforesaid. Any notice required or
permitted to be given by overnight courier service shall be deemed to be
delivered and given at the time delivered to such service with all charges
prepaid and addressed as aforesaid. Any notice required or permitted to be given
by telegram, telex, or telefax shall be deemed to be delivered and given at the
time transmitted with all charges prepaid and addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
Certificate of Incorporation, or these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be equivalent to the giving of such notice.
Attendance of a stockholder, director, or committee member at a meeting shall
constitute a waiver of notice of such meeting, except where such person attends
for the express purpose of objecting at the beginning of such meeting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
- 11 -
<PAGE> 16
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation
shall be a Chairman of the Board and Chief Executive Officer, a President, a
Secretary, and such other officers as the Board of Directors may from time to
time elect or appoint, including one or more Vice Presidents (with each Vice
President to have such descriptive title, if any, as the Board of Directors
shall determine) and a Treasurer. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified, until his
death, or until he shall resign or shall have been removed in the manner
hereinafter provided. Any two or more offices may be held by the same person.
None of the officers need be a stockholder or a director of the Corporation or a
resident of the State of Delaware.
6.2 Removal. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interest of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the Corporation
(by death, resignation, removal, or otherwise) may be filled by the Board of
Directors.
6.4 Authority. Officers shall have such authority and perform such
duties in the management of the Corporation as are provided in these Bylaws or
as may be determined by resolution of the Board of Directors not inconsistent
with these Bylaws.
6.5 Compensation. The compensation, if any, of officers and agents
shall be fixed from time to time by the Board of Directors; provided, however,
that the Board of Directors may delegate the power to determine the compensation
of any officer and agent (other than the officer to whom such power is
delegated) to the Chairman of the Board and Chief Executive Officer or the
President.
6.6 Chairman of the Board and Chief Executive Officer. The Chairman of
the Board and Chief Executive Officer shall be the chief executive officer of
the Corporation and, subject to the supervision of the Board of Directors of the
Corporation, shall have the general management and control of the Corporation
and its subsidiaries (including the right to vote the voting securities of the
subsidiaries of the Corporation on behalf of the Corporation), shall preside at
all meetings of the stockholders and of the Board of Directors and may sign all
certificates for shares of capital stock of the Corporation.
6.7 President. The President shall be the chief operating officer of
the Corporation and, subject to the supervision of the Chairman of the Board and
Chief Executive Officer, he shall have general executive charge, management, and
control of the properties and operations of the Corporation in the ordinary
course of its business, with all such powers with respect to such properties and
operations as may be reasonably incident to such responsibilities. In the
absence or inability to act of the Chairman of the Board and Chief Executive
Officer, the President shall
- 12 -
<PAGE> 17
exercise all of the powers and discharge all of the duties of the Chairman of
the Board and Chief Executive Officer. As between the Corporation and third
parties, any action taken by the President in the performance of the duties of
the Chairman of the Board and Chief Executive Officer shall be conclusive
evidence that the Chairman of the Board and Chief Executive Officer is absent or
unable to act. The President may sign all certificates for shares of stock of
the Corporation.
6.8 Vice Presidents. Each Vice President shall have such powers and
duties as may be assigned to him by the Board of Directors, the Chairman of the
Board and Chief Executive Officer, or the President, and (in order of their
seniority as determined by the Board of Directors or, in the absence of such
determination, as determined by the length of time they have held the office of
Vice President) shall exercise the powers of the President during that officer's
absence or inability to act. As between the Corporation and third parties, any
action taken by a Vice President in the performance of the duties of the
President shall be conclusive evidence of the absence or inability to act of the
President at the time such action was taken.
6.9 Treasurer. The Treasurer shall have custody of the Corporation's
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors, the Chairman of the Board and Chief
Executive Officer, or the President.
6.10 Assistant Treasurers. Each Assistant Treasurer shall have such
powers and duties as may be assigned to him by the Board of Directors, the
Chairman of the Board and Chief Executive Officer, or the President. The
Assistant Treasurers (in the order of their seniority as determined by the Board
of Directors or, in the absence of such a determination, as determined by the
length of time they have held the office of Assistant Treasurer) shall exercise
the powers of the Treasurer during that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these Bylaws, the
Secretary shall keep the minutes of all meetings of the Board of Directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman of the
Board and Chief Executive Officer or the President, in the name of the
Corporation, all contracts of the Corporation and affix the seal, if any, of the
Corporation thereto. He may sign with the Chairman of the Board and Chief
Executive Officer or the President all certificates for shares of stock of the
Corporation, and he shall have charge of the certificate books, transfer books,
and stock papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to inspection by any director upon application at the
office of the Corporation during business hours. He shall in general perform all
duties incident to the office of the Secretary, subject to the control of the
Board of Directors, the Chairman of the Board and Chief Executive Officer, and
the President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such
powers and duties as may be assigned to him by the Board of Directors, the
Chairman of the Board and Chief Executive Officer, or the President. The
Assistant Secretaries (in the order of their seniority as determined by
- 13 -
<PAGE> 18
the Board of Directors or, in the absence of such a determination, as determined
by the length of time they have held the office of Assistant Secretary) shall
exercise the powers of the Secretary during that officer's absence or inability
to act.
6.13 Vice Chairman of the Board. The Vice Chairman of the Board, if one
shall be appointed, shall have such powers and duties as may be provided herein
or assigned to him by the Board of Directors or the Chairman of the Board and
Chief Executive Officer.
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the Board of
Directors. The certificates shall be signed by the Chairman of the Board and
Chief Executive Officer or the President or a Vice President and also by the
Secretary or an Assistant Secretary or by the Treasurer or an Assistant
Treasurer. Any and all signatures on the certificate may be a facsimile and may
be sealed with the seal of the Corporation or a facsimile thereof. If any
officer, transfer agent, or registrar who has signed, or whose facsimile
signature has been placed upon, a certificate has ceased to be such officer,
transfer agent, or registrar before such certificate is issued, such certificate
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue. The certificates
shall be consecutively numbered and shall be entered in the books of the
Corporation as they are issued and shall exhibit the holder's name and the
number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The Corporation may
direct a new certificate or certificates to be issued in place of a certificate
or certificates theretofore issued by the Corporation and alleged to have been
lost or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate or certificates representing shares to be lost or
destroyed. When authorizing such issue of a new certificate or certificates the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond with a surety or
sureties satisfactory to the Corporation in such sum as it may direct as
indemnity against any claim, or expense resulting from a claim, that may be made
against the Corporation with respect to the certificate or certificates alleged
to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of
- 14 -
<PAGE> 19
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
7.5 Regulations. The Board of Directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 Legends. The Board of Directors shall have the power and authority
to provide that certificates representing shares of stock bear such legends as
the Board of Directors deems appropriate to assure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the Certificate of
Incorporation, dividends may be declared by the Board of Directors at any
regular or special meeting and may be paid in cash, in property, or in shares of
stock of the Corporation. Such declaration and payment shall be at the
discretion of the Board of Directors.
8.2 Reserves. There may be created by the Board of Directors out of
funds of the Corporation legally available therefor such reserve or reserves as
the directors from time to time, in their discretion, consider proper to provide
for contingencies, to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the Board of Directors shall
consider beneficial to the Corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
8.3 Books and Records. The Corporation shall keep correct and complete
books and records of account, shall keep minutes of the proceedings of its
stockholders and Board of Directors and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by
the Board of Directors; provided, that if such fiscal year is not fixed by the
Board of Directors and the selection of the fiscal year is not expressly
deferred by the Board of Directors, the fiscal year shall be the calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time to
time may be approved by the Board of Directors.
8.6 Resignations. Any director, committee member, or officer may resign
by so stating at any meeting of the Board of Directors or by giving written
notice to the Board of Directors, the Chairman of the Board and Chief Executive
Officer, the President, or the Secretary. Such resignation shall take effect at
the time specified therein or, if no time is specified therein,
- 15 -
<PAGE> 20
immediately upon its receipt. Unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
8.7 Securities of Other Corporations. The Chairman of the Board and
Chief Executive Officer or the President shall have the power and authority to
transfer, endorse for transfer, vote, consent, or take any other action with
respect to any securities of another issuer which may be held or owned by the
Corporation and to make, execute, and deliver any waiver, proxy, or consent with
respect to any such securities.
8.8 Telephone Meetings. Members of the Board of Directors and members
of a committee of the Board of Directors may participate in and hold a meeting
of such Board of Directors or committee by means of a conference telephone or
similar communications equipment by means of which persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 8.8 of this ARTICLE EIGHT (Miscellaneous Provisions -- Telephone
Meetings) shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting at the
beginning of such meeting to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
8.9 Action Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or by these Bylaws, any action required or
permitted to be taken at a meeting of the Board of Directors, or of any
committee of the Board of Directors, may be taken without a meeting if a consent
or consents in writing, setting forth the action so taken, shall be signed by
all the directors or all the committee members, as the case may be, entitled to
vote with respect to the subject matter thereof, and such consent shall have the
same force and effect as a vote of such directors or committee members, as the
case may be, and may be stated as such in any certificate or document filed with
the Secretary of State of the State of Delaware or in any certificate delivered
to any person. Such consent or consents shall be filed with the minutes of
proceedings of the Board of Directors or committee, as the case may be.
Effective immediately following the consummation of the initial public
offering of the Corporation's Common Stock pursuant to a registration statement
declared effective under the Securities Act of 1933, as amended and including
any successor provisions thereto, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
8.10 Invalid Provisions. If any part of these Bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust, mortgage,
or other instrument executed by the Corporation through its duly authorized
officer or officers, the attestation to such execution by the Secretary of the
Corporation shall not be necessary to constitute such deed, deed of trust,
mortgage, or other instrument a valid and binding obligation against the
Corporation unless
- 16 -
<PAGE> 21
the resolutions, if any, of the Board of Directors authorizing such execution
expressly state that such attestation is necessary.
8.12 Headings. The headings used in these Bylaws have been inserted for
administrative convenience only and do not constitute matter to be construed in
interpretation.
8.13 References. Whenever herein the singular number is used, the same
shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.14 Amendments. The Board of Directors may, upon the affirmative vote
of at least two-thirds of the Directors then serving, make, adopt, alter, amend,
and repeal from time to time these Bylaws and make from time to time new Bylaws
of the Corporation (subject to the right of the stockholders entitled to vote
thereon to adopt, alter, amend, and repeal Bylaws made by the Board of Directors
or to make new Bylaws); provided, however, that the stockholders of the
Corporation may adopt, alter, amend, or repeal Bylaws made by the Board of
Directors or make new Bylaws solely upon the affirmative vote of the holders of
at least 80% of the outstanding shares of capital stock then entitled to vote
thereon.
8.15 Ratification. Any transaction questioned in any lawsuit on the
grounds of, among other things, lack of authority, defective or irregular
execution, adverse interest of a director, officer or stockholder,
non-disclosure, miscomputation, or the application of improper principles or
practices of accounting, may be ratified, before or after judgment, by the Board
of Directors or by the stockholders, and if so ratified shall have the same
force and effect as if the questioned transaction had been originally duly
authorized. Such ratification shall be binding upon the Corporation and its
stockholders and shall constitute a bar to any claim or execution of any
judgment in respect of such questioned transaction.
8.16 Contracts. The Board of Directors may authorize any person or
persons, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other obligations
or instruments, and such authority may be general or confined in specific
instances.
* * * * *
- 17 -
<PAGE> 22
The undersigned Secretary of the Corporation hereby certifies that the
foregoing Bylaws were adopted by consent of the sole director of the Corporation
as of __________________, 2000.
----------------------------------
Secretary
- 18 -
<PAGE> 1
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
<TABLE>
<S> <C> <C>
[NUMBER] [LOGO] [SHARES]
ALAMOSA
PERSONAL COMMUNICATIONS SERVICE
COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE IN ALAMOSA PCS HOLDINGS, INC.
NEW YORK, NY AND RIDGEFIELD PARK, NJ
CUSIP 011593 10 0
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, OF THE PAR VALUE OF $0.01 PER SHARE, OF
ALAMOSA PCS HOLDINGS, INC.
transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and registered by the
Registrar.
WITNESS the seal of the Corporation and the signatures of its duly authorized officers.
/s/ DAVID SHARBUTT
- ---------------------
David Sharbutt
CHIEF EXECUTIVE OFFICER
/s/ KENDALL COWAN
---------------------
Kendall Cowan
SECRETARY
[SEAL] Dated:
COUNTERSIGNED AND REGISTERED
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Transfer Agent and Registrar
By
Authorized Signature
</TABLE>
<PAGE> 2
ALAMOSA PCS HOLDINGS, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE
CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS. A STOCKHOLDER MAY MAKE THE REQUEST TO THE CORPORATION
AT ITS PRINCIPAL EXECUTIVE OFFICES.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN THE RIGHTS AGREEMENT BY AND BETWEEN THE
CORPORATION AND CHASEMELLON SHAREHOLDER SERVICES L.L.C., AS RIGHTS AGENT, AS IT
MAY BE AMENDED FROM TIME TO TIME (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH
ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICES OF THE CORPORATION. UNDER CERTAIN CIRCUMSTANCES, AS SET
FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE
CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE
CORPORATION WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS
AGREEMENT, AS IN EFFECT ON THE DATE OF MAILING, WITHOUT CHARGE PROMPTLY AFTER
RECEIPT OF A WRITTEN REQUEST THEREFOR, UNDER CERTAIN CIRCUMSTANCES SET FORTH IN
THE RIGHTS AGREEMENT. RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR
BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS
ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF
SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____________ Custodian ___________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act __________________
in common (State)
</TABLE>
For value received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________________
_______________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation, with full power of substitution in the premises.
Dated:______________________________
X______________________________________
(SIGNATURE)
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
X______________________________________
(SIGNATURE)
THE SIGNATURE(S) MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
_________________________________________
SIGNATURE(S) GUARANTEED BY:
<PAGE> 1
EXHIBIT 5.1
[HAYNES AND BOONE, LLP LETTERHEAD]
December ___, 1999
Alamosa PCS Holdings, Inc.
4403 Brownfield Highway
Lubbock, Texas 79407
Re: Alamosa PCS Holdings, Inc. Registration Statement on Form S-1
Gentlemen:
We have acted as counsel to Alamosa PCS Holdings, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of the Company's
Registration Statement on Form S-1 (Registration No. 333-89995) and the
amendments thereto (the Registration Statement, as amended, is hereinafter
referred to as the "Registration Statement") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"). The Registration Statement relates to the offer and sale by
the Company of up to 12,321,100 shares of its Common Stock, par value $0.01 per
share ("Common Stock"). The opinions expressed herein relate solely to, are
based solely upon and are limited exclusively to, the internal substantive laws
of the State of Texas, the General Corporation Laws of the State of Delaware and
applicable federal laws of the United States of America.
In connection therewith, we have examined and relied upon the original, or
copies certified to our satisfaction, of (i) the Amended and Restated
Certificate of Incorporation of the Company (the "Certificate of
Incorporation"), and the Amended and Restated Bylaws of the Company (the
"Bylaws"); (ii) the minutes and records of the corporate proceedings of the
Company with respect to the issuance by the Company of the shares of Common
Stock; (iii) the Registration Statement and all exhibits thereto; (iv) the form
of Underwriting Agreement (herein so called), to be entered into among the
Company and Salomon Smith Barney Inc., Credit Suisse First Boston Corporation
and Deutsche Bank Securities Inc., as Underwriters named in the Underwriting
Agreement; (v) such other documents and instruments as we have deemed necessary
for the expression of the opinions contained herein and (vi) the specimen Common
Stock certificate filed as Exhibit 4.1 to the Registration Statement.
In making the foregoing examinations, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals,
and the conformity to original documents of all documents submitted to us as
certified or photostatic copies thereof. As to various questions of fact
material to this opinion, where such facts have not been independently
established, and as to the content and form of certain minutes, records,
resolutions and other documents or writings of the Company, we have relied, to
the extent we have deemed reasonably appropriate, upon representations or
certificates of officers of
<PAGE> 2
Alamosa PCS Holdings, Inc.
December ___, 1999
Page 2
the Company or governmental officials. We have assumed that the Underwriting
Agreement will be executed in substantially the same form submitted to us.
Finally, we have assumed that all formalities required by the Company's
Certificate of Incorporation, Bylaws and the Delaware General Corporation Law
will be complied with when the shares of Common Stock are issued.
Based upon the foregoing, and having due regard for such legal considerations as
we deem relevant, we are of the opinion that the shares of Common Stock, upon
receipt by the Company of the full consideration for the shares of Common Stock
in accordance with the terms of the Underwriting Agreement, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Securities and Exchange
Commission as Exhibit 5.1 to the Registration Statement and any abbreviated
registration statements relating thereto that may be filed to register
additional securities identical to those covered by the Registration Statement
(including a registration statement filed pursuant to Rule 462(b) under the
Securities Act), and to the reference to our firm under the caption "Legal
Matters" in the prospectus constituting a part of such Registration Statement.
In giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
Haynes and Boone, LLP
<PAGE> 1
EXHIBIT 10.16
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT WITH "[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]"
================================================================================
FORM OF
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of February __, 2000
by and among
ALAMOSA PCS, INC.
as Borrower
and
ALAMOSA PCS HOLDINGS, INC.
TEXAS TELECOMMUNICATIONS, LP
and
ALAMOSA WISCONSIN LIMITED PARTNERSHIP
as Guarantors
and
NORTEL NETWORKS INC.
as Administrative Agent
and
THE LENDERS NAMED HEREIN
$250,000,000 ADVANCING TERM LOAN FACILITIES
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
Definitions..............................................................................................3
Section 1.1 Definitions, etc.......................................................................3
Section 1.2 Other Definitional Provisions.........................................................30
Section 1.3 Accounting Terms and Determinations...................................................31
Section 1.4 Financial Covenants and Reporting.....................................................31
ARTICLE 2
Loans...................................................................................................32
Section 2.1 Commitments...........................................................................32
Section 2.2 Notes.................................................................................33
Section 2.3 Repayment of Loans....................................................................34
Section 2.4 Interest..............................................................................35
Section 2.5 Borrowing Procedure...................................................................36
Section 2.6 Optional Prepayments, Conversions and Continuations of Loans..........................36
Section 2.7 Mandatory Prepayments.................................................................37
Section 2.8 Minimum Amounts.......................................................................38
Section 2.9 Certain Notices.......................................................................38
Section 2.10 Use of Proceeds.......................................................................39
Section 2.11 Fees..................................................................................40
Section 2.12 Computations..........................................................................40
Section 2.13 Termination or Reduction of Commitments...............................................41
ARTICLE 3
Payments................................................................................................42
Section 3.1 Method of Payment.....................................................................42
Section 3.2 Pro Rata Treatment....................................................................42
Section 3.3 Sharing of Payments, Etc..............................................................42
Section 3.4 Non-Receipt of Funds by the Administrative Agent......................................43
Section 3.5 Taxes.................................................................................43
Section 3.6 Withholding Tax Exemption.............................................................44
Section 3.7 Reinstatement of Obligations..........................................................45
Section 3.8 No Force Majeure, Disputes............................................................45
ARTICLE 4
Yield Protection and Illegality.........................................................................46
Section 4.1 Additional Costs......................................................................46
</TABLE>
CREDIT AGREEMENT - Page i
<PAGE> 3
<TABLE>
<S> <C>
Section 4.2 Limitation on Types of Loans..........................................................47
Section 4.3 Illegality............................................................................48
Section 4.4 Treatment of Affected Loans...........................................................48
Section 4.5 Compensation..........................................................................48
Section 4.6 Capital Adequacy......................................................................49
Section 4.7 Additional Interest on Eurodollar Loans...............................................49
Section 4.8 Replacement of Lenders................................................................50
ARTICLE 5
Security................................................................................................50
Section 5.1 Collateral............................................................................50
Section 5.2 Guaranties............................................................................51
Section 5.3 New Subsidiaries; Additional Capital Stock............................................51
Section 5.4 Mortgaged Properties; Landlord Subordinations or Waivers..............................52
Section 5.5 Setoff................................................................................53
Section 5.6 Further Assurances....................................................................53
ARTICLE 6
Conditions Precedent....................................................................................53
Section 6.1 Initial Extension of Credit...........................................................53
Section 6.2 All Extensions of Credit..............................................................58
Section 6.3 Closing Certificates..................................................................59
ARTICLE 7
Representations and Warranties..........................................................................60
Section 7.1 Existence, etc........................................................................60
Section 7.2 Financial Statements..................................................................60
Section 7.3 Corporate Action; No Breach...........................................................61
Section 7.4 Operation of Business; Licenses.......................................................61
Section 7.5 Intellectual Property.................................................................61
Section 7.6 Litigation and Judgments..............................................................62
Section 7.7 Rights in Properties; Liens...........................................................62
Section 7.8 Enforceability........................................................................62
Section 7.9 Approvals.............................................................................62
Section 7.10 Debt..................................................................................63
Section 7.11 Taxes.................................................................................63
Section 7.12 Margin Securities.....................................................................63
Section 7.13 ERISA.................................................................................63
Section 7.14 Disclosure............................................................................64
Section 7.15 Loan Parties; Capitalization..........................................................64
Section 7.16 Compliance with Laws..................................................................65
Section 7.17 Investment Company Act................................................................65
</TABLE>
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<TABLE>
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Section 7.18 Public Utility Holding Company Act....................................................65
Section 7.19 Environmental Matters.................................................................65
Section 7.20 Year 2000 Compliance..................................................................66
Section 7.21 Labor Disputes and Acts of God........................................................66
Section 7.22 Material Contracts....................................................................66
Section 7.23 Bank Accounts.........................................................................67
Section 7.24 Outstanding Securities................................................................67
Section 7.25 Solvency..............................................................................67
Section 7.26 Employee Matters......................................................................67
Section 7.27 Insurance.............................................................................67
Section 7.28 Common Enterprise.....................................................................67
Section 7.29 Reorganization Transactions. ........................................................68
ARTICLE 8
Affirmative Covenants...................................................................................68
Section 8.1 Reporting Requirements................................................................68
Section 8.2 Maintenance of Existence; Conduct of Business.........................................72
Section 8.3 Maintenance of Properties and Permits.................................................72
Section 8.4 Taxes and Claims......................................................................72
Section 8.5 Insurance.............................................................................72
Section 8.6 Inspection Rights.....................................................................74
Section 8.7 Keeping Books and Records.............................................................74
Section 8.8 Compliance with Laws..................................................................74
Section 8.9 Compliance with Agreements............................................................75
Section 8.10 Further Assurances....................................................................75
Section 8.11 ERISA.................................................................................75
Section 8.12 Interest Rate Protection..............................................................75
Section 8.13 Sprint Agreements. ...................................................................75
Section 8.14 Non-Consolidation.....................................................................75
Section 8.15 Year 2000 Compliance..................................................................76
Section 8.16 Trade Accounts Payable................................................................76
Section 8.17 Delivery of Certain Amendments and Material Contracts.................................76
Section 8.18 Ownership of Borrower-Owned Operating Assets..........................................76
Section 8.19 Observation Rights....................................................................76
Section 8.20 Contributions to the Equity Capital of the Borrower...................................77
ARTICLE 9
Negative Covenants......................................................................................77
Section 9.1 Debt. ...............................................................................77
Section 9.2 Limitation on Liens...................................................................78
Section 9.3 Mergers, Etc..........................................................................78
Section 9.4 Restricted Payments...................................................................79
Section 9.5 Investments...........................................................................80
Section 9.6 Limitation on Issuance of Capital Stock...............................................81
</TABLE>
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<TABLE>
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Section 9.7 Transactions with Affiliates..........................................................81
Section 9.8 Disposition of Property...............................................................81
Section 9.9 Sale and Leaseback....................................................................82
Section 9.10 Lines of Business.....................................................................82
Section 9.11 Environmental Protection..............................................................83
Section 9.12 Intercompany Transactions.............................................................83
Section 9.13 Management Fees.......................................................................83
Section 9.14 Supply Agreement......................................................................83
Section 9.15 Modification of Certain Agreements....................................................83
Section 9.16 ERISA.................................................................................84
Section 9.17 Sprint PCS Fees.......................................................................84
Section 9.18 No Prepayment of Debt, Etc............................................................84
ARTICLE 10
Financial Covenants.....................................................................................85
Section 10.1 Total Debt to Total Capitalization....................................................85
Section 10.2 Total Debt to Annualized EBITDA......................................................86
Section 10.3 Annualized EBITDA.....................................................................86
Section 10.4 Fixed Charge Coverage.................................................................86
Section 10.5 Capital Expenditures..................................................................86
Section 10.6 Quarterly Minimum Revenue Levels......................................................86
Section 10.7 Wireless Subscribers..................................................................86
Section 10.8 Operating Leases......................................................................86
ARTICLE 11
Default.................................................................................................86
Section 11.1 Events of Default.....................................................................86
Section 11.2 Remedies..............................................................................90
Section 11.3 Performance by the Administrative Agent, etc..........................................90
ARTICLE 12
The Administrative Agent................................................................................91
Section 12.1 Appointment, Powers and Immunities....................................................91
Section 12.2 Rights of Administrative Agent as a Lender............................................92
Section 12.3 Defaults..............................................................................92
Section 12.4 INDEMNIFICATION.......................................................................92
Section 12.5 Independent Credit Decisions..........................................................93
Section 12.6 Several Commitments...................................................................94
Section 12.7 Successor Administrative Agent........................................................94
</TABLE>
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<TABLE>
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ARTICLE 13
Miscellaneous...........................................................................................94
Section 13.1 Expenses..............................................................................94
Section 13.2 INDEMNIFICATION.......................................................................95
Section 13.3 Limitation of Liability...............................................................96
Section 13.4 No Duty...............................................................................96
Section 13.5 No Fiduciary Relationship.............................................................96
Section 13.6 Equitable Relief......................................................................97
Section 13.7 No Waiver; Cumulative Remedies........................................................97
Section 13.8 Successors and Assigns................................................................97
Section 13.9 Survival.............................................................................100
Section 13.10 ENTIRE AGREEMENT.....................................................................101
Section 13.11 Amendments...........................................................................101
Section 13.12 Maximum Interest Rate................................................................102
Section 13.13 Notices..............................................................................102
Section 13.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF PROCESS........................103
Section 13.15 Counterparts.........................................................................103
Section 13.16 Severability.........................................................................104
Section 13.17 Headings.............................................................................104
Section 13.18 Construction.........................................................................104
Section 13.19 Independence of Covenants............................................................104
Section 13.20 Confidentiality......................................................................104
Section 13.21 WAIVER OF JURY TRIAL.................................................................105
Section 13.22 Approvals and Consent................................................................105
Section 13.23 Service of Process...................................................................105
Section 13.24 Reaffirmation of Supply Agreement....................................................106
Section 13.25 Amendment and Restatement of the Original Credit Agreement...........................106
Section 13.26 Assignments of Original Loans........................................................106
Section 13.27 No Requirement of Assumption or Payment of Another Person's Debt.....................106
</TABLE>
CREDIT AGREEMENT - Page v
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INDEX TO EXHIBITS
Exhibit A - Form of Assignment and Acceptance
Exhibit B-1 - Form of Tranche A Note
Exhibit B-2 - Form of Tranche B Note
Exhibit B-3 - Form of Tranche C Note
Exhibit C - Form of Notice of Borrowings, Conversions,
Continuations and Prepayments
Exhibit D - Form of Compliance Certificate
Exhibit E - Form of Permitted Third-Party Expenses Borrowing Base
Report
INDEX TO SCHEDULES
Schedule 1.1(a) - Permitted Holders
Schedule 1.1(b) - Certain Permitted Liens
Schedule 1.1(c) - Service Area (Basic Trading Areas)
Schedule 7.4 - Permits, Franchises and Authorizations required by
Governmental Requirements or issued by Governmental
Authorities
Schedule 7.5 - Intellectual Property
Schedule 7.6 - Litigation, Etc.
Schedule 7.7 - Real Property
Schedule 7.10 - Existing Debt
Schedule 7.13 - Plans
Schedule 7.15 - Subsidiaries; Capitalization
Schedule 7.22 - Material Contracts
Schedule 7.23 - Bank Accounts
Schedule 7.26 - Employee Matters
Schedule 7.27 - Insurance
Schedule 8.15 - Year 2000 Compliance
Schedule 9.5 - Certain Investments
Schedule 10.1 - Total Debt to Total Capitalization
Schedule 10.2 - Total Debt to Annualized EBITDA
Schedule 10.3 - Annualized EBITDA
Schedule 10.4 - Fixed Charge Coverage
Schedule 10.5 - Capital Expenditures
Schedule 10.6 - Quarterly Minimum Revenue Levels
Schedule 10.7 - Wireless Subscribers
CREDIT AGREEMENT - Page vi
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CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February __,
2000, is by and among ALAMOSA PCS, INC. (the "Borrower"), a Delaware
corporation, ALAMOSA PCS HOLDINGS, INC. ("Holdings"), a Delaware corporation,
TEXAS TELECOMMUNICATIONS, LP ("Alamosa Texas"), a Texas limited partnership,
ALAMOSA WISCONSIN LIMITED PARTNERSHIP ("Alamosa Wisconsin"), a Wisconsin limited
partnership, each of the lending entities which is a party hereto (as evidenced
by the signature pages of this Agreement) or which may from time to time become
a party hereto as a lender or any successor or assignee thereof (individually, a
"Lender" and, collectively, the "Lenders"), and NORTEL NETWORKS INC., a Delaware
corporation, as administrative agent for itself and the other Lenders (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
RECITALS:
A. Alamosa PCS LCC (the "Original Borrower"), a Texas limited liability
company, is a party to that certain Credit Agreement dated as of June 10, 1999,
among the Original Borrower, the lenders named therein (including Nortel
Networks Inc., the "Original Lenders") and Nortel Networks Inc. as
administrative agent (the "Original Administrative Agent") for itself and such
lenders (as amended by that certain First Amendment to Credit Agreement dated as
of December 22, 1999, the "Original Credit Agreement") pursuant to which the
Original Borrower was provided advancing term loan facilities in the aggregate
principal amount of $123,000,000. The Original Lenders made loans to the
Original Borrower under the Original Credit Agreement, which loans remain
outstanding.
B. Prior hereto and (in certain cases, substantially concurrently
herewith), the following transactions have occurred (collectively the
"Reorganization Transactions"):
(i) Holdings was incorporated and organized (but no Capital Stock of
Holdings was initially issued);
(ii) the Original Borrower formed and organized (a) Alamosa Wisconsin
GP, LLC ("Alamosa Wisconsin GP"), a Wisconsin limited liability company and the
general partner of Alamosa Wisconsin, (b) Alamosa Wisconsin, (c) Alamosa
Delaware GP, LLC ("Alamosa Texas GP"), a Delaware limited liability company and
the general partner of Alamosa Texas, and (d) Alamosa Texas;
(iii) the Original Borrower formed and organized the Borrower as a
wholly-owned subsidiary of the Original Borrower;
(iv) the Original Borrower converted from a Texas limited liability
company to a Texas corporation using the name "Alamosa PCS Holdings, Inc."
("Texas Holdings");
(v) Holdings issued shares of its Capital Stock to Texas Holdings, with
the effect that Holdings became a wholly-owned subsidiary of Texas Holdings;
CREDIT AGREEMENT - Page 1
<PAGE> 9
(vi) Texas Holdings contributed to the Borrower (a) 100% of the limited
liability company interests in Alamosa Wisconsin GP, (b) 100% of the limited
liability company interests in Alamosa Texas GP, (c) 99% of the limited
partnership interests in Alamosa Texas, and (d) 96% of the limited partnership
interests in Alamosa Wisconsin;
(vii) Texas Holdings contributed all of its Wisconsin assets and Texas
assets to the Borrower and, in connection with the foregoing contributions of
assets, the Borrower assumed all of the Original Obligations;
(viii) the Borrower contributed 1% of its Texas assets to Alamosa Texas
GP and 99% of its Texas assets to Alamosa Texas, and Alamosa Texas GP
contributed all of its Texas assets to Alamosa Texas;
(ix) the Borrower contributed 1% of its Wisconsin assets to Alamosa
Wisconsin GP and 99% of its Wisconsin assets to Alamosa Wisconsin, and Alamosa
Wisconsin GP contributed all of its Wisconsin assets to Alamosa Wisconsin;
(x) Texas Holdings merged with and into Holdings, with Holdings being
the surviving entity in such merger; and
(xi) in connection with each of the aforesaid contributions and/or
transfers of assets, such assets were contributed and/or transferred subject to
the security interests in such assets previously granted by the Original
Borrower to the Original Administrative Agent in connection with the Original
Credit Agreement.
C. The Borrower, Alamosa Texas and Alamosa Wisconsin have entered into
various agreements with Sprint PCS relating to the construction and operation of
PCS systems in the Service Area.
D. The Borrower desires to amend and restate the advancing term loan
facilities under the original Credit Agreement and to obtain advancing term loan
facilities in the aggregate principal amount of $250,000,000 to finance a
portion of its costs to construct and operate such PCS systems.
E. The Lender(s) identified on the signature pages of this Agreement
desire to provide such credit facilities with the assistance of the
Administrative Agent upon and subject to the terms and provisions contained in
this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
CREDIT AGREEMENT - Page 2
<PAGE> 10
ARTICLE 1
Definitions
Section 1.1 Definitions, etc. As used in this Agreement, the following
terms shall have the following meanings:
"Additional Costs" means as specified in Section 4.1(a).
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of one percent) determined by the Administrative Agent to be
equal to (a) the Eurodollar Rate for such Eurodollar Loan for such Interest
Period divided by (b) one minus the Reserve Requirement for such Eurodollar Loan
for such Interest Period.
"Adjusted Net Income" means for any period, Consolidated Net Income
less (without duplication) to the extent that any of the following shall have
been included in Consolidated Net Income for such period (a) any net gain or
loss arising from the sale of capital assets, (b) any net gain or loss arising
from any write-up or write-down of assets, (c) earnings or losses of any other
Person, substantially all of the assets of which have been acquired by the
Borrower or a Consolidated Subsidiary of the Borrower in any manner, to the
extent that such earnings or losses were realized by such other Person prior to
the date of such acquisition, (d) earnings or losses of any Person (other than a
Consolidated Subsidiary of the Borrower) in which the Borrower or a Consolidated
Subsidiary has an ownership interest, unless such earnings have actually been
received by the Borrower or such Consolidated Subsidiary in the form of cash
distributions, and (e) any net gain or loss arising from the acquisition of any
securities of the Borrower or a Consolidated Subsidiary of the Borrower.
"Administrative Agent" means as specified in the introductory paragraph
of this Agreement.
"Administrative Agent's Letter" means the letter agreement dated as of
February __, 2000 between the Administrative Agent and the Borrower.
"Advances" means the Loans made under this Agreement.
"Affiliate" means, as to any Person, any other Person (a) that directly
or indirectly through one or more intermediaries controls or is controlled by,
or is under direct or indirect common control with, such first Person, (b) that
directly or indirectly beneficially owns or holds ten percent or more of any
class of voting Capital Stock of such first Person, or (c) ten percent or more
of the voting Capital Stock of which is directly or indirectly beneficially
owned or held by such first Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the Loan Documents, neither the Administrative Agent nor any Lender
shall be deemed to be an Affiliate of the Borrower or any of its Subsidiaries.
CREDIT AGREEMENT - Page 3
<PAGE> 11
"Aggregate Commitments" means, as to all Lenders, the Tranche A
Commitments, Tranche B Commitments and Tranche C Commitments.
"Agreement" means this Agreement and any and all amendments,
modifications, supplements, renewals, extensions or restatements hereof.
"Alamosa Texas" means as specified in the initial paragraph of this
Agreement.
"Alamosa Texas GP" means as specified in clause (iii) of Recital B.
"Alamosa Wisconsin" means as specified in the initial paragraph of this
Agreement.
"Alamosa Wisconsin GP" means as specified in clause (ii) of Recital B.
"Amortization Commencement Date" means the earlier to occur of (a)
August __, 2002, or (b) February __, 2001, if less than $100,000,000 in
aggregate principal amount of the Loans has been advanced as of such date.
"Annualized EBITDA" means, for the applicable period, EBITDA for the
two most recently completed fiscal quarters multiplied by two.
"Applicable Lending Office" means for each Lender and each Type of
Loan, the lending office of such Lender (or an Affiliate of such Lender)
designated for such Type of Loan below its name on the signature pages hereof
(or, with respect to a Lender that becomes a party to this Agreement pursuant to
an assignment made in accordance with Section 13.8, in the Assignment and
Acceptance executed by it) or such other office of such Lender (or an Affiliate
of such Lender) as such Lender may from time to time specify to the Borrower and
the Administrative Agent as the office by which its Loans of such Type are to be
made and maintained.
"Applicable Margin" means the rate per annum equal to (a) with respect
to each Base Rate Loan, two and three-quarters of one percent (2.75%) and (b)
with respect to each Eurodollar Loan, three and three-quarters of one percent
(3.75%). [NOTE: IF THE HOLDINGS SENIOR NOTES PROVIDE FOR CASH PAY INTEREST PRIOR
TO 2005, THE APPLICABLE MARGIN FOR BASE RATE LOANS WILL BE INCREASED TO 3.00%
AND FOR EURODOLLAR LOANS WILL BE INCREASED TO 4.00%.]
"Approved Fund" means (a) with respect to any Lender which is a fund
primarily engaged in making, purchasing or otherwise investing in commercial
loans, any other fund which is primarily engaged in making, purchasing or
otherwise investing in commercial loans or extending, or investing in extensions
of, credit for its own account in the ordinary course of its business and which
is managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor or (b) any other entity which has been
approved by the Administrative Agent and which is (or which is managed by a
manager which manages funds which are) primarily engaged in making, purchasing
or otherwise investing in commercial loans or extending, or investing in
extensions of, credit for its own account in the ordinary course of its
business; provided, however, that Approved Fund shall not include any Affiliate
of the Borrower.
CREDIT AGREEMENT - Page 4
<PAGE> 12
"Approved Subordinated Debt" means all Debt which is unsecured and
which is structurally or contractually subordinated, as to payment, to the
payment of the Loans and other Obligations on terms, and pursuant to agreements
in form and substance, satisfactory to, and approved in writing by, the
Administrative Agent and the Required Lenders.
"Approved Subordinated Debt Documents" means any and all agreements,
documents and instruments now or hereafter evidencing or governing any Approved
Subordinated Debt.
"Asset Disposition" means the disposition of any or all of the Property
of any Loan Party, other than a disposition of Capital Stock of an Unrestricted
Subsidiary, whether by sale, lease, transfer, assignment, condemnation or
otherwise, but excluding (a) sales of inventory in the ordinary course of
business, (b) the grant of a Lien as security, (c) any involuntary disposition
resulting from casualty damage to Property, and (d) dispositions of equipment if
and to the extent that the equipment disposed of is, concurrently therewith,
exchanged or replaced by equipment of equal or greater value.
"Assignee" means as specified in Section 13.8(b).
"Assigning Lender" means as specified in Section 13.8(b).
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and its Assignee and accepted by the Administrative Agent
pursuant to Section 13.8(e), in substantially the form of Exhibit A hereto.
"Availability" means, as of any date of determination, the lesser of
(a) the unused amount of the Commitments or (b) the sum of (i) [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED] of the amount paid by the Borrower and its
Subsidiaries to Nortel Networks for Nortel Networks Goods and Services for the
Service Area Network plus (ii) the unused amount of the Tranche C Commitments.
"Bankruptcy Code" means as specified in Section 11.1(e).
"Base Rate" means, at any time, the greater of (a) the rate of interest
per annum then most recently announced or established by the Reference Bank at
its principal office in New York City as its highest commercial prime or base
rate then in effect, or (b) the Federal Funds Rate then in effect plus one-half
of one percent (0.50%). The Base Rate may not necessarily be the lowest rate of
interest charged by the Reference Bank to its commercial borrowers. Each change
in any interest rate provided for herein based upon the prime or base rate or
the Federal Funds Rate resulting from a change in the prime or base rate or the
Federal Funds Rate, respectively, shall take effect without notice to the
Borrower at the time of such change in the prime or base rate or the Federal
Funds Rate, respectively.
"Base Rate Loans" means Loans that bear interest at rates based upon
the Base Rate.
"Basle Accord" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International
CREDIT AGREEMENT - Page 5
<PAGE> 13
Convergence of Capital Measurement and Capital Standards" dated July 1988, as
amended, supplemented and otherwise modified and in effect from time to time, or
any replacement thereof.
"Board of Directors" means (a) with respect to Holdings, the Borrower
and any Subsidiary of the Borrower which is a corporation, the board of
directors of Holdings, the Borrower or such Subsidiary of the Borrower, as
applicable based upon the context in which such term appears, (b) with respect
to Alamosa Texas and Alamosa Wisconsin, the general partner of Alamosa Texas and
Alamosa Wisconsin, respectively, (c) with respect to Alamosa Texas GP and
Alamosa Wisconsin GP, the manager of Alamosa Texas GP and Alamosa Wisconsin GP,
respectively, and (d) with respect to any other Loan Party, the board of
directors if such Loan Party is a corporation, the general partner if such Loan
Party is a limited partnership, the managing partner if such Loan Party is a
general partnership, or the manager if such Loan Party is a limited liability
company or an analogous body, officer or representative which is the functional
equivalent of the board of directors of a corporation if such Loan Party is
another type of entity, in each case which body, officer or representative has
the power and authority to authorize and effectuate the execution, delivery and
performance of the Loan Documents and other actions to be taken by such Loan
Party.
"Board Resolution" means a resolution certified by the Secretary or an
Assistant Secretary or analogous officer of any Loan Party, as applicable based
upon the context in which such term appears, to have been duly adopted by the
Board of Directors of such entity and to be in full force and effect on the date
of such certification.
"Borrower" means as specified in the initial paragraph of this
Agreement.
"Borrower-Owned Operating Assets" means the "Manager Operating Assets"
as defined in the Sprint Management Agreement, which constitute the assets owned
by the Borrower or a Subsidiary of the Borrower constituting a part of the
Service Area Network. [CONFIRM.]
"BTA" means a Basic Trading Area for which a Basic Trading Area (BTA)
license is issued by the FCC.
"Build-out Plan" means the plan agreed upon by the Borrower and the
Operating Subsidiaries and Sprint PCS, along with any modifications and updates
to the plan, respecting the construction and design of the Service Area Network,
a copy of which is attached as Exhibit 2.1 to the Sprint Management Agreement.
"Business Day" means (a) any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required by law to close in New
York, New York or Dallas, Texas, and (b) with respect to all borrowings,
payments, Conversions, Continuations, Interest Periods and notices in connection
with Eurodollar Loans, any day which is a Business Day described in clause (a)
above and which is also a day on which dealings in Dollar deposits are carried
out in the London interbank market.
"Business Plan" means the Borrower's marketing and construction plans
for the Service Area Network, budget and schedule as submitted to and approved
by the Administrative Agent, including
CREDIT AGREEMENT - Page 6
<PAGE> 14
financial projections of the Borrower and its respective Consolidated
Subsidiaries for the eight year period beginning on January 1, 2000, certified
by the chief financial officer of the Borrower as being prepared generally in
accordance with GAAP (except for the absence of footnotes), such construction
plans giving effect to the Build-out Plan and such projections giving effect to
the Debt to be incurred under this Agreement as well as the other Debt to be
incurred by the Borrower and its Consolidated Subsidiaries during such period.
Unless any amendment or modification thereto or replacement thereof is
subsequently approved by the Administrative Agent in accordance with Section
9.15, the Business Plan identified as "Version [31D-1]" shall be the Business
Plan for purposes of this Agreement.
"Capital Expenditures" means amounts paid or Debt incurred by the
Borrower and/or any of its Subsidiaries in connection with the purchase or lease
by any such Person or Persons of Property that would be required to be
capitalized and shown on the balance sheet of such Person or Persons in
accordance with GAAP.
"Capital Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal Property, which obligations are
classified as a capital lease on a balance sheet of such Person under GAAP. For
purposes of this Agreement, the amount of such Capital Lease Obligations shall
be the capitalized amount thereof, determined in accordance with GAAP.
"Capital Stock" means corporate stock and any and all securities,
shares, partnership interests, limited partnership interests, limited liability
company interests, membership interests, equity interests, participations,
rights or other equivalents (however designated) of corporate stock or any of
the foregoing issued by any entity (whether a corporation, a partnership or
another entity) and includes, without limitation, securities convertible into
Capital Stock and rights, warrants or options to acquire Capital Stock.
"Change in Control" means the existence or occurrence of any of the
following: (a) any of the Capital Stock of the Borrower is owned by any Person
other than Holdings; (b) any Capital Stock of any Subsidiary of the Borrower is
owned directly or indirectly by any Person other than the Borrower, provided,
that with respect to (i) Alamosa Texas, up to one percent of its ownership
interests may be owned by Alamosa Texas GP and (ii) with respect to Alamosa
Wisconsin, up to one percent of its ownership interests may be owned by Alamosa
Wisconsin GP and up to three percent of its limited partnership interests may be
owned by Wisconsin telephone companies, in each case (i.e., as to each of
clauses (i) and (ii) preceding) without a Change in Control resulting from such
ownership by other than the Borrower, (c) any Person or two or more Persons
(other than the Permitted Holders) acting as a group (as defined in Section
13d-3 of the Exchange Act) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Exchange Act) of 35% or more of the outstanding shares of Voting Stock of
Holdings; (d) individuals who, as of the Closing Date, constitute the Board of
Directors of Holdings (the "Holdings Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of Holdings; provided,
however, that any individual becoming a director of Holdings subsequent to the
Closing Date whose election, or nomination for election by Holdings'
shareholders was approved by a vote of at least a majority of the directors then
comprising the Holdings Incumbent
CREDIT AGREEMENT - Page 7
<PAGE> 15
Board shall be considered as though such individual were a member of the
Holdings Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or contest by or on behalf of a Person other than the
Board of Directors of Holdings; or (e) the consummation of any transaction the
result of which is that any Person or group beneficially owns ten percent (10%)
or more of the outstanding shares of Voting Stock of Holdings and more of the
Voting Stock of Holdings than is beneficially owned, in the aggregate, by the
Permitted Holders.
"Closing Date" means the date of the making of the initial Loan under
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" means all Property of any Person of any nature whatsoever
upon which a Lien is created or purported to be created by any Loan Document as
security for the Obligations or any portion thereof.
"Commitment Percentage" means, as to any Lender and as to the Tranche A
Commitments, the Tranche B Commitments, the Tranche C Commitments or the
Aggregate Commitments (as applicable based upon the context in which such term
is used), the percentage equivalent of a fraction, the numerator of which is the
amount of the outstanding Tranche A Commitments, Tranche B Commitments, Tranche
C Commitments or the Aggregate Commitments (as applicable) of such Lender (or,
if such applicable commitment has terminated or expired, the outstanding
principal amount of Tranche A Loans, Tranche B Loans, Tranche C Loans or Loans,
respectively, of such Lender) and the denominator of which is the aggregate
amount of the outstanding Tranche A Commitments, Tranche B Commitments, Tranche
C Commitments or Aggregate Commitments (as applicable) of all Lenders (or, if
such applicable commitments have terminated or expired, the aggregate
outstanding principal amount of Tranche A Loans, Tranche B Loans, Tranche C
Loans or Loans, respectively, of all Lenders), as adjusted from time to time in
accordance with Section 13.8.
"Commitments" means, as to any Lender, such Lender's Tranche A
Commitment, Tranche B Commitment and Tranche C Commitment.
"Communications Act" means the Communications Act of 1934, and any
similar or successor federal statute, and the rules and regulations of the FCC
thereunder, all as amended and as the same may be in effect from time to time.
"Consent and Agreement" means that certain [AMENDED AND RESTATED]
Consent and Agreement dated as of ______, 2000, among Sprint Spectrum,
SprintCom, Inc., Sprint Communications Company, L.P., WirelessCo, L.P. and the
Administrative Agent, as acknowledged, consented and agreed to by the Borrower
and the Operating Subsidiaries, and any and all amendments, modifications,
supplements, renewals, extensions or restatements thereof.
CREDIT AGREEMENT - Page 8
<PAGE> 16
"Consolidated Fixed Charges" means, for any period, the sum of (a)
Consolidated Interest Expense for the Borrower and its Consolidated Subsidiaries
paid or payable in cash during such period (excluding interest accrued on the
Loans on or before the second anniversary of the Closing Date which has been
paid by the Borrower with the proceeds of Tranche C Loans), plus (b) all
scheduled payments (as such scheduled payments are reduced by application of any
prepayments) of principal with respect to the Loans and other outstanding Debt
during such period, plus (c) taxes of the Borrower and its Consolidated
Subsidiaries paid or payable in cash during such period, plus (d) the scheduled
amount paid or payable by the Borrower and its Consolidated Subsidiaries during
such period on account of Capital Expenditures.
"Consolidated Interest Expense" means, for any period, all interest on
Debt of the Borrower and its Consolidated Subsidiaries paid in cash during such
period, including the interest portion of payments under Capital Lease
Obligations.
"Consolidated Net Income" means, for any period, the net income (or
loss) of the Borrower and its Consolidated Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Subsidiary" means, with respect to any Person, any
Subsidiary the financial attributes of which would be consolidated with those of
such Person in the consolidated financial statements of such Person in
accordance with GAAP.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.6 of a Eurodollar Loan as a Eurodollar Loan
of the same Type from one Interest Period to the next Interest Period.
"Contract Rate" means as specified in Section 13.12(a).
"Contributed Capital" means, as to any Person and as of any date of
determination, the sum of (a) all equity contributions then made in cash or
previously made in cash to such Person (including equity contributed on or
before the Closing Date), minus (b) all Restricted Payments (in any form) then
made or previously made by such Person to or for the benefit of any other
Person.
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.6 or Article 4 of one Type of Loan into the other Type of
Loan.
"Current Date" means (a) a date occurring no more than 30 days prior to
the Closing Date or other relevant date as may be specified herein (as
applicable) or (b) such earlier date which is acceptable to the Administrative
Agent.
"Debt" means as to any Person at any time (without duplication): (a)
all indebtedness, liabilities and obligations of such Person for borrowed money,
(b) all indebtedness, liabilities and obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (c) all indebtedness,
liabilities and obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable of such Person arising in
the ordinary course of business
CREDIT AGREEMENT - Page 9
<PAGE> 17
that are not past due by more than 90 days, (d) all Capital Lease Obligations of
such Person, (e) all Debt of others Guaranteed by such Person, (f) all
indebtedness, liabilities and obligations secured by a Lien existing on Property
owned by such Person, whether or not the indebtedness, liabilities or
obligations secured thereby have been assumed by such Person or are non-recourse
to such Person, (g) all reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, bankers' acceptances,
surety or other bonds and similar instruments, (h) all indebtedness, liabilities
and obligations of such Person to redeem or retire shares of Capital Stock of
such Person, (i) all indebtedness, liabilities and obligations of such Person
under Interest Rate Protection Agreements, and (j) all indebtedness, liabilities
and obligations of such Person in respect of unfunded vested benefits under any
pension plans.
"Debt Service Coverage Ratio" means, as of the end of any calendar
quarter, the ratio of (a) Annualized EBITDA for the period ended as of the end
of such calendar quarter, exclusive of EBITDA attributable to tower sales, to
(b) the sum of (i) Consolidated Interest Expense for the four calendar quarter
period ended as of the end of such calendar quarter plus (ii) the aggregate
amount of all principal payments on Debt paid or due and owing during such four
calendar quarter period.
"Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means, in respect of any principal of any Loan at all
times during which any Default has occurred and is continuing or in respect of
any other amount payable by the Borrower under this Agreement or any other Loan
Document which is not paid when due (whether at stated maturity, by acceleration
or otherwise), a rate per annum during the period of such Default or during the
period commencing on the due date of such other amount until such other amount
is paid in full, respectively, equal to the lesser of (a) the sum of three
percent (3.00%) plus the Base Rate as in effect from time to time plus the
Applicable Margin for Base Rate Loans or (b) the Maximum Rate; provided,
however, that if such amount in default is principal of a Eurodollar Loan and
the due date is a day other than the last day of an Interest Period therefor,
the "Default Rate" for such principal shall be, for the period from and
including the due date and to but excluding the last day of the Interest Period
therefor, the lesser of the rate per annum equal to (i) the sum of three percent
(3.00%) plus the interest rate for such Eurodollar Loan for such Interest Period
as provided in clause (ii) of Section 2.4(a) hereof or (ii) the Maximum Rate
and, thereafter, the rate provided for above in this definition.
"Dollars" and "$" mean lawful money of the U.S.
"EBITDA" means, for any period, without duplication, the sum of the
following for the Borrower and its Consolidated Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP: (a) Adjusted Net
Income, plus (b) Consolidated Interest Expense, plus (c) income and franchise
taxes to the extent deducted in determining Adjusted Net Income, plus (d)
depreciation and amortization expense and other non-cash, non-tax items to the
extent deducted in determining Adjusted Net Income, minus (e) non-cash income
(or losses) to the extent included in determining Adjusted Net Income.
CREDIT AGREEMENT - Page 10
<PAGE> 18
"Eligible Assignee" means (a) any Lender or Affiliate of a Lender, (b)
any commercial bank, savings and loan association, savings bank, finance
company, insurance company, pension fund, mutual fund or other financial
institution (whether a corporation, partnership or other entity) which has been
approved by the Administrative Agent as a Lender under this Agreement or (c) any
Approved Fund; provided, however, that (i) Eligible Assignee shall not include
any Affiliate of the Borrower and (ii) Eligible Assignee shall not include any
business competitor of the Borrower or any Operating Subsidiary of the Borrower
engaged in the same line of business as the Borrower or any Operating Subsidiary
of the Borrower, respectively, except after the occurrence and during the
continuance of an Event of Default.
"Environmental Law" means any federal, state, provincial, local or
foreign law, statute, code or ordinance, principle of common law, rule or
regulation, as well as any Permit, order, decree, judgment or injunction issued,
promulgated, approved or entered thereunder, relating to pollution or the
protection, cleanup or restoration of the environment or natural resources, or
to the public health or safety, or otherwise governing the generation, use,
handling, collection, treatment, storage, transportation, recovery, recycling,
discharge or disposal of Hazardous Materials, including, without limitation as
to U.S. laws, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., the Superfund Amendment
and Reauthorization Act of 1986, 99-499, 100 Stat. 1613, the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., the Clean Air
Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33 U.S.C. Section 1251
et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C.
Section 11001 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Section 136 et seq., and the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., and any state or local counterparts.
"Environmental Liabilities" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability or criminal, penal or civil statute, including,
without limitation, any Environmental Law, Permit, order or agreement with any
Governmental Authority or other Person, arising from environmental, health or
safety conditions or the Release or threatened Release of a Hazardous Material
into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of a group of entities, organizations or employers of which a Loan Party
is also a member and which is treated as a single employer within the meaning of
Sections 414(b), (c), (m) or (o) of the Code.
"Eurodollar Loans" means Loans that bear interest at rates based upon
the Eurodollar Rate or the Adjusted Eurodollar Rate.
CREDIT AGREEMENT - Page 11
<PAGE> 19
"Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in Dollars in the approximate
amount of the proposed Eurodollar Loan at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If such rate ceases to be available from
Telerate News Service, the Eurodollar Rate shall be determined by the
Administrative Agent in good faith from another financial reporting service,
which service shall be reasonably acceptable to the Borrower.
"Event of Default" has the meaning specified in Section 11.1.
"Excess Cash Flow" means, for any fiscal year and without duplication,
EBITDA for such fiscal year minus (a) taxes payable in cash for such fiscal
year, (b) all principal and cash interest payments on Debt made during such
fiscal year whether optional, mandatory or scheduled payments, (c) Capital
Expenditures (but only to the extent paid in cash and not financed) made during
such fiscal year, and (d) the aggregate amount of dividends paid by the Borrower
to Holdings, and permitted to be paid by the Borrower to Holdings, in accordance
with clause (c) of Section 9.4.
"Excess Proceeds Amount" means as specified in Section 2.7(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act), and the rules and regulations thereunder (or respective
successors thereto).
"FCC" means the Federal Communications Commission and any successor
agency.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest one-sixteenth of one percent (1/16 of 1%))
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if such
rate is not so published on such next succeeding Business Day, the Federal Funds
Rate for any day shall be the average rate which would be charged to the
Reference Bank on such day on such transactions as determined by the
Administrative Agent.
"Former Members" means the former owners of membership interests in the
Original Borrower.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current
CREDIT AGREEMENT - Page 12
<PAGE> 20
period are comparable in all material respects to those accounting principles
applied in a preceding period.
"Governmental Authority" means any nation or government, any state,
provincial or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Governmental Requirement" means any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, Permit,
certificate, license, authorization or other directive or requirement of any
federal, state, county, municipal, parish, provincial or other Governmental
Authority or any department, commission, board, court, agency or any other
instrumentality of any of them.
"Gross Revenues" means, for any period, gross revenues, determined on a
consolidated basis, of the Borrower and its Consolidated Subsidiaries determined
in accordance with GAAP for such period.
"Gross Up Lender" means any Lender which requests a payment from the
Borrower pursuant to Section 3.5, 4.1 or 4.6.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any indebtedness, liability or obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take- or-pay or
to maintain financial statement conditions or otherwise) or (b) entered into for
the purpose of assuring in any other manner the obligee of such Debt or other
indebtedness, liability or obligation as to the payment thereof or to protect
the obligee against loss in respect thereof (in whole or in part), provided that
the term Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The amount of any Guarantee shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee is made or, if not stated or determinable, the
maximum anticipated liability in respect thereof (assuming such Person is
required to perform thereunder).
"Guarantors" means Holdings, each Subsidiary of Holdings, other than
Unrestricted Subsidiaries of Holdings, at any time existing, each Subsidiary of
the Borrower at any time existing and each other Person which has executed a
Guaranty (each individually a "Guarantor" and collectively the "Guarantors").
"Guaranty" means a guaranty agreement guaranteeing payment and
performance of the Obligations in form and substance satisfactory to the
Administrative Agent executed by a Guarantor in favor of the Administrative
Agent and the Lenders, and any and all amendments, modifications, supplements,
renewals, extensions or restatements thereof.
CREDIT AGREEMENT - Page 13
<PAGE> 21
"Hazardous Material" means any substance, product, liquid, waste,
pollutant, chemical, contaminant, insecticide, pesticide, gaseous or solid
matter, organic or inorganic matter, fuel, micro- organisms, ray, odor,
radiation, energy, vector, plasma, constituent or material which (a) is or
becomes listed, regulated or addressed under any Environmental Law or (b) is, or
is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic,
a pollutant, a deleterious substance, a contaminant or a source of pollution or
contamination under any Environmental Law, including, without limitation,
asbestos, petroleum, underground storage tanks (whether empty or containing any
substance) and polychlorinated biphenyls.
"Holdings" means as specified in the initial paragraph of this
Agreement.
"Holdings Public Offering" means an initial public offering of the
common stock of Holdings providing net cash proceeds to Holdings of at least
$100,000,000.
"Holdings Senior Notes" means senior discount notes due 2010
contemplated to be issued by Holdings that will yield gross proceeds at issuance
of approximately $156,000,000, which notes shall be unsecured and shall
otherwise be in form and substance satisfactory to, and approved in writing
(subsequent to the Closing Date) by, the Administrative Agent and the Required
Lenders.
"Holdings Senior Notes Documents" means any and all agreements,
documents and instruments now or hereafter evidencing or governing the Holdings
Senior Notes and includes, without limitation, the Holdings Senior Notes
Indenture.
"Holdings Senior Notes Event of Default" means an "Event of Default"
[CONFIRM] as such term is defined in the Holdings Senior Note Indenture.
"Holdings Senior Notes Indenture" means an indenture in form and
substance satisfactory to, and approved in writing (subsequent to the Closing
Date) by, the Administrative Agent and the Required Lenders which governs the
Holdings Senior Notes.
"Insurance Recovery" means, with respect to any Property of any Loan
Party and any single occurrence or related occurrences with respect thereto, the
receipt or constructive receipt by such Person, or the payment by an insurance
company to the Administrative Agent, of proceeds of any such Property or
casualty insurance.
"Intellectual Property" means any U.S. or foreign patents, patent
applications, trademarks, trade names, service marks, brand names, logos and
other trade designations (including unregistered names and marks), trademark and
service mark registrations and applications, copyrights and copyright
registrations and applications, inventions, invention disclosures, protected
formulae, formulations, processes, methods, trade secrets, computer software,
computer programs and source codes, manufacturing research and similar technical
information, engineering know-how, customer and supplier information, assembly
and test data drawings or royalty rights.
"Interest Period" means, with respect to any Eurodollar Loan, each
period commencing on the date such Loan is made or Converted from a Base Rate
Loan or (if Continued) the last day of the
CREDIT AGREEMENT - Page 14
<PAGE> 22
next preceding Interest Period with respect to such Loan, and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Borrower may select as provided in Section 2.9 hereof,
except that each such Interest Period which commences on the last Business Day
of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month. Notwithstanding
the foregoing: (a) each Interest Period which would otherwise end on a day which
is not a Business Day shall end on the next succeeding Business Day (or, if such
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); (b) any Interest Period which would otherwise extend
beyond the Maturity Date shall end on the Maturity Date; (c) no more than five
Interest Periods for Eurodollar Loans shall be in effect at the same time; (d)
no Interest Period shall have a duration of less than one month and, if the
Interest Period for any Eurodollar Loans would otherwise be a shorter period,
such Loans shall not be available hereunder; and (e) no Interest Period for a
Loan may commence before, and end after, any principal payment date unless,
after giving effect thereto, the aggregate principal amount of the Eurodollar
Loans having Interest Periods that end after such principal payment date shall
be equal to or less than the amount of the applicable Loans scheduled to be
outstanding hereunder after such principal payment date.
"Interest Rate Protection Agreements" means, with respect to the
Borrower, an interest rate swap, cap or collar agreement or similar arrangement
between the Borrower and one or more Lenders or other counterparties providing
for the transfer or mitigation of interest rate risks either generally or under
specified contingencies.
"Investments" means as specified in Section 9.5.
"Lender" and "Lenders" means as specified in the initial paragraph of
this Agreement.
"Lien" means, with respect to any Property, any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, tax lien, financing statement, pledge, charge, hypothecation or other
lien, charge, easement (other than any easement not materially impairing
usefulness), encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such Property (including, without limitation, any conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Administrative Agent's Letter, the Consent and Agreement and all
other agreements, documents, instruments and certificates now or hereafter
executed and/or delivered pursuant to or in connection with any of the
foregoing, and any and all amendments, modifications, supplements, renewals,
extensions or restatements thereof.
"Loan Party" means any of Holdings, the Borrower, any Operating
Subsidiary, any Subsidiary of Holdings other than an Unrestricted Subsidiary,
any Subsidiary of the Borrower, any Guarantor or any Person who grants a Lien on
any Property to secure the payment or performance of the Obligations or any
portion thereof, and "Loan Parties" means all of such Persons.
CREDIT AGREEMENT - Page 15
<PAGE> 23
"Loans" means the Tranche A Loans, the Tranche B Loans and the Tranche
C Loans, and "Loan" means any of such loans.
"Material Adverse Effect" means any event, development or circumstance
that has had or could reasonably be expected to have a material adverse effect
on (a) the business, assets, financial condition, results of operations or
prospects of Holdings and its Subsidiaries taken as a whole, the Borrower and
its Subsidiaries taken as a whole, (b) the validity or enforceability of any of
the Loan Documents or the Liens created or purported to be created thereby or
the rights and/or remedies of the Administrative Agent and the Lenders
thereunder, (c) the ability of any Loan Party to pay and perform its
indebtedness, liabilities and/or obligations under any of the Loan Documents, or
(d) the value of Collateral available to the Administrative Agent and the
Lenders after giving effect to Liens in favor of other Persons.
"Material Contracts" means, as to any Loan Party, (a) any Sprint
Agreement and (b) any supply, purchase, service, employment, tax, indemnity,
shareholder or other agreement or contract for which the aggregate amount or
value of services performed or to be performed for or by, or funds or other
Property transferred or to be transferred to or by, any such Person to such
agreement or contract, or by which any such Person or any of its Properties is
otherwise bound, during any fiscal year of the Borrower exceeds $1,000,000 (or
the equivalent amount in any currency) and any and all amendments,
modifications, supplements, renewals or restatements thereof.
"Maturity Date" means the earlier to occur of (a) August __, 2007 or
(b) the fifth anniversary of the Amortization Commencement Date.
"Maximum Rate" means, with respect to any Lender, the maximum
non-usurious interest rate or an amount computed in reference to such rate (as
applicable), if any, that any time or from time to time may be contracted for,
taken, reserved, charged or received with respect to the particular Obligations
as to which such rate is to be determined, payable to such Lender pursuant to
this Agreement or any other Loan Document, under laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than applicable laws now allow. The Maximum
Rate shall be calculated in a manner that takes into account any and all fees,
payments and other charges in respect of the Loan Documents that constitute
interest under applicable law. Each change in any interest rate provided for
herein based upon the Maximum Rate resulting from a change in the Maximum Rate
shall take effect without notice to the Borrower at the time of such change in
the Maximum Rate.
"Monthly Date" means the last day of each month of each year the first
of which shall be March 31, 2000.
"Mortgage" means a mortgage, deed of trust or other appropriate
agreement, document or instrument evidencing or creating a Lien on real Property
(and any related personal Property) as security for the Obligations or any
portion thereof in form and substance satisfactory to the Administrative Agent
executed by any Loan Party in favor of the Administrative Agent for the benefit
CREDIT AGREEMENT - Page 16
<PAGE> 24
of the Administrative Agent and the Lenders, and any and all amendments,
modifications, supplements, renewals, extensions or restatements thereof.
"Mortgaged Properties" means Properties in which a Lien has been
granted or purported to be granted pursuant to a Mortgage.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by or are required
from any Loan Party or any ERISA Affiliate since 1974 and which is covered by
Title IV of ERISA.
"Net Proceeds" means, with respect to any Asset Disposition, (a) the
gross amount of cash received by any Loan Party from such Asset Disposition,
minus (b) the amount, if any, of all taxes paid or payable by such Loan Party
directly resulting from such Asset Disposition (including the amount, if any,
estimated by such Loan Party in good faith at the time of such Asset Disposition
for taxes payable by such Loan Party on or measured by net income or gain
resulting from such Asset Disposition), minus (c) the reasonable out-of-pocket
costs and expenses incurred by such Loan Party in connection with such Asset
Disposition (including reasonable brokerage fees paid to a Person other than an
Affiliate of a Loan Party) excluding any fees or expenses paid to an Affiliate
of a Loan Party, minus (d) amounts applied to the repayment of indebtedness
(other than the Obligations) secured by any Permitted Lien (if any) on the
Property subject to the Asset Disposition. "Net Proceeds" with respect to any
Asset Disposition shall also include proceeds (after deducting any amounts
specified in clauses (b), (c) and (d) of the preceding sentence) of insurance
with respect to any actual or constructive loss of Property, an agreed or
compromised loss of Property or the taking of any Property under the power of
eminent domain and condemnation awards and awards in lieu of condemnation for
the taking of Property under the power of eminent domain. "Net Proceeds" means,
with respect to the Holdings Senior Notes and without duplication, (i) the gross
amount of cash or cash equivalents plus the gross value of all other
consideration received by Holdings or any of its Subsidiaries from the issuance
of the Holdings Senior Notes, minus (ii) the out-of-pocket costs and expenses
incurred by Holdings in connection with such issuance of the Holdings Senior
Notes (including any underwriting fees) excluding any fees or expenses paid to
an Affiliate of Holdings which are in excess of those that would be paid or
payable in connection with an arms' length transaction with a Person who is not
an Affiliate of Holdings.
"New Areas" means, as of any date of determination, those portions of
the Service Area not covered by the then-existing Build-out Plan that Sprint PCS
or the Borrower decides should be built- out.
"Nortel Networks" means Nortel Networks Inc., a Delaware corporation.
"Nortel Networks Equipment" means all hardware, software and equipment
(including fixtures) manufactured, sold or otherwise provided to the Borrower or
any other Subsidiary of the Borrower by Nortel Networks and/or Nortel Networks
Corporation, including, without limitation, all equipment sold to the Borrower
or a Subsidiary of the Borrower pursuant to the Supply Agreement and all Nortel
Networks Software.
CREDIT AGREEMENT - Page 17
<PAGE> 25
"Nortel Networks Goods and Services" means (a) Nortel Networks
Equipment and related software (including Nortel Networks Software), (b) sales,
installation and commissioning of Nortel Networks Equipment and related software
(including Nortel Networks Software), and (c) project management, system design
and services performed by personnel of Nortel Networks and/or Nortel Networks
Corporation.
"Nortel Networks Software" means any and all software sold or licensed
by Nortel Networks and/or Nortel Networks Corporation to the Borrower or any
Subsidiary of the Borrower, including, without limitation, all source code and
object code and all manuals and other documentation relating thereto and each
copy thereof regardless of the media in which they are stored.
"Noteholders" means the holders of the Holdings Senior Notes.
"Notes" means the Tranche A Notes, the Tranche B Notes and the Tranche
C Notes, in the form of Exhibit B-1, Exhibit B-2 and Exhibit B-3, respectively,
hereto, made by the Borrower evidencing the Loans and any and all amendments,
modifications, supplements, renewals, extensions or restatements thereof and all
substitutions therefor (including promissory notes issued by the Borrower
pursuant to Section 13.8), and "Note" means any such promissory note.
"Notice of Borrowing" means as specified in Section 2.9.
"Obligations" means any and all (a) indebtedness, liabilities and
obligations of the Borrower or any other Loan Party to the Administrative Agent
and the Lenders, or any of them, evidenced by and/or arising pursuant to any of
the Loan Documents (including, without limitation, this Agreement and the
Notes), now existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint
and several, including, without limitation, (i) the obligations of the Borrower
or any other Loan Party to repay the Loans, to pay interest on the Loans
(including, without limitation, interest accruing after any, if any, bankruptcy,
insolvency, reorganization or other similar filing) and to pay all fees,
indemnities, costs and expenses (including attorneys' fees) provided for in the
Loan Documents and (ii) the indebtedness constituting the Loans and such
interest, fees, indemnities, costs and expenses, and (b) indebtedness,
liabilities and obligations of the Borrower or any other Loan Party under any
and all Interest Rate Protection Agreements that it may enter into with any
Lender with the prior written consent of the Administrative Agent and the
Required Lenders.
"Operating Lease" means, as to any Person, a lease of (or other
agreement conveying the right to use) real and/or personal Property, provided
that the obligations thereunder are not required to be capitalized on a balance
sheet of such Person under GAAP.
"Operating Subsidiary" means Alamosa Texas or Alamosa Wisconsin, and
"Operating Subsidiaries" means both of such entities.
"Original Administrative Agent" means as specified in Recital A.
"Original Borrower" means as specified in Recital A.
CREDIT AGREEMENT - Page 18
<PAGE> 26
"Original Credit Agreement" means as specified in Recital A.
"Original Lenders" means as specified in Recital A.
"Original Loans" means the "Loans" as such term is defined in the
Original Credit Agreement.
"Original Obligations" means the "Obligations" as such term is defined
in the Original Credit Agreement.
"Original Tranche A Loans" means the "Tranche A Loans" as such term is
defined in the Original Credit Agreement.
"Original Tranche B Loans" means the "Tranche B Loans" as such term is
defined in the Original Credit Agreement.
"Original Tranche C Loans" means the "Tranche C Loans" as such term is
defined in the Original Credit Agreement.
"Payor" means as specified in Section 3.4.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PCS" means a radio communication system authorized under the rules for
broadband personal communications services designated as Subpart E of Part 24 of
the FCC's rules, including the network, marketing, distribution, sales, customer
interface and operations functions relating thereto.
"PCS Licenses" means the PCS license(s) issued by the FCC for the BTAs
constituting the Service Area.
"PCS Spectrum" means the range of frequencies that Sprint PCS is
authorized to use under the PCS Licenses held by Sprint PCS.
"Pension Plan" means an employee pension benefit plan as defined in
Section 3(2) of ERISA (including a Multiemployer Plan) which is subject to the
funding requirements under Section 302 of ERISA or Section 412 of the Code, in
whole or in part, and which is maintained or contributed to currently or at any
time within the six years immediately preceding the Closing Date or, in the case
of a Multiemployer Plan, at any time since September 2, 1974, by any Loan Party
or any ERISA Affiliate for employees of any Loan Party or any ERISA Affiliate.
"Permit" means any permit, certificate, approval, order, PCS License,
license, right-of-way (whether an easement, contract or agreement in any form)
or other authorization.
"Permitted Holders" means the shareholders of Holdings identified in
Schedule 1.1(a) hereto.
CREDIT AGREEMENT - Page 19
<PAGE> 27
"Permitted Liens" mean:
(a) Liens disclosed on Schedule 1.1(b) hereto;
(b) Liens securing the Obligations in favor of the
Administrative Agent (for the benefit of the Administrative Agent and
the Lenders) pursuant to the Loan Documents;
(c) Encumbrances consisting of easements, rights-of-way,
zoning restrictions or other restrictions on the use of real Property
or imperfections to title that do not (individually or in the
aggregate) materially affect the value of the Property encumbered
thereby or materially impair the ability of any Loan Party to use such
Property in its businesses, and none of which is violated in any
material respect by existing or proposed structures or land use;
(d) Liens for taxes, assessments or other governmental charges
that are not delinquent or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such
Liens, and for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory Liens securing obligations that
are not yet due and are incurred in the ordinary course of business or
which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale
of the Property subject to such Liens, and for which adequate reserves
have been established;
(f) Liens resulting from good faith deposits to secure payment
of worker's compensation or other social security programs or to secure
the performance of tenders, statutory obligations, surety and appeal
bonds, bids, contracts (other than for payment of Debt) or leases, all
in the ordinary course of business;
(g) Purchase-money Liens on any Property hereafter acquired or
the assumption after the Closing Date of any Lien on Property existing
at the time of such acquisition (and not created in contemplation of
such acquisition), or a Lien incurred after the Closing Date in
connection with any conditional sale or other title retention agreement
or Capital Lease Obligation; provided that:
(i) any Property subject to the foregoing is
acquired by the applicable Loan Party in the ordinary course
of its respective business and the Lien on the Property
attaches concurrently or within 90 days after the acquisition
thereof;
(ii) the Debt secured by any Lien so created,
assumed or existing shall not exceed the lesser of the cost or
fair market value at the time of acquisition of the Property
covered thereby (inclusive of the cost of engineering,
furnishing and installation services directly relating to such
Property) and shall not be less than 75% of the amortized
value of the Property acquired with the proceeds of such Debt;
CREDIT AGREEMENT - Page 20
<PAGE> 28
(iii) each such Lien shall attach only to the
Property so acquired and the proceeds thereof; and
(iv) the Debt secured by all such Liens, when
aggregated with the Debt secured by all purchase-money Liens
and all Liens in connection with any conditional sale or other
title retention agreement or Capital Lease Obligation existing
as of the Closing Date or at any other time, shall not exceed
$15,000,000 at any time outstanding in the aggregate;
(h) Liens attaching to the Capital Stock of Unrestricted
Subsidiaries of Holdings securing Debt of Holdings or its Unrestricted
Subsidiaries; and
(i) Any extension, renewal or replacement of any of the
foregoing, provided that Liens permitted hereunder shall not be
extended or spread to cover any additional indebtedness or Property;
provided, however, that (A) none of the Permitted Liens (except those in favor
of the Administrative Agent) may attach or relate to the Capital Stock of or any
other ownership interest in the Borrower or any of its Subsidiaries and (B)
except for the Liens disclosed on Schedule 1.1(b) hereto which are expressly
identified as constituting purchase money Liens, none of the Permitted Liens
referred to in clause (a) preceding may have a priority equal or prior to the
Liens in favor of the Administrative Agent as security for the Obligations.
"Permitted Third-Party Expenses" means (a) amounts paid to vendors of
equipment and services (including sales taxes), including Nortel Networks, for
the construction of the Service Area Network, (b) Service Area Network site
acquisition costs excluding any lease costs, but including civil engineering
work, site preparation and costs of power connection, (c) costs of establishing
physical interconnection with the local public switched telephone network, and
(d) microwave relocation costs associated with construction of the Service Area
Network, whether paid directly or reimbursed to third parties who previously
performed the relocation, provided, however, that such microwave relocation
costs includable as Permitted Third-Party Expenses shall not exceed $8,000,000
in the aggregate.
"Permitted Third-Party Expenses Borrowing Base" means, at any time as
determined by the Administrative Agent in accordance with Section 2.1(f), an
amount equal to 50% of the amount paid to Nortel Networks by the Borrower for
Nortel Networks Goods and Services for the Service Area Network (including any
amounts to be paid with the proceeds of an Advance requested on the date of the
Permitted Third-Party Expenses Borrowing Base Report).
"Permitted Third-Party Expenses Borrowing Base Report" means a report
in substantially the form of Exhibit E attached hereto properly completed and
certified by a Responsible Officer of the Borrower to the satisfaction of the
Administrative Agent which specifies the Permitted Third-Party Expenses
Borrowing Base as calculated as of the date of the report.
CREDIT AGREEMENT - Page 21
<PAGE> 29
"Person" means any individual, corporation, trust, association,
company, partnership, joint venture, limited liability company, joint stock
company, Governmental Authority or other entity.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA established or maintained or contributed to by any Loan Party or any ERISA
Affiliate, including any Pension Plan.
"Principal Office" means the principal office of the Administrative
Agent in Richardson, Texas, presently located at 2221 Lakeside Blvd.,
Richardson, Texas 75082.
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"Property" means property and/or assets of all kinds, real, personal or
mixed, tangible or intangible (including, without limitation, all rights
relating thereto), whether owned or acquired on or after the Closing Date.
"Quarterly Date" means the last day of each March, June, September and
December of each year, the first of which shall be March 31, 2000. [MAY BE
REVISED TO ENSURE INTEREST PAYMENT DATES ON THE LOANS PRECEDE THE DATES FOR
PAYMENTS OF CASH INTEREST ON THE HOLDINGS SENIOR NOTES.]
"Receivables" means, as at any date of determination thereof, each and
every "account" as such term is defined in the UCC and includes, without
limitation, the unpaid portion of the obligation, as stated on the respective
invoice, or, if there is no invoice, other writing, of a customer of any Loan
Party in respect of services rendered by any Loan Party.
"Reference Bank" means Citibank, N.A.
"Register" means as specified in Section 13.8(d).
"Registered Note" means as specified in Section 2.2(b).
"Registered Note Register" means as specified in Section 13.8(h).
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, with respect to any Lender, any change after
the Closing Date in any U.S. federal or state or foreign laws or regulations
(including Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of lenders including
such Lender of or under any U.S. federal or state or foreign laws or regulations
(whether or not having the force of law) by any Governmental Authority charged
with the interpretation or administration thereof.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, discharge, disposal, dispersement,
leaching or migration of Hazardous Materials into the
CREDIT AGREEMENT - Page 22
<PAGE> 30
indoor or outdoor environment or into or out of Property owned by such Person,
including, without limitation, the movement of Hazardous Materials through or in
the air, soil, surface water or ground water.
"Remedial Action" means all actions required to (a) cleanup, remove,
respond to, treat or otherwise address Hazardous Materials in the indoor or
outdoor environment, (b) prevent the Release or threat of Release or minimize
the further Release of Hazardous Materials so that they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) perform studies and investigations on the extent and
nature of any actual or suspected contamination, the remedy or remedies to be
used or health effects or risks of such contamination, or (d) perform
post-remedial monitoring, care or remedy of a contaminated site.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA other than any such event for which the 30-day notice requirement has
been waived in regulations issued by the PBGC.
"Required Lenders" means, at any date of determination, Lenders holding
at least two-thirds (in Dollar amount) of the sum of (a) the aggregate
outstanding principal amount of the Loans, plus (b) the aggregate principal
amount of the outstanding Commitments.
"Required Payment" means as specified in Section 3.4.
"Reorganization Transactions" means as specified in Recital B.
"Reserve Requirement" means, for any Eurodollar Loan of any Lender for
any Interest Period therefor, the maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under any regulations of the Board of Governors of
the Federal Reserve System (or any successor) by such Lender for deposits
exceeding $1,000,000 against "Eurocurrency Liabilities" as such term is used in
Regulation D. Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
Lenders by reason of any Regulatory Change against (a) any category of
liabilities which includes deposits by reference to which the Eurodollar Rate or
the Adjusted Eurodollar Rate is to be determined or (b) any category of
extensions of credit or other assets which include Eurodollar Loans.
"Responsible Officer" means, as to any Loan Party, the chief executive
officer, the president, any vice president, the chief financial officer, the
chief operating officer or the treasurer of such Person.
"Restricted Payment" means (a) any dividend or other distribution
(whether in cash, Property or obligations), direct or indirect, on account of
(or the setting apart of money for a sinking or other analogous fund for) any
shares of any class of Capital Stock of the Borrower or any of its Subsidiaries
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class; (b) any redemption, conversion,
exchange, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of
CREDIT AGREEMENT - Page 23
<PAGE> 31
Capital Stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding; (c) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, purchase, retirement or
defeasance of, or payment with respect to, any subordinated debt; (d) any loan,
advance or payment to any officer, director or shareholder of the Borrower or
any of its Subsidiaries (other than a shareholder consisting of the Borrower or
a Wholly- Owned Subsidiary of the Borrower), exclusive of reasonable
compensation paid to officers or directors paid in the ordinary course of
business; and (e) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
Capital Stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding.
"Security Agreements" means security agreements, pledge agreements,
securities pledge agreements and other agreements, documents or instruments
evidencing or creating a Lien as security for the Obligations or any portion
thereof in form and substance satisfactory to the Administrative Agent executed
by any Loan Party, in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders, and any such agreement, document or
instrument subsequently executed in accordance or connection with this Agreement
or any other Loan Document, and any and all amendments, modifications,
supplements, renewals, extensions or restatements thereof.
"Security Documents" means the Security Agreements and the Mortgages,
as they may be amended, modified, supplemented, renewed, extended or restated
from time to time, and any and all other agreements, deeds of trust, mortgages,
chattel mortgages, security agreements, pledges, guaranties, assignments of
proceeds, assignments of income, assignments of contract rights, assignments of
partnership interests, assignments of royalty interests, assignments of
performance or other collateral assignments, subordination agreements,
undertakings and other agreements, documents, instruments and financing
statements now or hereafter executed and/or delivered by any Person in
connection with or as security or assurance for the payment or performance of
the Obligations or any part thereof.
"Senior Debt" means, as of any date of determination and with respect
to any Person and its Consolidated Subsidiaries, the remainder of (a) Total Debt
minus (b) the aggregate principal amount of all Approved Subordinated Debt
outstanding, determined on a consolidated basis in accordance with GAAP.
"Service Area" means the BTAs described on the Service Area Exhibit to
the Sprint Management Agreement and as identified (by number and otherwise) on
Schedule 1.1(c) hereto, except that the term does not include any BTAs not
disclosed on Schedule 1.1(c) or any New Areas that the Borrower chooses not to
build out.
"Service Area Network" means the network and business activities of the
Borrower and its Operating Subsidiaries managed by the Borrower and/or its
Operating Subsidiaries under the Sprint Management Agreement in the Service Area
under the PCS Licenses.
"Solvent" means, with respect to any Person as of the date of any
determination, that on such date (a) the fair value of the Property of such
Person (both at fair valuation and at present fair saleable value) is greater
than the total liabilities, including, without limitation, contingent
liabilities, of such
CREDIT AGREEMENT - Page 24
<PAGE> 32
Person, (b) the present fair saleable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person is able
to realize upon its assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's Property would constitute unreasonably small capital after giving
due consideration to current and anticipated future capital requirements and
current and anticipated future business conduct and the prevailing practice in
the industry in which such Person is engaged. In computing the amount of
contingent liabilities at any time, such liabilities shall be computed at the
amount which, in light of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Sprint Agreements" means the Sprint Management Agreement, the Sprint
Services Agreement, the Sprint Trademark and Service Mark License Agreement and
the Sprint Spectrum Trademark and Service Mark License Agreement. [DISCUSS.]
"Sprint Management Agreement" means that certain Sprint PCS Management
Agreement dated as of July 17, 1998 executed by the Borrower and Sprint PCS, as
amended by that certain Addendum I to Sprint PCS Management Agreement dated as
of July 17, 1998, and that certain Addendum II to Sprint PCS Management
Agreement dated as of June 10, 1999, all as reaffirmed as of June 10, 1999, and
any documents incorporated by reference in said agreement. [REVISE TO REFER TO
AMENDMENT OR AMENDMENT AND RESTATEMENT.] [ENSURE THIS INCLUDES THE WISCONSIN
AGREEMENTS.]
"Sprint PCS" means any or all of the following related parties who are
PCS License holders or signatories to any Sprint Agreement: Sprint Spectrum,
SprintCom, Inc., a Kansas corporation, Sprint Communications Company, L.P., a
Delaware limited partnership, and WirelessCo, L.P., a Delaware limited
partnership. [REVISE TO REFER TO AMENDMENT OR AMENDMENT AND RESTATEMENT.]
"Sprint PCS Fees" means any fees payable to Sprint PCS by the Borrower
or any Subsidiary of the Borrower, and any amounts retained by Sprint PCS, under
Section 10 of the Sprint Management Agreement. [REVISE TO REFER TO AMENDMENT OR
AMENDMENT AND RESTATEMENT.]
"Sprint Services Agreement" means that certain Sprint PCS Services
Agreement dated as of July 17, 1998 executed by the Borrower and Sprint
Spectrum, as reaffirmed as of June 10, 1999, and any documents incorporated by
reference in said agreement, whereby the Borrower may delegate the performance
of certain services to Sprint PCS for fees that represent an adjustment of the
fees paid by Sprint PCS to the Borrower under Section 10 of the Sprint
Management Agreement. [REVISE TO REFER TO AMENDMENT OR AMENDMENT AND
RESTATEMENT.] [ENSURE THIS INCLUDES THE WISCONSIN AGREEMENTS.]
"Sprint Spectrum" means Sprint Spectrum L.P., a Delaware limited
partnership.
CREDIT AGREEMENT - Page 25
<PAGE> 33
"Sprint Spectrum Trademark and Service Mark License Agreement" means
that certain Sprint Trademark and Service Mark License Agreement dated as of
July 17, 1998 executed by the Borrower and Sprint Spectrum, as reaffirmed as of
June 10, 1999, and any documents incorporated by reference in said agreement.
[REVISE TO REFER TO AMENDMENT OR AMENDMENT AND RESTATEMENT.] [ENSURE THIS
INCLUDES THE WISCONSIN AGREEMENTS.]
"Sprint Trademark and Service Mark License Agreement" means that
certain Sprint Trademark and Service Mark License Agreement dated as of July 17,
1998 executed by the Borrower and Sprint Communications Company, L.P., as
reaffirmed as of June 10, 1999, and any documents incorporated by reference in
said agreement. [REVISE TO REFER TO AMENDMENT OR AMENDMENT AND RESTATEMENT.]
[ENSURE THIS INCLUDES THE WISCONSIN AGREEMENTS.]
"Subordinated Guarantee" means a Guarantee executed by the Borrower or
any Subsidiary of the Borrower by virtue of its execution of the Holdings Senior
Notes Indenture solely for the purpose of being obligated under the guaranty
provisions contained in [ARTICLE XI AND ARTICLE XII] thereof pursuant to which
it, on a subordinated basis, guarantees payment of the Holdings Senior Notes on
terms satisfactory to the Administrative Agent and the Required Lenders, which
terms shall generally include, without limitation, the following: (a) an
agreement that (i) each of the Trustee and the Noteholders will not, directly or
indirectly, make any demand for payment or other amount or exercise any other
right or remedy under such guaranty, and will not take, accept, receive or
retain any such payment or other amount or the benefit of any such other right
or remedy, and (ii) such guarantor will not, directly or indirectly, make or pay
any payment or other amount or provide any other benefit to or for the benefit
of the Trustee or any holder of the Holding Senior Notes, in each case unless
and until each of the following two conditions has been satisfied: (A) a
Holdings Senior Notes Event of Default shall have occurred and be continuing and
the Administrative Agent (with a copy to its counsel) shall have received at
least ten Business Days' prior written notice of such Holdings Senior Notes
Event of Default, and (B) none of (1) an Event of Default under clause (a) of
Section 11.1 shall have occurred (unless such Event of Default shall have been
cured or waived or all Obligations have been paid in full in cash and all
Commitments have terminated or expired), (2) the maturity of any of the Loans or
other Obligations shall have been accelerated (unless such acceleration has been
rescinded), (C) an Event of Default under clause (e) or clause (f) of Section
11.1 shall have occurred or (D) a 179 day blockage period shall be in effect
(which blockage period may be commenced by the giving of a blockage notice by
the Administrative Agent to the Trustee after the occurrence of any Event of
Default); (b) an agreement of each of the Trustee and the Noteholders that, in
the event it receives, directly or indirectly, any payment or other amount from
such guarantor that it is not permitted to receive, it will promptly, upon
becoming aware thereof or upon written demand therefor made by the
Administrative Agent or any Lender, deliver such payment or other amount, in the
form received, to the Administrative Agent for and on behalf of the Lenders; and
(c) an agreement that the terms and provisions of such guaranty relating to the
subordination thereof shall inure to the benefit of, and be enforceable by, the
Administrative Agent for and on behalf of the Lenders and may not be amended
without the prior written consent of the Administrative Agent and the Required
Lenders (provided, however, that the Trustee shall be permitted to rely upon a
representation from the Administrative Agent as to any consent of the Required
Lenders).
CREDIT AGREEMENT - Page 26
<PAGE> 34
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which at least a majority of the outstanding shares of stock or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors (or Persons performing similar
functions) of such corporation or entity (irrespective of whether or not at the
time, in the case of a corporation, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more of its Subsidiaries or by such Person and one or more
of its Subsidiaries.
"Supply Agreement" means the that certain CDMA 1900 Sprintcom
Additional Affiliate Agreement dated as of December 21, 1998, by and between the
Borrower and Nortel Networks, as amended by that certain Amendment No. 1 dated
as of January 12, 1999, Amendment No. 2 dated as of March 1, 1999, as reaffirmed
as of June 10, 1999, Amendment No. 3 dated as of August 11, 1999 [CONFIRM], and
Amendment No. 4 dated as of ________________, ________, and as further amended,
supplemented or restated from time to time. [REVISE?]
"Total Capitalization" means, as of any date of determination and with
respect to any Person and its Consolidated Subsidiaries, the sum of (a) Total
Debt of such Person and its Consolidated Subsidiaries as of such date plus (b)
Contributed Capital of such Person as of such date.
"Total Debt" means, as of any date of determination and with respect to
any Person and its Consolidated Subsidiaries, the aggregate principal amount of
all Debt outstanding, determined on a consolidated basis in accordance with
GAAP.
"Tranche A Commitment" means, as to any Tranche A Lender, the
obligation of such Tranche A Lender to make or continue Tranche A Loans
hereunder in an aggregate principal amount up to but not exceeding the amount
set forth opposite the name of such Tranche A Lender on the signature pages
hereto under the heading "Tranche A Commitment" or, if such Tranche A Lender is
a party to an Assignment and Acceptance, the amount of the "Tranche A
Commitment" set forth in the most recent Assignment and Acceptance of such
Tranche A Lender, as the same may be reduced or terminated pursuant to Section
2.13 or 11.2, and "Tranche A Commitments" means such obligations of all Tranche
A Lenders. As of the Closing Date, the aggregate principal amount of the Tranche
A Commitments is $167,000,000.
"Tranche A Commitment Termination Date" means the earlier to occur of
(a) August __, 2002, (b) the date on which the Tranche A Loans are fully funded,
or (c) February __, 2001, if less than $100,000,000 in aggregate principal
amount of the Loans has been advanced as of such date (regardless of the
outstanding principal amount of the Loans as of such date).
"Tranche A Lenders" means the Lenders who hold Tranche A Loans or who
have Tranche A Commitments.
"Tranche A Loans" means as specified in Section 2.1(a).
CREDIT AGREEMENT - Page 27
<PAGE> 35
"Tranche A Notes" means the promissory notes evidencing the Tranche A
Loans executed in accordance with Section 2.2.
"Tranche B Commitment" means, as to any Tranche B Lender, the
obligation of such Tranche B Lender to make or continue Tranche B Loans
hereunder in an aggregate principal amount up to but not exceeding the amount
set forth opposite the name of such Tranche B Lender on the signature pages
hereto under the heading "Tranche B Commitment" or, if such Tranche B Lender is
a party to an Assignment and Acceptance, the amount of the "Tranche B
Commitment" set forth in the most recent Assignment and Acceptance of such
Tranche B Lender, as the same may be reduced or terminated pursuant to Section
2.13 or 11.2, and "Tranche B Commitments" means such obligations of all Tranche
B Lenders. As of the Closing Date, the aggregate principal amount of the Tranche
B Commitments is $58,000,000.
"Tranche B Commitment Termination Date" means the earlier to occur of
(a) August __, 2002, (b) the date on which the Tranche B Loans are fully funded,
or (c) February __, 2001, if less than $100,000,000 in aggregate principal
amount of the Loans has been advanced as of such date (regardless of the
outstanding principal amount of the Loans as of such date).
"Tranche B Lenders" means the Lenders who hold Tranche B Loans or who
have Tranche B Commitments.
"Tranche B Loans" means as specified in Section 2.1(b).
"Tranche B Notes" means the promissory notes evidencing the Tranche B
Loans executed in accordance with Section 2.2.
"Tranche C Commitment" means, as to any Tranche C Lender, the
obligation of such Tranche C Lender to make or continue Tranche C Loans
hereunder in an aggregate principal amount up to but not exceeding the amount
set forth opposite the name of such Tranche C Lender on the signature pages
hereto under the heading "Tranche C Commitment" or, if such Tranche C Lender is
a party to an Assignment and Acceptance, the amount of the "Tranche C
Commitment" set forth in the most recent Assignment and Acceptance of such
Tranche C Lender, as the same may be reduced or terminated pursuant to Section
2.13 or 11.2, and "Tranche C Commitments" means such obligations of all Tranche
C Lenders. As of the Closing Date, the aggregate principal amount of the Tranche
C Commitments is $25,000,000.
"Tranche C Commitment Termination Date" means the earlier to occur of
(a) February __, 2002, (b) the date on which the Tranche C Loans are fully
funded, or (c) February __, 2001, if less than $100,000,000 in aggregate
principal amount of the Loans has been advanced as of such date (regardless of
the outstanding principal amount of the Loans as of such date).
"Tranche C Lenders" means the Lenders who hold Tranche C Loans or who
have Tranche C Commitments.
"Tranche C Loans" means as specified in Section 2.1(c).
CREDIT AGREEMENT - Page 28
<PAGE> 36
"Tranche C Notes" means the promissory notes evidencing the Tranche C
Loans executed in accordance with Section 2.2.
"Trustee" means Norwest Bank Minnesota, N.A. in its capacity as trustee
under the Holdings Senior Notes Indenture and any successor trustee thereunder.
"Type" means any type of Loan (i.e., a Base Rate Loan or Eurodollar
Loan).
"UCC" means the Uniform Commercial Code as in effect in the State of
New York and/or any other jurisdiction, the laws of which may be applicable to
or in connection with the creation, perfection or priority of any Lien on any
Property created pursuant to any Security Document.
"Unrestricted Subsidiary" means a Subsidiary of Holdings, other than
the Borrower or a Subsidiary of the Borrower, designated by Holdings as an
"Unrestricted Subsidiary" (which may not be the Borrower or any of its
Subsidiaries) which is a corporation, trust, limited liability company,
partnership or any other type of entity reasonably acceptable to the Required
Lenders, and which (a) complies with the provisions of the laws of the state of
its formation relating to corporations, limited liability companies,
partnerships or such other entities, as applicable, (b) observes all customary
formalities regarding its existence, including having meetings of its board of
directors or analogous governing body separate from those held by the Loan
Parties, (c) accurately maintains its financial statements, accounting records
and other documents separate from those of its shareholders, members, partners,
Affiliates of its shareholders, members or partners and any other Person, (d)
does not commingle its assets with those of its shareholders, members, partners,
Affiliates of its shareholders, members or partners and any other Person, (e)
accurately maintains its own bank accounts and separate books of account, (f)
pays its own liabilities from its own separate assets, (g) identifies itself, in
all dealings with the public, under its own name or trade names and as a
separate and distinct entity and not as being a division or a part of any other
entity, (h) does not identify its shareholders, members or partners as being a
division or part of the Borrower or Holdings, provided that each Unrestricted
Subsidiary may describe its status vis-a-vis its parent or ultimate parent
entity, (i) is adequately capitalized in light of the nature of its business,
(j) does not assume or guarantee the liabilities of its shareholders, members or
partners, (k) does not acquire obligations or securities of its shareholders,
members or partners (or any predecessor corporation, partnership or limited
liability company), or any Affiliates of its shareholders, members or partners,
(l) does not make loans to its shareholders, members or partners (or any
predecessor), or any Affiliates of its shareholders, members or partners, and
(m) does not enter into or become a party to any transaction with its
shareholders, members or partners (or any predecessor) or any Affiliates of its
shareholders, members or partners, except on terms which are no less favorable
to such Unrestricted Subsidiary than would be obtained in a comparable arm's
length transaction with an unrelated third party.
"U.S." means the United States of America.
"U.S. Person" means a citizen or resident of the U.S., a corporation,
partnership or other entity created or organized in or under any laws of the
U.S. or any estate or trust that is subject to U.S. Federal income taxation
regardless of the source of its income.
CREDIT AGREEMENT - Page 29
<PAGE> 37
"U.S. Taxes" means any present or future tax, assessment or other
charge or levy imposed by or on behalf of the U.S. or any taxing authority
thereof.
"Vendor" means Nortel Networks in its capacity as vendor under the
Supply Agreement.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors, managers or general
partners (or persons performing similar functions) of such Person, whether at
all times or only for so long as no senior class of securities has such voting
power by reason of any contingency.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of such Person all of whose outstanding Capital Stock (other than
directors' qualifying shares, if any) shall at the time be owned by such Person
and/or one or more of its Wholly-Owned Subsidiaries.
"Wireless Subscribers" means, at any time, all customers then receiving
wireless communications services from the Borrower or any Subsidiary of the
Borrower through the Service Area Network in the Service Area.
"Year 2000 Compliant" means that (a) the services, products or other
item(s) at issue accurately process, provide and/or receive all date/time data
(including calculating, comparing, sequencing, processing and outputting)
within, from, into and between centuries (including the twentieth and
twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (b) neither the performance nor the functionality nor the
business' provision of the services, products and other item(s) at issue will be
affected by any dates/times prior to, on, after or spanning January 1, 2000. The
design of the services, products and other item(s) at issue to ensure compliance
with the "year 2000" representations and warranties and covenants contained in
this Agreement includes proper date/time data century recognition and
recognition of 1999 and 2000, calculations that accommodate single century and
multi-century formulae and date/time values before, on, after and spanning
January 1, 2000, and date/time data interface values that reflect the century,
1999 and 2000. In particular, but without limitation, such design means that (i)
no value for current date/time will cause any error, interruption or decreased
performance in or for such services, products and other item(s), (ii) all
manipulations of date and time related data (including calculating, comparing,
sequencing processing and outputting) will produce correct results for all valid
dates and times when used independently or in combination with other services,
products and/or items, (iii) date/time elements in interfaces and data storage
will specify the century to eliminate date ambiguity without human intervention,
including leap year calculations, (iv) where any date/time element is
represented without a century, the correct century will be unambiguous for all
manipulations involving that element, (v) authorization codes, passwords and
zaps (purge functions) will function normally and in the same manner during,
prior to, on and after January 1, 2000, including the manner in which they
function with respect to expiration dates and CPU serial numbers, and (vi) the
business' supply of the services, products and other item(s) will not be
interrupted, delayed, decreased or otherwise affected by the advent of the year
2000.
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein"
CREDIT AGREEMENT - Page 30
<PAGE> 38
and "hereunder" and words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.
The term "continuing", "continuation" or "continuance" means, in reference to
any Default or Event of Default that has occurred, that such Default or Event of
Default has not been either cured to the reasonable satisfaction of the
Administrative Agent within the applicable grace period (if any) specified in
this Agreement or the other Loan Documents (as applicable) or waived in writing
by the requisite Lenders in accordance with Section 13.11. The term "pro rata"
as it relates to the application of payments to the Tranche A Loans, the Tranche
B Loans and/or the Tranche C Loans means pro rata based upon the relative
outstanding principal amount of such Loans. Unless otherwise specified, all
Article and Section references pertain to this Agreement. Terms used herein that
are defined in the UCC, unless otherwise defined herein, shall have the meanings
specified in the UCC. All references in this Agreement to any agreement shall be
deemed to mean and refer to such agreement as it may be amended, modified or
supplemented from time to time if (but only if) such amendment, modification or
supplement has been approved by the Administrative Agent and the Required
Lenders, is expressly referred to in such reference or is otherwise expressly
permitted by the terms of this Agreement.
Section 1.3 Accounting Terms and Determinations.
(a) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP (subject to year end adjustments, if
applicable) consistent with such accounting principles applied in the
preparation of the audited financial statements referred to in Section 7.2(a).
All financial information delivered to the Administrative Agent pursuant to
Section 8.1 shall be prepared in accordance with GAAP (subject to year end
adjustments, if applicable) applied on a basis consistent with such accounting
principles applied in the preparation of the audited financial statements of
such Person referred to in Section 7.2 or in accordance with Section 8.7.
(b) The Borrower shall deliver to the Administrative Agent and the
Lenders, at the same time as the delivery of any annual or quarterly financial
statement under Section 8.1, (i) a description, in reasonable detail, of any
material variation between the application of GAAP employed in the preparation
of the immediately preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of Section
1.3(a) preceding and (ii) reasonable estimates of the difference between such
statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance with
the covenants set forth in this Agreement, neither the Borrower nor Holdings
will change the last day of its fiscal year from December 31 or the last days of
its first three fiscal quarters in each of its fiscal years from March 31, June
30 and September 30, respectively.
(d) Unless otherwise expressly provided herein to the contrary, all
references herein to the Closing Date shall be deemed to mean and refer to the
Closing Date after giving effect to all transactions which occur on or before
such date.
Section 1.4 Financial Covenants and Reporting. All financial statements
and reports required to be delivered pursuant to this Agreement and the other
Loan Documents, and all financial covenants (if any) contained in this
Agreement, shall be prepared or determined (as applicable) in
CREDIT AGREEMENT - Page 31
<PAGE> 39
accordance with GAAP (except as may be expressly provided to the contrary
herein) and, if and to the extent that such statements, reports or covenants are
to be prepared or determined on a consolidated basis, shall be prepared or
determined on a consolidated basis for Holdings and its Consolidated
Subsidiaries or the Borrower and its Consolidated Subsidiaries (as applicable),
except as may be expressly provided to the contrary herein.
ARTICLE 2
Loans
Section 2.1 Commitments.
(a) Tranche A Loans. Subject to the terms and conditions of this
Agreement (including, without limitation, Section 2.13(a)), each Tranche A
Lender severally agrees to make one or more loans to the Borrower from time to
time from and including the Closing Date to but excluding the Tranche A
Commitment Termination Date up to but not exceeding the amount of such Tranche A
Lender's Tranche A Commitment as then in effect. Notwithstanding anything to the
contrary contained in this Agreement, the Borrower, the Administrative Agent and
the Lenders agree that, as of the Closing Date, the aggregate outstanding
principal amount of the Original Tranche A Loans was $______________ , which
amount shall be deemed outstanding as Tranche A Loans hereunder. (Such loans
referred to in this Section 2.1(a) now or hereafter made or deemed made by the
Tranche A Lenders to the Borrower, including, without limitation, such loans
which remain outstanding after the Tranche A Commitment Termination Date, are
hereinafter collectively called the "Tranche A Loans".) The Borrower may not
reborrow the Tranche A Loans which have been repaid; provided, however, that the
Borrower may reborrow the Tranche A Loans which have been prepaid in accordance
with Section 2.7(e) in the event that the Borrower elects to increase the
Tranche A Commitments in accordance with Section 2.13(c) by an amount equal to
or greater than the amount of such reborrowed Loan.
(b) Tranche B Loans. Subject to the terms and conditions of this
Agreement (including, without limitation, Section 2.13(a)), each Tranche B
Lender severally agrees to make one or more loans to the Borrower from time to
time from and including the Closing Date to but excluding the Tranche B
Commitment Termination Date up to but not exceeding the amount of such Tranche B
Lender's Tranche B Commitment as then in effect; provided, however, that the
aggregate outstanding principal amount of the Tranche B Loans shall not at any
time exceed the Permitted Third-Party Expenses Borrowing Base. Notwithstanding
anything to the contrary contained in this Agreement, the Borrower, the
Administrative Agent and the Lenders agree that, as of the Closing Date, the
aggregate outstanding principal amount of the Original Tranche B Loans was
$______________ , which amount shall be deemed outstanding as Tranche B Loans
hereunder. (Such loans referred to in this Section 2.1(b) now or hereafter made
or deemed made by the Tranche B Lenders to the Borrower, including, without
limitation, such loans which remain outstanding after the Tranche B Commitment
Termination Date, are hereinafter collectively called the "Tranche B Loans".)
The Borrower may not reborrow the Tranche B Loans which have been repaid;
provided, however, that the Borrower may reborrow the Tranche B Loans which have
been prepaid in accordance with Section 2.7(e) in the event that the Borrower
elects to increase the Tranche B Commitments in
CREDIT AGREEMENT - Page 32
<PAGE> 40
accordance with Section 2.13(c) by an amount equal to or greater than the amount
of such reborrowed Loan.
(c) Tranche C Loans. Subject to the terms and conditions of this
Agreement (including, without limitation, Section 2.13(a)), each Tranche C
Lender severally agrees to make one or more loans to the Borrower from time to
time from and including the Closing Date to but excluding the Tranche C
Commitment Termination Date up to but not exceeding the amount of such Tranche C
Lender's Tranche C Commitment as then in effect. Notwithstanding anything to the
contrary contained in this Agreement, the Borrower, the Administrative Agent and
the Lenders agree that, as of the Closing Date, the aggregate outstanding
principal amount of the Original Tranche C Loans was $______________ , which
amount shall be deemed outstanding as Tranche C Loans hereunder. (Such loans
referred to in this Section 2.1(c) now or hereafter made or deemed made by the
Tranche C Lenders to the Borrower, including, without limitation, such loans
which remain outstanding after the Tranche C Commitment Termination Date, are
hereinafter collectively called the "Tranche C Loans".) The Borrower may not
reborrow the Tranche C Loans which have been repaid; provided, however, that the
Borrower may reborrow the Tranche C Loans which have been prepaid in accordance
with Section 2.7(e) in the event that the Borrower elects to increase the
Tranche C Commitments in accordance with Section 2.13(c) by an amount equal to
or greater than the amount of such reborrowed Loan.
(d) Continuation and Conversion of Loans. Subject to the terms and
conditions of this Agreement, the Borrower may borrow the Loans as Base Rate
Loans or Eurodollar Loans and, until the applicable Maturity Date, the Borrower
may Continue Eurodollar Loans or Convert Loans of one Type into Loans of the
other Type.
(e) Lending Offices. Loans of each Type made by each Lender shall be
made and maintained at such Lender's Applicable Lending Office for Loans of such
Type.
(f) Determinations of the Permitted Third-Party Expenses Borrowing
Base. The Permitted Third-Party Expenses Borrowing Base shall be determined in
good faith by the Administrative Agent as of the Closing Date and will be
redetermined in good faith by the Administrative Agent thereafter promptly after
the delivery, or required delivery, of a Permitted Third-Party Expenses
Borrowing Base Report in accordance with Section 8.1(k), in each case as of the
applicable date (i.e., as of the date of the Notice of Borrowing, if applicable,
or as of the last day of the immediately preceding fiscal quarter). In addition,
the Permitted Third-Party Expenses Borrowing Base shall be determined in good
faith by the Administrative Agent prior to and in connection with each new
Tranche B Loan or Tranche C Loan, as the case may be, and may be redetermined in
good faith by the Administrative Agent at any time and from time to time upon
the occurrence and during the continuation of a Default.
Section 2.2 Notes.
(a) Notes. All of the Tranche A Loans, Tranche B Loans and Tranche C
Loans made by each Lender shall be evidenced by a single promissory note of the
Borrower in substantially the form of Exhibit B-1, Exhibit B-2 and Exhibit B-3,
respectively, hereto dated the Closing Date (or such later
CREDIT AGREEMENT - Page 33
<PAGE> 41
date on which such Lender becomes a party to this Agreement), payable to the
order of such Lender in a principal amount equal to the sum of (i) the aggregate
principal amount of such Loans of such Lender plus (ii) the aggregate principal
amount of the unfunded Commitment of such Lender relating to such Loans as
originally in effect. Each Lender is hereby authorized by the Borrower to
endorse on the schedule (or a continuation thereof) attached to the Notes of
such Lender, to the extent applicable, the date, amount and Type of and the
Interest Period for each applicable Loan made by such Lender to the Borrower and
the amount of each payment or prepayment of principal of such Loan received by
such Lender, provided that any failure by such Lender to make any such
endorsement shall not affect the obligations of the Borrower under any such Note
or this Agreement in respect of any such Loan.
(b) Registered Notes. Any Lender that is not a U.S. Person and that
could become completely exempt from withholding of U.S. Taxes in respect of
payment of any Obligations due to such Lender hereunder relating to any of its
Loans if such Loans were in registered form for U.S. Federal income tax purposes
may request the Borrower (through the Administrative Agent), and the Borrower
agrees thereupon, to exchange such Lender's Note evidencing its Loans for a
promissory note registered as provided in Section 13.8(h) hereof (a "Registered
Note"). Registered Notes may not be exchanged for Notes that are not in
registered form.
Section 2.3 Repayment of Loans. The Borrower shall pay to the
Administrative Agent for the account of each Lender the principal of the Tranche
A Loans, the Tranche B Loans and the Tranche C Loans outstanding as of the
Tranche A Commitment Termination Date, the Tranche B Commitment Termination Date
and the Tranche C Commitment Termination Date, respectively (and the principal
of each of such Loans outstanding as of such dates shall be due and payable) in
20 quarterly installments, commencing on the first Quarterly Date after the
Amortization Commencement Date and continuing on each Quarterly Date thereafter
through and including the Maturity Date, each of which installments shall be in
an amount equal to the percentage of the aggregate principal amount of such
Loans outstanding as of such applicable date specified opposite such installment
in the following table:
<TABLE>
<CAPTION>
Percentage of the Aggregate Principal Amount of
Principal Installment each of the Loans Due and Payable
--------------------- ---------------------------------
<S> <C>
1 3.75%
2 3.75%
3 5.14%
4 5.14%
5 5.14%
6 5.14%
7 5.14%
8 5.14%
9 5.14%
10 5.14%
11 5.14%
12 5.14%
</TABLE>
CREDIT AGREEMENT - Page 34
<PAGE> 42
<TABLE>
<CAPTION>
Percentage of the Aggregate Principal Amount of
Principal Installment each of the Loans Due and Payable
--------------------- ---------------------------------
<S> <C>
13 5.14%
14 5.14%
15 5.14%
16 5.14%
17 5.14%
18 5.14%
19 5.14%
20 5.12%
</TABLE>
In addition and notwithstanding anything to the contrary contained in this
Section 2.3 preceding, the Borrower shall pay to the Administrative Agent for
the account of each Lender all outstanding principal of the Loans (and all
outstanding principal of the Loans shall be due and payable) on the Maturity
Date.
Section 2.4 Interest.
(a) Interest Rate. The Borrower shall pay to the Administrative Agent
for the account of each Lender interest on the unpaid principal amount of each
Loan made by such Lender (or deemed made by such Lender with respect to a Loan
assigned to such Lender after the making of such Loan) to the Borrower for the
period commencing on the date of such Loan to, but excluding, the date such Loan
shall be paid in full, at the following rates per annum:
(i) during the periods such Loan is a Base Rate Loan, the
lesser of (A) the Base Rate plus the Applicable Margin or (B) the
Maximum Rate; and
(ii) during the periods such Loan is a Eurodollar Loan, the
lesser of (A) the Adjusted Eurodollar Rate plus the Applicable Margin
or (B) the Maximum Rate.
(b) Payment Dates. Accrued interest on the Loans shall be due and
payable as follows:
(i) in the case of Base Rate Loans, on each Monthly Date;
(ii) in the case of each Eurodollar Loan, on the last day of
the Interest Period with respect thereto and, in the case of an
Interest Period greater than three months, at three- month intervals
after the first day of such Interest Period;
(iii) upon the payment or prepayment (whether mandatory or
optional) of any Loan or the Conversion of any Loan to a Loan of the
other Type (but only on the principal amount so paid, prepaid or
Converted); and
(iv) with respect to all Loans, on the Maturity Date.
CREDIT AGREEMENT - Page 35
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(c) Default Interest. Notwithstanding the foregoing, the Borrower shall
pay to the Administrative Agent for the account of each Lender interest at the
applicable Default Rate (i) at all times during which any Default has occurred
and is continuing, on any principal of any Loan outstanding, and (ii) to the
fullest extent permitted by law, any other amount payable by the Borrower under
this Agreement or any other Loan Document to or for the account of such Lender
which is not paid in full when due (whether at stated maturity, by acceleration
or otherwise) for the period from and including the due date thereof to but
excluding the date the same is paid in full. Interest payable at the Default
Rate shall be payable from time to time on demand by the Administrative Agent.
Section 2.5 Borrowing Procedure. The Borrower shall give the
Administrative Agent notice of each borrowing hereunder in accordance with
Section 2.9. Not later than 1:00 p.m. (New York, New York time) on the date
specified for each borrowing hereunder, each Lender will make available the
amount of the Loan to be made by it on such date to the Administrative Agent, at
the Principal Office, in immediately available funds, for the account of the
Borrower. The amount of each borrowing hereunder so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available, for and on behalf of the Borrower, in immediately
available funds by no later than 1:00 p.m. (New York, New York time); provided,
however, that the Administrative Agent may, in its discretion, cause such amount
to be made available directly to or for the benefit of the Person who is to
receive the proceeds of such Loan in accordance with Section 2.10.
Notwithstanding anything to the contrary contained in this Agreement, if and to
the extent that Nortel Networks is a Lender under this Agreement, the Borrower
further hereby irrevocably agrees that each Loan to be advanced by Nortel
Networks to the Borrower in accordance with this Agreement (and only in
accordance with this Agreement and after the Administrative Agent's receipt of a
Notice of Borrowing executed by the Borrower) may (in the discretion of Nortel
Networks and if and to the extent that the proceeds of such Loan are to be paid
to Nortel Networks) be effectively disbursed on the date set forth in the Notice
of Borrowing for such disbursement to the Borrower by virtue of a credit in the
amount of such Loan given to the Borrower under the Supply Agreement.
Section 2.6 Optional Prepayments, Conversions and Continuations of
Loans. Subject to Section 2.8, the Borrower shall have the right from time to
time to prepay the Loans in whole or in part, to Convert all or part of a Loan
of one Type into a Loan of another Type or to Continue Eurodollar Loans;
provided that: (a) the Borrower shall give the Administrative Agent notice of
each such prepayment, Conversion or Continuation as provided in Section 2.9, (b)
Eurodollar Loans may only be Converted on the last day of the Interest Period
and any prepayment of Eurodollar Loans on any day other than the last day of the
Interest Period shall be subject to payment of the additional compensation
specified in Section 4.5, (c) except for Conversions of Eurodollar Loans into
Base Rate Loans, no Conversions or Continuations shall be made while a Default
has occurred and is continuing, and (d) optional prepayments of the Loans shall
be applied pro rata to the principal of the Loans prepaid in the inverse order
of the maturities of the then remaining installments of such Loans. No amounts
prepaid pursuant to this Section 2.6 may be reborrowed.
CREDIT AGREEMENT - Page 36
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Section 2.7 Mandatory Prepayments.
(a) Asset Dispositions, etc. The Borrower will, within two Business
Days after any Loan Party receives any Net Proceeds of any Asset Disposition,
proceeds of any Insurance Recovery or proceeds of condemnation awards
aggregating in excess of $250,000 during any period of 12 consecutive months or
less (the amount of such proceeds exceeding $250,000 received during any such
period are herein called the "Excess Proceeds Amount"), pay to the
Administrative Agent, as a prepayment of the Loans, an aggregate amount equal to
the Excess Proceeds Amount; provided, however, that no such prepayment will be
required if and to the extent that the Excess Proceeds Amount is fully
re-invested in productive assets used in the ordinary course of such Loan
Party's business within 60 days of the receipt of such Excess Proceeds Amount
or, if and to the extent that such Excess Proceeds Amount has been, prior to the
expiration of such 60 day period, deposited into a cash collateral account held
by the Administrative Agent pursuant to an agreement in form and substance
satisfactory to the Administrative Agent, within 120 days of the receipt of such
Excess Proceeds Amount; provided, further, however, that the Excess Proceeds
Amount (or portion thereof) not so re-invested within 60 days of the receipt
thereof shall be deposited into a cash collateral account held by the
Administrative Agent pursuant to an agreement in form and substance satisfactory
to the Administrative Agent until such time as such amount is either re-invested
within 120 days of the receipt thereof or applied to the Loans or other
Obligations as provided in this Section 2.7.
(b) Excess Cash Flow. The Borrower will, commencing on the first March
31st following the Tranche A Commitment Termination Date and on each March 31st
thereafter, pay (or cause to be paid) to the Administrative Agent, as a
prepayment of the Loans and other Obligations then outstanding, an aggregate
amount equal to 50% of Excess Cash Flow for the fiscal year then most recently
ended.
(c) Borrowing Base. If at any time on or prior to the date that is six
months after the Tranche B Commitment Termination Date, the aggregate
outstanding principal amount of the Tranche B Loans and Tranche C Loans, the
proceeds of which have been used to pay Permitted Third-Party Expenses, exceeds
an amount equal to the lesser of (A) the Permitted Third-Party Expenses
Borrowing Base then in effect (as determined from time to time in accordance
with Section 2.1(f)) or (B) the aggregate amount of the Tranche B Commitments
and the Tranche C Commitments as of the Tranche B Commitment Termination Date,
then, within one Business Day thereafter, the Borrower shall pay to the
Administrative Agent the amount of such excess as a prepayment of the Tranche B
Loans and/or the Tranche C Loans.
(d) Sale of the Service Area Network. The Borrower shall, concurrently
with any sale, transfer or other disposition of the Service Area Network or any
material portion thereof, prepay in full (i) all outstanding principal amount of
the Loans, (ii) all interest accrued and unpaid with respect to all Loans, and
(iii) all other outstanding Obligations.
(e) Holdings Senior Notes Issuance. The Borrower shall, substantially
concurrently with the date upon which Holdings receives any proceeds of any
issuance of Holdings Senior Notes, pay
CREDIT AGREEMENT - Page 37
<PAGE> 45
to the Administrative Agent, as a prepayment of the Loans, an aggregate amount
equal to the lesser of (i) $75,000,000 or (ii) the aggregate principal amount of
the Loans then outstanding.
(f) Application of Mandatory Prepayments. All prepayments pursuant to
Section 2.7(a) and Section 2.7(b) shall be applied pro rata to the outstanding
principal of the Tranche A Loans, the Tranche B Loans and the Tranche C Loans
(based upon the outstanding principal amounts of such Loans) in the inverse
order of the maturities of the then remaining installments of such Loans and
then to the remaining outstanding Obligations in such order as the
Administrative Agent may determine. All prepayments pursuant to Section 2.7(c)
shall be applied pro rata to the outstanding principal of the Tranche B Loans
and the Tranche C Loans (based upon the outstanding principal amounts of such
Loans) in the inverse order of the maturities of the then remaining installments
of such Loans and then to the remaining outstanding Obligations in such order as
the Administrative Agent may determine. All prepayments pursuant to Section
2.7(e) shall be applied pro rata to the outstanding principal of the Tranche A
Loans, the Tranche B Loans and the Tranche C Loans (based upon the outstanding
principal amounts of such Loans) and shall be applied pro rata to the then
remaining installments of such Loans.
(h) No Reborrowing. No amounts of the Loans prepaid pursuant to this
Section 2.7 may be reborrowed.
Section 2.8 Minimum Amounts. Except for Conversions and prepayments
pursuant to Section 2.7 and Article 4, each borrowing, each Conversion and each
optional prepayment of principal of the Loans shall be in an amount at least
equal to $3,000,000 or an integral multiple of $100,000 in excess thereof
(borrowings, prepayments or Conversions of or into Loans of different Types or,
in the case of Eurodollar Loans, having different Interest Periods at the same
time hereunder shall be deemed separate borrowings, prepayments and Conversions
for purposes of the foregoing, one for each Type or Interest Period).
Section 2.9 Certain Notices. Notices by the Borrower to the
Administrative Agent of terminations or reductions of Commitments, of
borrowings, Conversions, Continuations and prepayments of Loans and of the
duration of Interest Periods shall be irrevocable and shall be effective only if
received by the Administrative Agent not later than 11:00 a.m. (New York, New
York, time) on the Business Day prior to the date of the relevant termination,
reduction, borrowing, Conversion, Continuation or prepayment or the first day of
such Interest Period specified below:
<TABLE>
<CAPTION>
Number of
Notice Business Days Prior
------ -------------------
<S> <C>
Terminations or Reductions of Commitments 1
Borrowings of Loans which are Base Rate Loans 2
Borrowings of Loans which are Eurodollar Loans 3
Prepayments of Loans 3
</TABLE>
CREDIT AGREEMENT - Page 38
<PAGE> 46
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or prepayment shall specify the Loans to be borrowed,
Converted, Continued or prepaid and the amount (subject to Section 2.8 hereof)
and Type of the Loans to be borrowed, Converted, Continued or prepaid (and, in
the case of a Conversion, the Type of Loans to result from such Conversion) and
the date of borrowing, Conversion, Continuation or prepayment (which shall be a
Business Day). Each such notice of termination, reduction, borrowing,
Conversion, Continuation or prepayment shall be in the form of Exhibit C hereto,
appropriately completed as applicable. Each notice of borrowing (a "Notice of
Borrowing") (a) shall certify that all proceeds of the requested Loans are,
concurrently with the making of such Loans, being used by the Borrower for the
purpose specified in Section 2.10 and (b) shall be accompanied by such other
evidence as to use of the proceeds of such borrowing, as the Administrative
Agent may reasonably request from time to time. Each notice which includes
reference to the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event the
Borrower fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as provided
in this Section 2.9, such Loan (if outstanding as Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of preceding
Interest Period for such Loan or (if outstanding as a Base Rate Loan) will
remain as, or (if not then outstanding) will be made as, a Base Rate Loan. The
Borrower may not borrow any Eurodollar Loans, Convert any Loans into Eurodollar
Loans or Continue any Loans as Eurodollar Loans if the interest rate for such
Eurodollar Loans would exceed the Maximum Rate.
Section 2.10 Use of Proceeds.
(a) Tranche A Loans. The Borrower agrees that all proceeds of the
Tranche A Loans shall be, promptly upon the Borrower's receipt thereof,
contributed as equity to the capital of, or loaned to, the Operating Subsidiary
that is to [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] with such proceeds
and thereupon promptly used by such Operating Subsidiary [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED]. [NOTE: THE NOTICE OF BORROWING WILL SPECIFY
WHICH OPERATING SUBSIDIARY WILL RECEIVE LOAN PROCEEDS.]
(b) Tranche B Loans. The Borrower agrees that all proceeds of the
Tranche B Loans shall be, promptly upon the Borrower's receipt thereof,
contributed as equity to the capital of, or loaned to, the Operating Subsidiary
that is to pay [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] with such
proceeds and thereupon promptly used by such Operating Subsidiary to [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED] provided, however, that, as of any
date of determination, the aggregate principal amount of the Tranche B Loans and
the Tranche C Loans at any and all times used to [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED] [NOTE: THE NOTICE OF BORROWING WILL SPECIFY WHICH OPERATING
SUBSIDIARY WILL RECEIVE LOAN PROCEEDS.]
(c) Tranche C Loans. The Borrower agrees that all proceeds of the
Tranche C Loans shall be, promptly upon the Borrower's receipt thereof, [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
CREDIT AGREEMENT - Page 39
<PAGE> 47
or (iii) contributed as equity to the capital of, or loaned to, the Operating
Subsidiary that is to [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED] with
such proceeds and thereupon promptly used by such Operating Subsidiary to [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED] with such proceeds and thereupon
promptly used by such Operating Subsidiary to [TEXT OMITTED - CONFIDENTIAL
TREATMENT REQUESTED], provided, however, that, as of any date of determination,
the aggregate principal amount of the Tranche B Loans and the Tranche C Loans at
any and all times used to [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED].
[NOTE: THE NOTICE OF BORROWING WILL SPECIFY WHICH OPERATING SUBSIDIARY WILL
RECEIVE LOAN PROCEEDS.]
(d) Margin Stock. None of the proceeds of any Loan have been or will be
used to acquire any security in any transaction that is subject to Section 13 or
14 of the Exchange Act or to purchase or carry any margin stock (within the
meaning of Regulations T, U or X of the Board of Governors of the Federal
Reserve System).
Section 2.11 Fees.
(a) Subject to Section 13.12, the Borrower shall pay to the
Administrative Agent for the account of each applicable Lender a commitment fee
on the daily average unused or unfunded amount of each of such Lender's
Commitments, for the period from and including the date on which such Lender (or
its predecessor in interest with respect to Commitments assigned to such Lender
as to which a commitment fee has not previously been paid during the applicable
period) became a party hereto to but excluding the Tranche A Commitment
Termination Date, Tranche B Commitment Termination Date or the Tranche C
Commitment Termination Date, as the case may be, at the rate of three-fourths of
one percent (0.75%) per annum based on a 360 day year and the actual number of
days elapsed, which accrued commitment fees shall be payable in arrears on each
Quarterly Date and on the Tranche A Commitment Termination Date, Tranche B
Commitment Termination Date or the Tranche C Commitment Termination Date, as the
case may be; provided, however, that, notwithstanding the foregoing, the
commitment fees referred to in this Section 2.11(a) preceding shall not commence
to accrue until the date that is six months after the Closing Date.
(b) Subject to Section 13.12, the Borrower agrees to pay to the
Administrative Agent and Nortel Networks such additional fees as are specified
in the Administrative Agent's Letter, which fees shall be payable in such
amounts and on such dates as are specified therein.
Section 2.12 Computations. Interest and fees payable by the Borrower
hereunder and under the other Loan Documents on all Loans shall be computed on
the basis of a year of 360 days and the actual number of days elapsed (including
the first day but excluding the last day) occurring in the period for which
payable unless, in the case of interest, such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a year
of 365 or 366 days, as the case may be.
Section 2.13 Termination or Reduction of Commitments.
CREDIT AGREEMENT - Page 40
<PAGE> 48
(a) Notwithstanding anything to the contrary contained in this
Agreement, each of the Commitments shall automatically terminate upon the
earlier to occur of (i) the occurrence of any Change in Control or (ii) any
sale, transfer or other disposition of the Service Area Network or any material
portion thereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, on the date Holdings receives any net proceeds of any issuance of
Holdings Senior Notes, the Aggregate Commitments shall be reduced by an
aggregate amount such that, immediately after giving effect to such reduction,
the sum of (i) the aggregate outstanding principal amount of the Loans, plus
(ii) the aggregate outstanding principal amount of the Loans then previously
required to be prepaid or paid in accordance with Section 2.7 or Section 2.3,
respectively, plus (iii) the amount of the Aggregate Commitments does not exceed
$175,000,000. All reductions of the Aggregate Commitments pursuant to this
Section 2.13(b) shall be applied pro rata to reduce the Tranche A Commitments,
the Tranche B Commitments and the Tranche C Commitments (based upon the
outstanding principal amounts of such Commitments).
(c) Notwithstanding anything to the contrary contained in this
Agreement, each of the Tranche A Commitments, the Tranche B Commitments and the
Tranche C Commitments shall automatically be reduced, concurrently with the
making of any Tranche A Loans, Tranche B Loans or Tranche C Loans, respectively,
by an amount equal to the principal amount of such Tranche A Loans, Tranche B
Loans or Tranche C Loans, respectively, advanced; provided, however, that, at
the election of the Borrower and subject to the terms and provisions of this
Agreement, any of the Tranche A Loans, the Tranche B Loans and/or the Tranche C
Loans may be, at the election of the Borrower by its giving of _____ Business
Days' prior written notice of such election to the Administrative Agent,
increased by an amount not to exceed the amount by which such Commitment was
previously reduced pursuant to Section 2.13(b).
(d) The Borrower shall have the right to terminate or reduce in part
the unused portion of the Tranche A Commitments, the Tranche B Commitments and
the Tranche C Commitments at any time and from time to time prior to the Tranche
A Commitment Termination Date, the Tranche B Commitment Termination Date and the
Tranche C Commitment Termination Date, respectively; provided, however, that no
such termination or reduction shall be effective unless the Borrower shall have
given notice of each such termination or reduction as provided in Section 2.9,
and each partial reduction of the Commitments shall be in an aggregate amount at
least equal to $3,000,000 or an integral multiple of $100,000 in excess thereof.
(e) Except as provided in Section 2.13(c), the Commitments may not be
reinstated after they have been terminated or increased after they have been
reduced.
CREDIT AGREEMENT - Page 41
<PAGE> 49
ARTICLE 3
Payments
Section 3.1 Method of Payment. All payments of principal, interest,
fees and other amounts to be made by the Borrower under this Agreement and the
other Loan Documents shall be made to the Administrative Agent at the Principal
Office for the account of each Lender's Applicable Lending Office in Dollars and
in immediately available funds, without setoff, deduction or counterclaim, not
later than 1:00 p.m. (New York, New York time) on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). The Borrower
shall, at the time of making each such payment, specify to the Administrative
Agent the sums payable by the Borrower under this Agreement and the other Loan
Documents to which such payment is to be applied (and in the event that the
Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Administrative Agent may apply such payment to the Obligations
in such order and manner as the Administrative Agent may elect, subject to
Section 3.2). Upon the occurrence and during the continuation of an Event of
Default, all proceeds of any Collateral and all other funds of the Borrower or
any Guarantor in the possession of the Administrative Agent or any Lender, may
be applied by the Administrative Agent to the Obligations in such order and
manner as the Administrative Agent may elect, subject to Section 3.2. Each
payment received by the Administrative Agent under this Agreement or any other
Loan Document for the account of a Lender shall be paid promptly to such Lender,
in immediately available funds, for the account of such Lender's Applicable
Lending Office. Whenever any payment under this Agreement or any other Loan
Document shall be stated to be due on a day that is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of the payment of
interest and commitment fee, as the case may be.
Section 3.2 Pro Rata Treatment. Except to the extent otherwise provided
in this Agreement: (a) each Loan shall be made by the Lenders under Section 2.1,
each payment of commitment fees under Section 2.11(a) shall be made for the
account of the Lenders, and each termination or reduction of the Commitments
under Section 2.13 shall be applied to the Commitments of the Lenders, pro rata
according to the respective unused Commitments; (b) the making, Conversion and
Continuation of Loans of a particular Type (other than Conversions provided for
by Section 4.4) shall be made pro rata among the Lenders holding Loans of such
Type according to the amounts of their respective Commitments; (c) each payment
and prepayment by the Borrower of principal of or interest on Loans of a
particular Type shall be made to the Administrative Agent for the account of the
Lenders holding Loans of such Type pro rata in accordance with the respective
unpaid principal amounts of such Loans held by such Lenders; and (d) Interest
Periods for Loans of a particular Type shall be allocated among the Lenders
holding Loans of such Type pro rata according to the respective principal
amounts held by such Lenders.
Section 3.3 Sharing of Payments, Etc. If a Lender shall obtain payment
of any principal of or interest on any of the Obligations due to such Lender
hereunder through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, it shall promptly purchase from the
other Lenders participations in the Obligations held by the other Lenders in
such amounts,
CREDIT AGREEMENT - Page 42
<PAGE> 50
and make such adjustments from time to time, as shall be equitable to the end
that all the Lenders shall share pro rata in accordance with the unpaid
principal and interest on the Obligations then due to each of them. To such end,
all of the Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if all or any portion of such excess
payment is thereafter rescinded or must otherwise be restored. Each of the Loan
Parties agrees, to the fullest extent it may effectively do so under applicable
law, that any Lender so purchasing a participation in the Obligations by the
other Lenders may exercise all rights of setoff, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of Obligations in the amount of such participation. Nothing
contained herein shall require any Lender to exercise any such right or shall
affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness, liability or
obligation of any of the Loan Parties.
Section 3.4 Non-Receipt of Funds by the Administrative Agent. Unless
the Administrative Agent shall have been notified by a Lender or the Borrower
(the "Payor") prior to the date on which such Lender is to make payment to the
Administrative Agent of the proceeds of a Loan to be made by it hereunder or the
Borrower is to make a payment to the Administrative Agent for the account of one
or more of the Lenders, as the case may be (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt, that the
Payor does not intend to make the Required Payment to the Administrative Agent,
the Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to the Administrative Agent, the
recipient of such payment shall, on demand, pay to the Administrative Agent the
amount made available to it together with interest thereon in respect of the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such period.
Section 3.5 Taxes.
(a) All payments by the Borrower and/or any Guarantor of principal of
and interest on the Loans and of all fees and other amounts payable under the
Loan Documents shall be made free and clear of, and without withholding or
deduction by reason of, any present or future taxes, levies, duties, imposts,
assessments or other charges levied or imposed by any Governmental Authority
(other than franchise taxes and taxes on the overall net income of any Lender).
If any such taxes, levies, duties, imposts, assessments or other charges are so
levied or imposed, the Borrower will (i) make additional payments in such
amounts so that every net payment of principal of and interest on the Loans and
of all other amounts payable by it under the Loan Documents, after withholding
or deduction for or on account of any such present or future taxes, levies,
duties, imposts, assessments or other charges (including any tax imposed on or
measured by net income of a Lender attributable to payments made to or on behalf
of a Lender pursuant to this Section 3.5 and any penalties or interest
attributable to such payments), will not be less than the amount provided for
herein or therein absent such withholding or deduction (provided that the
Borrower shall not have any obligation to pay such additional amounts to any
Lender to the extent that such taxes, levies, duties, imposts, assessments or
other charges are levied or imposed by reason of the failure of such Lender to
comply
CREDIT AGREEMENT - Page 43
<PAGE> 51
with the provisions of Section 3.6), (ii) make such withholding or deduction and
(iii) remit the full amount deducted or withheld to the relevant Governmental
Authority in accordance with applicable law. Without limiting the generality of
the foregoing, the Borrower will, upon written request of any Lender, reimburse
each such Lender for the amount of (A) such taxes, levies, duties, imports,
assessments or other charges so levied or imposed by any Governmental Authority
and paid by such Lender as a result of payments made by the Borrower under or
with respect to the Loans other than such taxes, levies, duties, imports,
assessments and other charges previously withheld or deducted by the Borrower
which have previously resulted in the payment of the required additional amount
to such Lender, and (B) such taxes, levies, duties, assessments and other
charges so levied or imposed with respect to any Lender reimbursement under the
foregoing clause (A), so that the net amount received by such Lender (net of
payments made under or with respect to the Loans) after such reimbursement will
not be less than the net amount such Lender would have received if such taxes,
levies, duties, assessments and other charges on such reimbursement had not been
levied or imposed. The Borrower shall furnish promptly to the Administrative
Agent for distribution to each affected Lender, as the case may be, upon request
of such Lender, official receipts evidencing any such payment, withholding or
reduction.
(b) The Borrower will indemnify the Administrative Agent and each
Lender (without duplication) against, and reimburse the Administrative Agent and
each Lender for, all present and future taxes, levies, duties, imposts,
assessments or other charges (including interest and penalties) levied or
collected (whether or not legally or correctly imposed, assessed, levied or
collected), excluding, however, any taxes imposed on the overall net income of
the Administrative Agent or such Lender or any lending office of the
Administrative Agent or such Lender by any jurisdiction in which the
Administrative Agent or such Lender or any such lending office is located, on or
in respect of this Agreement, any of the Loan Documents or the Obligations or
any portion thereof (the "reimbursable taxes"). Any such indemnification shall
be on an after-tax basis, taking into account any such reimbursable taxes
imposed on the amounts paid as indemnity.
(c) Without prejudice to the survival of any other term or provision of
this Agreement, the obligations of the Borrower and the Guarantors under this
Section 3.5 shall survive the payment of the Loans and the other Obligations and
termination of the Commitments.
Section 3.6 Withholding Tax Exemption. Each Lender that is not
incorporated or otherwise formed under the laws of the U.S. or a state thereof
agrees that it will, prior to or on or about the Closing Date or the date upon
which it initially becomes a party to this Agreement and if it is legally able
to do so, deliver to the Borrower and the Administrative Agent two duly
completed copies of U.S. Internal Revenue Service Form W-8ECI or W-8BEN or other
equivalent successor form, as appropriate, certifying in any case that such
Lender is entitled to receive payments from the Borrower under any Loan Document
without deduction or withholding of any U.S. federal income taxes. Each Lender
which so delivers a Form W-8ECI or W-8BEN or other equivalent successor form, as
appropriate, further undertakes to deliver to the Borrower and the
Administrative Agent two additional copies of such form (or a successor form) on
or before the date such form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Administrative Agent, in each case certifying
that such Lender is
CREDIT AGREEMENT - Page 44
<PAGE> 52
entitled to receive payments from the Borrower under any Loan Document without
deduction or withholding of any U.S. federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises the Borrower and the Administrative Agent that it is not
capable of receiving such payments without any deduction or withholding of U.S.
federal income tax.
Section 3.7 Reinstatement of Obligations. Notwithstanding anything to
the contrary contained in this Agreement or any other Loan Document, if the
payment of any amount of principal of or interest with respect to the Loans or
any other amount of the Obligations, or any portion thereof, is rescinded,
voided or must otherwise be refunded by the Administrative Agent or any Lender
upon the insolvency, bankruptcy or reorganization of any Loan Party or otherwise
for any reason whatsoever, then each of (a) the Obligations, (b) the Loan
Documents (including, without limitation, this Agreement, the Notes and the
Security Documents), (c) the indebtedness, liabilities and obligations of the
Borrower and any other Loan Parties and (d) all Liens for the benefit of the
Administrative Agent and the Lenders created under or evidenced by the Loan
Documents, will be automatically reinstated and become automatically effective
and in full force and effect, all to the extent that and as though such payment
so rescinded, voided or otherwise refunded had never been made.
Section 3.8 No Force Majeure, Disputes. The obligations of the Borrower
and the other Loan Parties (as applicable), or any one or more of them, to pay
all amounts due under the Loans and the other Obligations shall not be affected
by (a) any set-off, counterclaim, recoupment, deduction, abatement, suspension,
diminution, reduction, defense or other right which the Borrower or any other
Loan Party may have against the Vendor for any reason whatsoever arising under
or pursuant to the Supply Agreement or otherwise relating to the purchase of
goods or services from the Vendor, (b) any defect in the condition, design,
operation or fitness for use of, or any damage to or loss or destruction of, any
equipment or material or service provided by the Vendor, (c) any insolvency,
bankruptcy, reorganization or similar proceedings by or against the Borrower or
any other Loan Party or affecting any of its Properties, (d) any action of any
Governmental Authority or any damage to or destruction of or any taking of the
Property of the Borrower or any other Loan Party or any part thereof, (e) any
change, waiver, extension, indulgence or failure to perform or comply with, or
other action or omission herein or in the other Loan Documents (except for
express written modifications to this Agreement or other Loan Documents as and
in the manner permitted under this Agreement or the other Loan Documents), (f)
any dissolution of the Borrower or any other Loan Party, (g) any inability or
illegality with respect to the use or ownership of the Property of the Borrower
or any other Loan Party, (h) any failure to obtain, or expiration, suspension or
other termination of, or interruption to, any required licenses, permits,
consents, authorizations, approvals or other legal requirements, (i) the
invalidity or unenforceability of any of the Loan Documents or any other
infirmity therein or any lack of power or authority of the Administrative Agent
or any Lender or the Borrower or any other Loan Party, or (j) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing and
whether or not the Borrower or any other Loan Party shall have notice or
knowledge of any of the foregoing, it being the intention of the Administrative
Agent and the Lenders and the Borrower and the other Loan Parties that the
Obligations of the Borrower
CREDIT AGREEMENT - Page 45
<PAGE> 53
and/or the other Loan Parties (as applicable) shall be absolute and
unconditional and shall be separate and independent covenants and agreements and
shall continue unaffected unless the requirements to pay or perform the same
shall have been terminated pursuant to an express provision thereof or of any of
the other Loan Documents.
ARTICLE 4
Yield Protection and Illegality
Section 4.1 Additional Costs.
(a) The Borrower shall pay directly to each Lender from time to time,
promptly upon the request of such Lender, the costs incurred by such Lender
which such Lender determines are attributable to its making or maintaining of
any Eurodollar Loans or its obligation to make any of such Loans, or any
reduction in any amount receivable by such Lender hereunder in respect of any
such Loans or obligations (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to
such Lender under this Agreement or its Notes in respect of any of such
Loans (other than taxes imposed on the overall net income of such
Lender or its Applicable Lending Office for any of such Loans by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office);
(ii) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio or similar requirement relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities or commitments of, such Lender (including any of such Loans
or any deposits referred to in the definition of "Eurodollar Rate" in
Section 1.1 hereof, but excluding the Reserve Requirement to the extent
it is included in the calculation of the Adjusted Eurodollar Rate); or
(iii) imposes any other condition affecting this Agreement or
the Notes or any extensions of credit or liabilities or commitments
contemplated hereunder or thereunder.
Each Lender will notify the Borrower (with a copy to the Administrative Agent)
of any event occurring after the Closing Date which will entitle such Lender to
compensation pursuant to this Section 4.1(a) as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, and (if
so requested by the Borrower) will designate a different Applicable Lending
Office for the Eurodollar Loans of such Lender if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
sole opinion of such Lender, violate any law, rule or regulation or be in any
way disadvantageous to such Lender, provided that such Lender shall have no
obligation to so designate an Applicable Lending Office located in the U.S. Each
Lender will furnish the Borrower with a certificate setting forth the basis and
the amount of each request of such Lender for compensation under this Section
4.1(a). If any Lender requests compensation from the Borrower under this Section
4.1(a), the Borrower may, by notice to such
CREDIT AGREEMENT - Page 46
<PAGE> 54
Lender (with a copy to the Administrative Agent), suspend the obligation of such
Lender to make or Continue making, or Convert Base Rate Loans into, Eurodollar
Loans until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 4.4 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions of this
Section 4.1, in the event that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender which includes Eurodollar
Loans or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets which it may hold, then, if such Lender so elects by
notice to the Borrower (with a copy to the Administrative Agent), the obligation
of such Lender to make or Continue making, or Convert Base Rate Loans into,
Eurodollar Loans hereunder shall be suspended until such Regulatory Change
ceases to be in effect (in which case the provisions of Section 4.4 hereof shall
be applicable).
(c) Determinations and allocations by any Lender for purposes of this
Section 4.1 of the effect of any Regulatory Change on its costs of maintaining
its obligation to make Loans or of making or maintaining Loans or on amounts
receivable by it in respect of Loans and of the additional amounts required to
compensate such Lender in respect of any Additional Costs, shall be conclusive
in the absence of manifest error, provided that such determinations and
allocations are made on a reasonable basis. Notwithstanding anything to the
contrary contained herein, the Borrower shall not be required to make any
payment of Additional Costs to any Lender pursuant to this Section 4.1 with
respect to Additional Costs relating to any period of time which is more than
180 days prior to such Lender's request for such Additional Costs, provided that
the foregoing provisions of this sentence shall not apply to Additional Costs
attributable to any Regulatory Change which takes effect retroactively.
Section 4.2 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if with respect to any Eurodollar Loans for any
Interest Period therefor:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Rate" in Section
1.1 hereof are not being provided in the relative amounts or for the relative
maturities for purposes of determining the rate of interest for such Loans as
provided in this Agreement; or
(b) the Required Lenders determine (which determination shall be
conclusive absent manifest error) and notify the Administrative Agent that the
relevant rates of interest referred to in the definition of "Eurodollar Rate" or
"Adjusted Eurodollar Rate" in Section 1.1 hereof on the basis of which the rate
of interest for such Loans for such Interest Period is to be determined do not
accurately reflect the cost to the Lenders of making or maintaining such Loans
for such Interest Period;
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then the Administrative Agent shall give the Borrower prompt notice thereof and,
so long as such condition remains in effect, the Lenders shall be under no
obligation to make Eurodollar Loans or to Convert Base Rate Loans into
Eurodollar Loans and the Borrower shall, on the last day(s) of the then current
Interest Period(s) for the outstanding Eurodollar Loans, either prepay such
Loans or Convert such Loans into Base Rate Loans in accordance with the terms of
this Agreement.
Section 4.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make Eurodollar Loans
or (b) maintain Eurodollar Loans, then such Lender shall promptly notify the
Borrower (with a copy to the Administrative Agent) thereof and such Lender's
obligation to make or maintain Eurodollar Loans and to Convert Base Rate Loans
into Eurodollar Loans hereunder shall be suspended until such time as such
Lender may again make and maintain Eurodollar Loans (in which case the
provisions of Section 4.4 hereof shall be applicable).
Section 4.4 Treatment of Affected Loans. If the obligation of any
Lender to make or Continue, or to Convert Base Rate Loans into, Eurodollar Loans
is suspended pursuant to Section 4.1 or 4.3 hereof, such Lender's Eurodollar
Loans shall be automatically Converted into Base Rate Loans on the last day(s)
of the then current Interest Period(s) for the Eurodollar Loans (or, in the case
of a Conversion required by Section 4.1(b) or 4.3 hereof, on such earlier date
as such Lender may specify to the Borrower with a copy to the Administrative
Agent) and, unless and until such Lender gives notice as provided below that the
circumstances specified in Section 4.1 or 4.3 hereof which gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal which would otherwise be
applied to such Lender's Eurodollar Loans shall be applied instead to its Base
Rate Loans; and
(b) all Loans which would otherwise be made or Continued by such Lender
as Eurodollar Loans shall be made as or Converted into Base Rate Loans and all
Loans of such Lender which would otherwise be Converted into Eurodollar Loans
shall be Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower that the circumstances specified in
Section 4.1 or 4.3 hereof which gave rise to the Conversion of such Lender's
Eurodollar Loans pursuant to this Section 4.4 no longer exist (which such Lender
agrees to do promptly upon such circumstances ceasing to exist) at a time when
Eurodollar Loans are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Loans, to the extent necessary so
that, after giving effect thereto, all Loans held by the Lenders holding
Eurodollar Loans and by such Lender are held pro rata (as to principal amounts,
Types and Interest Periods) in accordance with their respective Commitments.
Section 4.5 Compensation. The Borrower shall pay to the Administrative
Agent for the account of each Lender, promptly upon the request of such Lender
through the Administrative Agent, such amount or amounts as shall be sufficient
(in the reasonable opinion of such Lender) to compensate it for any loss, cost
or expense incurred by it as a result of:
CREDIT AGREEMENT - Page 48
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(a) Any payment, prepayment or Conversion of a Eurodollar Loan for any
reason (including, without limitation, the acceleration of the outstanding Loans
pursuant to Section 11.2) on a date other than the last day of an Interest
Period for such Loan; or
(b) Any failure by the Borrower for any reason (including, without
limitation, the failure of any conditions precedent specified in Article 6 to be
satisfied) to borrow, Convert or prepay a Eurodollar Loan on the date for such
borrowing, Conversion or prepayment specified in the relevant notice of
borrowing, prepayment or Conversion under this Agreement.
Section 4.6 Capital Adequacy. If, after the Closing Date, any Lender
shall have determined that the adoption or implementation of any applicable law,
rule or regulation regarding capital adequacy (including, without limitation,
any law, rule or regulation implementing the Basle Accord), or any change
therein, or any change in the interpretation or administration thereof by any
central bank or other Governmental Authority charged with the interpretation or
administration thereof, or compliance by such Lender (or its parent) with any
guideline, request or directive regarding capital adequacy (whether or not
having the force of law) of any central bank or other Governmental Authority
(including, without limitation, any guideline or other requirement implementing
the Basle Accord), has or would have the effect of reducing the rate of return
on such Lender's (or its parent's) capital as a consequence of its obligations
hereunder or the transactions contemplated hereby to a level below that which
such Lender (or its parent) could have achieved but for such adoption,
implementation, change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount reasonably deemed by
such Lender to be material, then from time to time, within ten Business Days
after demand by such Lender (with a copy to the Administrative Agent), the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender (or its parent) for such reduction. A certificate of such
Lender claiming compensation under this Section 4.6 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive
absent manifest error, provided that the determination thereof is made on a
reasonable basis. In determining such amount or amounts, such Lender may use any
reasonable averaging and attribution methods. Notwithstanding anything to the
contrary contained herein, the Borrower shall not be required to make any
payment of additional amounts to any Lender pursuant to this Section 4.6 with
respect to additional amounts relating to any period of time which is more than
180 days prior to such Lender's request for such additional amounts, provided
that the foregoing provisions of this sentence shall not apply to additional
amounts attributable to any Regulatory Change which takes effect retroactively.
Section 4.7 Additional Interest on Eurodollar Loans. Without
duplication of Section 2.4 or amounts directly included in the definition of the
term "Adjusted Eurodollar Rate", the Borrower shall pay, directly to each Lender
from time to time, additional interest on the unpaid principal amount of each
Eurodollar Loan held by such Lender, from the date of the making of such
Eurodollar Loan until such principal amount is paid in full, at an interest rate
per annum determined by such Lender in good faith equal to the positive
remainder (if any) of (a) the Adjusted Eurodollar Rate applicable to such
Eurodollar Loan minus (b) the Eurodollar Rate applicable to such Eurodollar
Loan. Each payment of additional interest pursuant to this Section 4.7 shall be
payable by the Borrower on each date upon which interest is payable on such
Eurodollar Loan pursuant to Section 2.4(b); provided, however, that the Borrower
shall not be obligated to make any such payment of additional interest
CREDIT AGREEMENT - Page 49
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until the first Business Day after the date when the Borrower has been informed
(i) that such Lender is subject to a Reserve Requirement and (ii) of the amount
of such Reserve Requirement (after which time the Borrower shall be obligated to
make all such payments of additional interest, including, without limitation,
such payment of additional interest that otherwise would have been payable by
the Borrower on or prior to such time had the Borrower been earlier informed).
Section 4.8 Replacement of Lenders. If at any time a Lender, other than
Nortel Networks, becomes a Gross Up Lender, the Borrower shall have the right to
replace such Lender with another Person; provided that (a) such other Person
shall be an Eligible Assignee and such other Person shall execute an Assignment
and Acceptance, (b) neither the Administrative Agent nor any Lender shall have
any obligation to the Borrower to find such other Person, (c) in the event of a
replacement of a Gross Up Lender, in order for the Borrower to be entitled to
replace such Lender, such replacement must take place no later than 180 days
after the date the Gross Up Lender shall notify the Borrower and the
Administrative Agent of its desire to be paid any amounts pursuant to Section
3.5, 4.1 or 4.6, and (d) if the Borrower replaces one Gross Up Lender, it must
replace all Gross Up Lenders or replace all Gross Up Lenders on a pro rata
basis. Each Lender, other than Nortel Networks, agrees to its replacement at the
option of the Borrower pursuant to this Section 4.8 and in accordance with
Section 13.8; provided that the successor Lender shall purchase without recourse
such Lender's interest in the Obligations of the Borrower to such Lender for
cash in an aggregate amount equal to the aggregate unpaid principal thereof, all
unpaid interest accrued thereon, all unpaid commitment fees accrued for the
account of such Lender, any breakage costs incurred by the selling Lender
because of the prepayment of any Eurodollar Loans, all other fees (if any)
applicable thereto and all other amounts (including any amounts under this
Article 4) then owing to such Lender hereunder or under any other Loan Document
and the Loan Parties shall execute a release addressed to such Lender releasing
such Lender from all claims arising in connection with the Loan Documents.
ARTICLE 5
Security
Section 5.1 Collateral. To secure the full and complete payment and
performance of the Obligations, the Borrower, Holdings and the Operating
Subsidiaries will (as applicable), and will cause each of the Loan Parties (as
applicable) to, grant to the Administrative Agent for the benefit of the
Administrative Agent and the Lenders a perfected, first priority Lien on all of
its right, title and interest in and to the Collateral, whether now owned or
hereafter acquired, pursuant to the Security Documents, including, without
limitation, the following:
(a) all Capital Stock of the Borrower and the Subsidiaries of Holdings
and the Borrower owned by Holdings, the Borrower or any Subsidiary of Holdings
or the Borrower, other than Capital Stock of Unrestricted Subsidiaries of
Holdings;
(b) all of the Property (as such Property is more specifically
described in the Security Documents), including tangible and intangible property
and real and personal property, of Holdings and the Borrower and each Subsidiary
of Holdings or the Borrower, other than Property of the
CREDIT AGREEMENT - Page 50
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Unrestricted Subsidiaries of Holdings, including, without limitation, the
following: Investments (including certificates of deposit); accounts; inventory
(including, without limitation, work in process); equipment; deposit accounts
(including cash collateral accounts); brokerage accounts; instruments;
Borrower-Owned Operating Assets; the Sprint Agreements; contract rights
(including, without limitation, all contracts relating to the construction or
operation of the Service Area Network, including rights of way, easements,
leases and all related contracts, and all consents and waivers necessary or
appropriate from all parties to such contracts, including, without limitation,
all consents and waivers necessary or appropriate to permit the collateral
assignment of or security interest granted in such contracts); customer deposits
in connection with purchase orders; general intangibles; real Property and
interests therein (if and to the extent required pursuant to Section 5.4);
instruments; chattel paper; Permits; Intellectual Property; and intercompany
Debt (including, without limitation, Debt of the Borrower or any of its
Subsidiaries owed to or held by Holdings); provided, however, that Holdings
shall not be required to grant to the Administrative Agent a security interest
in the proceeds of the issuance of the Holdings Senior Notes; and
(c) all cash and non-cash proceeds and products of any of the
foregoing.
Section 5.2 Guaranties. (a) Holdings and each of the Operating
Subsidiaries will Guarantee the payment and performance of the Obligations
pursuant to the Guaranties, and (b) the Borrower, Holdings and the Operating
Subsidiaries will cause (i) Holdings, (ii) each of the Subsidiaries of Holdings
(whether owned as of the Closing Date or thereafter organized or created), other
than Unrestricted Subsidiaries of Holdings, and (iii) each of the Subsidiaries
of the Borrower (whether owned as of the Closing Date or thereafter organized or
created) to Guarantee the payment and performance of the Obligations pursuant to
the Guaranties.
Section 5.3 New Subsidiaries; Additional Capital Stock.
Contemporaneously with the creation or acquisition of any Subsidiary of Holdings
or the Borrower after the Closing Date other than an Unrestricted Subsidiary of
Holdings, the Borrower, Holdings and the Operating Subsidiaries shall (as
applicable):
(a) grant or cause to be granted to the Administrative Agent, for the
benefit of itself and the Lenders, a perfected, first priority security interest
in all Capital Stock of such Subsidiary owned by Holdings or the Borrower or any
Subsidiary of Holdings or the Borrower (to the extent such Capital Stock was not
previously pledged to the Administrative Agent);
(b) cause each such Subsidiary to Guarantee the payment and performance
of the Obligations by executing and delivering to the Administrative Agent a
Guaranty or a joinder therein acceptable to the Administrative Agent; and
(c) cause each such Subsidiary to execute and deliver to the
Administrative Agent a Security Agreement and such other Security Documents, in
form and substance acceptable to the Administrative Agent, as the Administrative
Agent may request to grant the Administrative Agent, for the benefit of itself
and the Lenders, a perfected, first priority Lien on all Property of such
Subsidiary.
CREDIT AGREEMENT - Page 51
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Contemporaneously with the issuance of any additional Capital Stock of the
Borrower or any Subsidiary of Holdings or the Borrower after the Closing Date,
other than Capital Stock of an Unrestricted Subsidiary of Holdings, the
Borrower, Holdings and the Operating Subsidiaries shall, or shall cause Holdings
or the appropriate Subsidiary of Holdings or the Borrower to (as applicable),
grant or cause to be granted to the Administrative Agent, for the benefit of the
Administrative Agent and the Lenders, a perfected, first priority security
interest in all Capital Stock or other ownership interests in the Borrower or
any Subsidiary of Holdings or the Borrower, other than Capital Stock of an
Unrestricted Subsidiary of Holdings, owned by the Borrower or Holdings or any
such Subsidiary of Holdings or the Borrower (to the extent such Capital Stock or
other ownership interests are already not so pledged to the Administrative
Agent). Each of the Borrower, Holdings and the Operating Subsidiaries covenants
that none of the Capital Stock to be pledged in accordance with this Section 5.3
shall be subject to any transfer restriction, shareholders' agreement or other
restriction except for such restrictions under applicable securities laws, such
restrictions existing as of the Closing Date which have been disclosed to the
Administrative Agent in the Security Documents and such restrictions, if any, as
may be reasonably acceptable to the Administrative Agent. In connection with and
in addition to the foregoing, each of the Loan Parties shall, and shall cause
each other appropriate Person (as applicable) to, execute and/or deliver such
further agreements, documents and instruments (including, without limitation,
stock certificates, stock powers and financing statements) as the Administrative
Agent may reasonably request in order for it to obtain and maintain the
perfected, first priority Liens to be granted in accordance with this Section
5.3.
Section 5.4 Mortgaged Properties; Landlord Subordinations or Waivers.
The Borrower, Holdings and the Operating Subsidiaries shall, and shall cause
each of the other Loan Parties to, on the Closing Date (with respect to any fee
real Property owned on such date) or contemporaneously with the acquisition of
any fee real Property (with respect to any fee real Property acquired after the
Closing Date), execute, acknowledge and deliver to the Administrative Agent a
Mortgage or an amendment or modification to an existing Mortgage covering all
fee real Property owned on the Closing Date or acquired by the Borrower or any
such Loan Party subsequent to the Closing Date, together with evidence
satisfactory to the Administrative Agent and its counsel that the Mortgage
creates a valid, first priority Lien on the fee estate, in favor of the
Administrative Agent for the benefit of the Administrative Agent and the
Lenders, a mortgagee policy of title insurance insuring the Administrative
Agent's first priority Lien status created by each such Mortgage, a current
survey certified to the Administrative Agent and the Lenders, an appraisal
complying with all applicable regulatory requirements, and an environmental
survey acceptable to the Administrative Agent, all of which shall be in form and
substance reasonably satisfactory to the Administrative Agent; provided,
however, that, with respect to any particular parcel of real Property having a
fair market value (inclusive of fixtures) of $250,000 or less, a mortgagee
policy of title insurance and a current survey shall not be required to be
provided if the aggregate fair market value (inclusive of fixtures) of all real
Property as to which the same have not been provided does not exceed $1,000,000;
provided, further, however, that a mortgagee policy of title insurance shall be
required to be provided with respect to each real Property as to which an
owner's policy of title insurance has been or is being obtained and a current
survey shall be required to be provided if available. In addition, if reasonably
requested by the Administrative Agent, the Borrower, Holdings and the Operating
Subsidiaries shall, and shall cause each of the other Loan Parties with an
interest in such Property to, provide the Administrative Agent with a current
environmental assessment of such Property in form and substance reasonably
CREDIT AGREEMENT - Page 52
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satisfactory to the Administrative Agent. With respect to each lease of real
Property as to which the Borrower or any other Loan Party is lessee, the
Borrower, Holdings and the Operating Subsidiaries will, and will cause each of
the other Loan Parties to, obtain subordinations or waivers of landlord's Liens
from each lessor and other agreements from such lessor and its lenders necessary
or appropriate to ensure Administrative Agent's perfected, first priority Lien
on the Collateral or Property affected thereby, the Administrative Agent's
access to such Collateral or Property and the right of the Administrative Agent,
the Lenders or their designee to succeed to the rights of the Borrower or such
other Loan Party that is the lessee under such lease, in each case in form and
substance reasonably satisfactory to the Administrative Agent.
Section 5.5 Setoff. If an Event of Default shall have occurred and be
continuing, each Lender is hereby authorized at any time and from time to time,
without notice to the Borrower or any other Loan Party (any such notice being
hereby expressly waived by the Borrower and the other Loan Parties), to set off
and apply any and all deposits (general or special, time or demand, provisional
or final excluding any trust accounts) at any time held and other indebtedness
at any time owing by such Lender to or for the credit or the account of the
Borrower or any Guarantor against any and all of the Obligations of the Borrower
or such Guarantor now or hereafter existing under this Agreement, such Lender's
Note or any other Loan Document, irrespective of whether or not the
Administrative Agent or such Lender shall have made any demand under this
Agreement, such Lender's Note or any such other Loan Document and although such
Obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
(with a copy to the Administrative Agent) after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights and remedies of each Lender hereunder
are in addition to other rights and remedies (including, without limitation,
other rights of setoff) which such Lender may have.
Section 5.6 Further Assurances. In addition to the foregoing, the
Borrower, Holdings and the Operating Subsidiaries will, and will cause each of
the other Loan Parties (as applicable) to, execute and/or deliver such further
agreements, documents and instruments (including, without limitation, Security
Documents and financing statements) as the Administrative Agent may reasonably
request from time to time in order for it to obtain and maintain valid,
perfected first priority Liens required to be granted to secure the payment and
performance of the Obligations in accordance with this Article 5.
ARTICLE 6
Conditions Precedent
Section 6.1 Initial Extension of Credit. The obligation of each Lender
to make its initial Loan under this Agreement is subject to completion of
Lenders' due diligence review of each of the Loan Parties and the receipt by the
Administrative Agent, on or before the Closing Date, of all of the following in
form and substance satisfactory to the Administrative Agent and, in the case of
actions to be taken, the taking of the following required actions and evidence
that such actions have been taken to the satisfaction of the Administrative
Agent:
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(a) Resolutions. Resolutions of the Board of Directors or equivalent
governing body (as applicable) certified by the Secretary or an Assistant
Secretary (or equivalent officer or representative) of each Loan Party which
authorize the execution, delivery and performance by such Loan Party of the Loan
Documents to which it is or is to be a party;
(b) Incumbency Certificate. A certificate of incumbency certified by
the Secretary or an Assistant Secretary (or equivalent officer or
representative) of each Loan Party certifying as to the name of each officer or
other representative of such Loan Party (i) who is authorized to sign the Loan
Documents to which it is or is to be a party (including any certificates
contemplated therein), together with specimen signatures of each such officer or
other representative, and (ii) who will, until replaced by other officers or
representatives duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other communications in
connection with the Loan Documents and the transactions contemplated thereby;
(c) Certificate of Incorporation, Etc. The certificate of
incorporation, articles of incorporation, certificate of formation, certificate
of organization, partnership agreement or other analogous constitutional
documents of each Loan Party certified by the Secretary of State or other
applicable Governmental Authority of the state of incorporation, formation or
organization of such entity and dated as of a Current Date;
(d) Bylaws, Etc. The bylaws, partnership agreement, operating
agreement, regulations or other analogous constitutional documents of each Loan
Party certified by its Secretary or an Assistant Secretary (or equivalent
officer or representative);
(e) Governmental Certificates. Certificates of appropriate officials as
to the existence and good standing of each Loan Party in its jurisdiction of
incorporation, formation or organization and in all jurisdictions in which such
Loan Party is qualified or is required to qualify to do business as a foreign
entity, each such certificate to be dated as of a Current Date;
(f) Notes. The Notes duly completed and executed by the Borrower (one
payable to the order of each Lender with respect to each of its Commitments);
(g) Mortgages. As required by Section 5.4, each of the Loan Parties
shall execute Mortgages in favor of the Administrative Agent for the benefit of
the Lenders covering all real property owned by such Loan Party, and with
respect to each tract of real property owned by such Loan Party, except as may
not be required pursuant to Section 5.4, shall provide to the Administrative
Agent a mortgagee policy of title insurance insuring the Administrative Agent's
first priority Lien status created by each such Mortgage, a current survey
certified to the Administrative Agent and the Lenders, an appraisal complying
with all applicable regulatory requirements and an environmental survey
acceptable to the Administrative Agent;
(h) Security Agreements and Other Security Documents. Security
Agreements and other Security Documents executed by each of the Loan Parties
pertaining to the Collateral owned by such Loan Party or in which such Loan
Party has rights sufficient to create a Lien (one such Security Agreement
executed by each such Loan Party) together with all related financing statements
and
CREDIT AGREEMENT - Page 54
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other filings, consents to collateral assignments from all parties to all
Material Contracts included as part of the Collateral in form and substance
acceptable to the Administrative Agent, delivery of all pledged Capital Stock
and instruments constituting Collateral, together with appropriate stock or unit
powers and endorsements thereto and, with respect to each existing lease of real
Property by any Loan Party, waivers of landlord's Liens from each lessor and
other agreements from such lessor and its lenders necessary or appropriate to
ensure Administrative Agent's perfected, first priority Lien on the Collateral
or Property affected thereby, the Administrative Agent's access to such
Collateral or Property and the right of the Administrative Agent, the Lenders or
their designee to succeed to the rights of such Loan Party that is the lessee
under the lease, in each case in form and substance reasonably satisfactory to
the Administrative Agent; and all Liens in favor of the Administrative Agent
securing the payment or performance of the Obligations shall have been created
and perfected with respect to all Collateral and shall constitute valid,
perfected first priority Liens (subject only to Permitted Liens which are
expressly permitted to have equal or greater priority in accordance with this
Agreement);
(i) Insurance Certificates and Policies. Certificates evidencing all
insurance policies required by this Agreement and the other Loan Documents and,
if requested by the Administrative Agent, copies of all such insurance policies;
(j) Lien Searches. Lien searches in the name of each Loan Party (and in
all names under which any of them has done business within the last five years)
in each jurisdiction where such Loan Party maintains an office or has Property,
showing no financing statements or other Lien instruments of record affecting
the Collateral except for Permitted Liens;
(k) Supply Agreement. The Amendment No. 4 (dated as of __________, ___)
to the Supply Agreement shall have been executed and delivered by all parties
thereto and shall, subject to the terms and conditions thereof, obligate the
Borrower and the Operating Subsidiaries to purchase at least [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED] worth of Nortel Networks Goods and Services,
and the Administrative Agent shall have received a photocopy of such amendment
the Supply Agreement as so executed and delivered, certified by a Responsible
Officer of the Borrower as being a true and correct copy of such document as of
the Closing Date;
(l) Holdings Public Offering. The Holdings Public Offering shall have
been completed and all net cash proceeds thereof (which net cash proceeds shall
not be less than $100,000,000) shall have been received by Holdings and
contributed by Holdings as equity to the capital of the Borrower, all to the
reasonable satisfaction of the Administrative Agent, and, as a result thereof
and as a result of any other contributions to the equity capital of Holdings and
the Borrower prior to the Closing Date, the total equity capital of the Borrower
as of the Closing Date shall not be less than $148,000,000;
(m) Payment of Interest, Fees and Expenses. The Borrower shall have
paid in full to the Administrative Agent (i) all interest accrued and unpaid
with respect to the Original Loans, (ii) all fees accrued and unpaid with
respect to the Original Credit Agreement and/or any commitment thereunder, (iii)
all fees due on or before the Closing Date as specified in this Agreement or in
the Administrative Agent's Letter and (iv) all fees, costs and expenses of or
incurred by the
CREDIT AGREEMENT - Page 55
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Administrative Agent and/or its counsel to the extent billed on or before the
Closing Date and payable pursuant to the Original Credit Agreement or this
Agreement;
(n) Compliance with Laws. As of the Closing Date, the Borrower and the
other Loan Parties shall have complied in all material respects with all
Governmental Requirements necessary to consummate the transactions contemplated
by this Agreement and the other Loan Documents;
(o) No Prohibitions. No Governmental Requirement shall prohibit the
consummation of the transactions contemplated by this Agreement or any other
Loan Document, and no order, judgment or decree of any Governmental Authority or
arbitrator shall, and no litigation or other proceeding shall be pending or, to
the any Loan Party's knowledge, threatened which would, enjoin, prohibit,
restrain or otherwise adversely affect in any material manner the consummation
of the transactions contemplated by this Agreement and the other Loan Documents
or otherwise have a Material Adverse Effect;
(p) Financial Statements. Copies of each of the financial statements
referred to in Section 7.2;
(q) Opinions of Counsel. Favorable legal opinions of counsel for the
Loan Parties, in form and substance and issued by law firms satisfactory to the
Administrative Agent, with respect to the Loan Parties and with respect to the
Loan Documents, and a favorable legal opinion of regulatory counsel to the Loan
Parties in form and substance satisfactory to the Administrative Agent;
(r) Legal Matters and Loan Documents. All matters of a legal nature
relating to the Loan Parties and the Loan Documents shall be reasonably
satisfactory to the Administrative Agent and its counsel, and the Administrative
Agent shall have received all such other agreements, documents and instruments,
each in form and substance and executed and delivered by all parties, as the
Administrative Agent may have reasonably requested to receive;
(s) Business Plan. A copy of the Business Plan in form and substance
satisfactory to the Administrative Agent;
(t) Material Contracts. A true and correct and fully-executed copy of
each of the Material Contracts in existence as of the Closing Date, including,
without limitation, the Sprint Agreements and the Consent and Agreement (each of
which must be in existence as of the Closing Date) in form and substance
satisfactory to the Administrative Agent;
(u) Permits. Copies of all PCS Licenses and all other material Permits
affecting each Loan Party or necessary in connection with the construction or
operation of the Service Area Network or in connection with its businesses or
any of the Properties owned or leased by it or its businesses to be conducted
and Properties to be owned or leased as contemplated by the Sprint Agreements
and the Business Plan, and evidence satisfactory to the Administrative Agent
that each Loan Party is able to conduct its businesses conducted and to be
conducted as contemplated by the Sprint Agreements and the Business Plan with
the use of such PCS Licenses and Permits in full force and effect; and the
Administrative Agent shall be satisfied that (i) the Borrower and the Operating
Subsidiaries have the
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exclusive, unrestricted right to use each of such PCS Licenses and Permits, as
applicable, pursuant to license agreements or other agreements, documents or
instruments in form and substance reasonably satisfactory to the Administrative
Agent and (ii) each of Sprint PCS, the Borrower and the Operating Subsidiaries
has complied with all initial and on-going conditions of the issuance and use of
all such PCS Licenses and Permits and all other terms and provisions thereof;
without limiting the generality of the foregoing, the Administrative Agent shall
have received (A) copies of all Permits evidencing that the Borrower and the
Operating Subsidiaries hold all Permits necessary to construct and operate the
Service Area Network, other than the PCS Licenses for the Service Area held by
Sprint PCS under which the Borrower and the Operating Subsidiaries will operate
pursuant to the Sprint Agreements, and (B) evidence satisfactory to the
Administrative Agent that (1) Sprint PCS holds all PCS Licenses for the Service
Area, (2) the Borrower and the Operating Subsidiaries hold all necessary or
appropriate Permits from any state public utility commission, (3) all such PCS
Licenses and Permits referred to in clauses (1) and (2) preceding have been duly
issued by the FCC and the appropriate state public utility commission,
respectively, and (4) the Borrower and the Operating Subsidiaries, and the
Administrative Agent as the collateral assignee from the Borrower and the
Operating Subsidiaries, have the exclusive, unrestricted right to use all such
PCS Licenses and Permits referred to in clauses (1) and (2) preceding pursuant
to the Sprint Agreements and such other agreements as have been approved by the
Administrative Agent;
(v) Waivers and Consents. To the extent not referred to in clause (h)
preceding, copies of all material waivers and consents necessary for the
execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party, including, without limitation, any waivers and consents in
connection with the Supply Agreement as the Administrative Agent may require and
the grant of a security interest in each Material Contract of each Loan Party,
which waivers and consents shall be certified by a Responsible Officer of the
Borrower (or other applicable Loan Party) as true and correct copies of such
consents as of the Closing Date;
(w) Regulatory Approvals. Evidence satisfactory to the Administrative
Agent that all filings, consents or approvals with or of Governmental
Authorities necessary to consummate the transactions contemplated by the Loan
Documents have been made and obtained, as applicable;
(x) No Material Adverse Change. As of the Closing Date, (i) no material
adverse change shall have occurred with respect to the financial condition,
results of operations, businesses, operations, capitalization, indebtedness,
liabilities, obligations, profitability or prospects or Properties or of the
general affairs or management of the Borrower and its Subsidiaries, taken as a
whole, or of the Borrower, in each case since September 30, 1999, (ii) no
disruption or adverse change in the capital markets generally or in the market
for loan syndications in particular shall have occurred since September 30,
1999, which disruption or adverse change is deemed material in the judgment of
the Administrative Agent, and (iii) the Administrative Agent shall be satisfied
that the financial performance of the Borrower and its Subsidiaries and of the
Borrower to the Closing Date is not materially different from the financial
projections for such Person(s) through the Closing Date that were previously
submitted to the Administrative Agent;
(y) Form U-1. If requested by the Administrative Agent, a Form U-1
relating to any margin stock which directly or indirectly secures the
Obligations or any part thereof;
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(z) Management and Management Agreements. The Borrower shall have hired
and retained as employees an experienced telecom management team reasonably
satisfactory to the Administrative Agent and the Required Lender, which
management term shall include, at a minimum, a chief executive officer, chief
financial officer, chief operating officer and chief technology officer, each of
whom shall have entered into an employment agreement with the Borrower providing
for an employment term of not less than two years and appropriate
non-competition and non-disclosure agreements, each of which employment
agreements shall be in form and substance reasonably satisfactory to the
Administrative Agent;
(aa) Solvency Certificate. A certificate from Holdings and the Borrower
certifying that each of the Loan Parties is Solvent, together with contribution
agreements between and among each of the Loan Parties other than the Borrower as
the Administrative Agent may reasonably require; and
(bb) Reorganization Transactions. Each of the Reorganization
Transactions shall have been consummated in accordance with the terms and
provisions of the agreements and documents governing such transactions, and true
and correct copies of such agreements and documents shall have been delivered to
the Administrative Agent.
The Borrower shall deliver, or cause to be delivered, to the Administrative
Agent sufficient counterparts of each agreement, document or instrument to be
received by the Administrative Agent under this Section 6. 1 to permit the
Administrative Agent to distribute a copy of the same to each of the Lenders.
After the request of the Borrower, the Administrative Agent shall inform the
Borrower in writing as to the status of satisfaction of the conditions precedent
set forth in this Section 6.1.
Section 6.2 All Extensions of Credit. The obligation of each Lender to
make any Loan (including the initial Loan) under this Agreement is subject to
the continued satisfaction of each of the conditions precedent set forth in
Section 6.1 and each of the following additional conditions precedent:
(a) No Default or Material Adverse Effect. No Default or Material
Adverse Effect shall have occurred and be continuing, or would result from such
Loan;
(b) Representations and Warranties. All of the representations and
warranties of the Loan Parties contained in this Agreement and in the other Loan
Documents shall be true and correct on and as of the date of such Loan with the
same force and effect as if such representations and warranties had been made on
and as of such date unless they relate solely to an earlier date;
(c) Ratio of Total Debt to Contributed Capital. After giving effect to
the requested Loan, the ratio of Total Debt of the Borrower and its Consolidated
Subsidiaries to Contributed Capital of the Borrower is less than or equal to
1.50 to 1.00;
(d) Permitted Third-Party Expenses Borrowing Base. After giving effect
to the requested Loan, the aggregate amount of proceeds of the Loans (including
the Original Loans) used to pay
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Permitted Third-Party Expenses shall not exceed the Permitted Third-Party
Expenses Borrowing Base;
(e) Use of Proceeds. The Borrower shall have certified to the
Administrative Agent that all proceeds of the Loans then being made by the
Lenders are, concurrently with the making of such Loans, being used by the
Borrower for the purposes specified in Section 2.10, and the Borrower shall have
delivered to the Administrative Agent such further evidence thereof (if any) as
the Administrative Agent may reasonably request;
(f) Third-Party Expenses Borrowing Base Report. The Administrative
Agent shall have received a current Permitted Third-Party Expenses Borrowing
Base Report dated as of the date of the Notice of Borrowing;
(g) Supply Agreement. The Supply Agreement shall not have been
terminated by the Borrower or any other Loan Party and shall remain in full
force and effect;
(h) Full Disclosure. Neither the Borrower nor any other Loan Party has
failed to disclose to the Administrative Agent or any Lender any material fact
with respect to the Service Area Network or their respective financial
conditions (including any contingent liabilities) or results of operations, or
has failed to disclose any information the absence of which makes any
information previously disclosed to the Administrative Agent or any Lender
materially misleading; and
(i) Additional Documentation. The Administrative Agent shall have
received such additional approvals, agreements, documents and instruments as the
Administrative Agent may reasonably request.
Each notice of borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower that the conditions precedent set
forth in this Section 6.2 have been satisfied (both as of the date of such
notice and, unless the Borrower otherwise notifies the Administrative Agent
prior to the date of such borrowing, as of the date of such borrowing).
Section 6.3 Closing Certificates. The Borrower shall, concurrently with
the Closing Date (with respect to the conditions precedent set forth in Section
6.1), and concurrently with the date of the making of each other Loan, execute
and deliver to the Administrative Agent a certificate in form and substance
satisfactory to the Administrative Agent certifying as to the satisfaction of
each of the conditions precedent set forth in this Article 6 which are required
to be satisfied on or before such date (without regard to whether such matters
are, in fact, satisfactory to the Administrative Agent to the extent that such
satisfaction is required hereunder).
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ARTICLE 7
Representations and Warranties
Each of the Borrower, Holdings and each Operating Subsidiary hereby
represents and warrants to the Administrative Agent and the Lenders that the
following statements are and, after giving effect to the funding of the initial
Loans on the Closing Date and continuing thereafter as long as the Obligations
or any part thereof are outstanding or any Lender has any Commitment hereunder,
will be true, correct and complete:
Section 7.1 Existence, etc. Each of the Loan Parties (a) is a
corporation, partnership, limited liability company or other entity (as
described in the Loan Documents) duly organized, validly existing and (if and to
the extent that the concept of good standing is applicable to the type of entity
in question) in good standing under the laws of the jurisdiction of its
incorporation, formation or organization, (b) has all requisite power and
authority to own its Properties and carry on its business as now conducted, and
(c) is qualified to do business in all jurisdictions in which the nature of its
business makes such qualification necessary and where failure to so qualify
would have a Material Adverse Effect. Each of the Loan Parties has the power and
authority and legal right to execute, deliver and perform its obligations under
the Loan Documents and the Sprint Agreements to which it is or may become a
party.
Section 7.2 Financial Statements.
(a) The Borrower has delivered to the Administrative Agent and the
Lenders (i) an unaudited balance sheet of Holdings and its Consolidated
Subsidiaries (including, without limitation, the Borrower), together with
consolidated schedules, as of and for the nine-month period ended September 30,
1999, and (ii) an unaudited pro forma balance sheet of Holdings and its
Consolidated Subsidiaries (including, without limitation, the Borrower),
together with consolidating schedules, dated as of the Closing Date which gives
effect to the initial Loans made on the Closing Date and the other transactions
that have occurred on or before the Closing Date (including, without limitation,
the Reorganization Transactions, the Holdings Public Offering and the capital
contributions to Holdings and the Borrower). Such financial statements, as well
as all other financial statements to be delivered to the Administrative Agent in
accordance with this Agreement, are or will be when delivered (as applicable)
true and correct, have been or will be (as applicable) prepared in accordance
with GAAP and fairly and accurately present or will fairly and accurately
present (as applicable), on a consolidated and consolidating basis (as
applicable), the financial condition of Holdings and its Consolidated
Subsidiaries (including without limitation, the Borrower) as of such dates and
the results of operations for the respective periods indicated therein. There
has not been, as of the Closing Date, any material adverse change in the
financial condition, results of operations, businesses, operations or Properties
of Holdings and its Subsidiaries, taken as a whole, the Borrower and its
Subsidiaries, taken as a whole, or of the Borrower on an individual basis, since
September 30, 1999 or December 31, 1999.
(b) The Business Plan (including, without limitation, the financial
projections contained therein) represents, as of the Closing Date, the good
faith estimate of the Borrower and its senior
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management concerning the probable financial condition and performance of the
Borrower and its Subsidiaries for the time period covered thereunder based upon
the assumptions believed to be reasonable at the time made.
Section 7.3 Corporate Action; No Breach. The execution, delivery and
performance by each of the Loan Parties of the Loan Documents and the Sprint
Agreements to which it is or may become a party and compliance with the terms
and provisions hereof and thereof have been duly authorized by all requisite
entity action and do not and will not (a) violate or conflict with, or result in
a breach of, or require any consent under (i) the certificate of incorporation,
articles of incorporation, certificate of formation, certificate of
organization, partnership agreement, regulations, bylaws or other constitutional
documents of such Loan Party, (ii) any Governmental Requirement (including,
without limitation, the Communications Act, any rule or regulation of the FCC or
any rule or regulation of any state public utility commission) or any order,
writ, injunction or decree of any Governmental Authority or arbitrator, or (iii)
any material agreement, document or instrument to which any Loan Party is a
party or by which any Loan Party or any of its Property is bound or subject, or
(b) constitute a default under any such material agreement, document or
instrument, or result in the creation or imposition of any Lien (except a Lien
in favor of the Administrative Agent for and on behalf of the Lenders under the
Security Documents as provided in Article 5) upon any of the revenues or
Property of any Loan Party.
Section 7.4 Operation of Business; Licenses. Each of the Loan Parties
(a) possesses all material Permits, franchises, licenses and authorizations
necessary or appropriate to conduct its businesses substantially as now
conducted and as to be conducted as contemplated by the Business Plan, and (b)
has complied with all initial and on-going conditions to the issuance and use of
all such Permits, franchises, licenses and authorizations, except where failure
to comply could not reasonably be expected to have a Material Adverse Effect.
None of the Loan Parties is in violation of any such material Permits,
franchises, licenses or authorizations which could be expected to result in any
termination or cessation thereof. All of the PCS Licenses and all of the Permits
of the Loan Parties issued by any state public utility commission, and all other
material Permits, franchises, licenses and authorizations required by any
Governmental Requirement (including, without limitation, the Communications Act,
any rule or regulation of the FCC or any rule or regulation of any state public
utility commission) or issued by any Governmental Authority as of the Closing
Date, are summarized by category or type, as relevant to the operation of the
Loan Parties on Schedule 7.4 as to each Loan Party separately. Sprint PCS holds
all PCS Licenses, and the Borrower and the Operating Subsidiaries hold all
Permits of any state public utility commission, necessary to operate a PCS
system in each of the BTAs set forth on Schedule 1.1(c). Such PCS Licenses and
Permits are as set forth on Schedule 7.4, have been duly issued by the FCC and
the appropriate state public utility commission (as applicable) and are in full
force and effect, and all provisions of such PCS Licenses and Permits have been
complied with in all material respects. No PCS License or Permit for any BTA set
forth on Schedule 1.1(c) is subject to any pending or, to the knowledge of any
Loan Party, threatened revocation or termination proceeding or action.
Section 7.5 Intellectual Property. The Intellectual Property owned or
used by each of the Loan Parties in the operation of their respective businesses
are set forth on Schedule 7.5. Each of the Loan Parties owns or possesses (or
will be licensed or have the full right to use) all Intellectual
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Property which is necessary or appropriate for the operation of their respective
businesses as presently conducted and as proposed to be conducted, without any
known conflict with the rights of others. The consummation of the transactions
contemplated by this Agreement and the other Loan Documents will not materially
alter or impair, individually or in the aggregate, any of such rights of the
Loan Parties. No product or service of any of the Loan Parties infringes upon
any Intellectual Property of any other Person, and no claim or litigation is
pending or, to the knowledge of any Loan Party, threatened against any Loan
Party contesting its right to sell or otherwise use any product or material or
service which could reasonably be expected to have a Material Adverse Effect.
There is no violation by any Loan Party of any right of any such other Person
with respect to any material Intellectual Property owned or used by any such
other Person.
Section 7.6 Litigation and Judgments. Each material action, suit,
investigation or proceeding before or by any Governmental Authority or
arbitrator pending or, to the knowledge of any Loan Party, threatened against or
affecting any Loan Party, or that relates to any of the Loan Documents as of the
Closing Date, is disclosed on Schedule 7.6. None of such actions, suits,
investigations or proceedings could, if adversely determined, reasonably be
expected to have a Material Adverse Effect. Except as may be disclosed on
Schedule 7.6, as of the Closing Date, there are no outstanding judgments against
any Loan Party. No Loan Party has received any opinion or memorandum or legal
advice in writing from legal counsel to the effect that it is exposed to any
liability or disadvantage that could reasonably be expected to have a Material
Adverse Effect.
Section 7.7 Rights in Properties; Liens. Except as disclosed on
Schedule 7.7, none of the Loan Parties owns any right, title or interest in any
real Property. Each of the Borrower and its Subsidiaries has good and marketable
title to or, with respect to leasehold interests, valid leasehold interests in
all of its material Properties and assets, real and personal, including the
material Properties, assets and leasehold interests reflected in the financial
statements described in Section 7.2(a), except where failure to have good and
marketable title or valid leasehold interests could not reasonably be expected
to have a Material Adverse Effect, and none of the Properties or leasehold
interests of any of the Loan Parties is subject to any Lien, except Permitted
Liens. The Borrower or an Operating Subsidiary of the Borrower owns all existing
Borrower-Owned Operating Assets. No Loan Party has granted or voluntarily
allowed or permitted to exist any Lien to or in favor of any Person (other than
the Administrative Agent for and on behalf of the Lenders as security for the
Obligations) which attaches or relates to any of the Collateral and the Liens on
the Collateral in favor of the Administrative Agent are perfected, first
priority Liens subject only to Permitted Liens which are expressly permitted to
be equal or prior to the Liens of the Administrative Agent in the definition of
the term "Permitted Liens".
Section 7.8 Enforceability. The Loan Documents have been duly and
validly executed and delivered by each of the Loan Parties that is a party
thereto, and such Loan Documents constitute the legal, valid and binding
obligations of such Persons, enforceable against each such Person in accordance
with their respective terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to the enforcement of creditors'
rights and general principles of equity.
Section 7.9 Approvals. No authorization, approval or consent of, and no
filing or registration with or notice to, any Governmental Authority (including
the FCC) or other Person is
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or will be necessary for the execution, delivery or performance by any Loan
Party of any of the Loan Documents or any of the Sprint Agreements to which it
is or will be a party or for the validity or enforceability thereof, except for
such consents, approvals and filings as have been validly obtained or made and
are in full force and effect. The consummation of the transactions contemplated
by the Loan Documents and the Sprint Agreements does not require the consent or
approval of any other Person, except such consents and approvals (a) as have
been validly obtained and are in full force and effect or (b) as to which the
failure to obtain is not, individually or in the aggregate, material. None of
the Loan Parties has failed to obtain any material consent, approval, license,
Permit, franchise or other authorization of any Governmental Authority
(including the FCC) necessary for the ownership or use of any of its Properties,
conduct of its business and performance of the Business Plan.
Section 7.10 Debt. As of the Closing Date, none of the Loan Parties has
any Debt other than (a) the Obligations, and (b) the Debt disclosed on Schedule
7.10 hereto.
Section 7.11 Taxes. Each of the Loan Parties has filed (a) all tax
returns (federal, state and local) and reports required to be filed, including,
without limitation, all income, franchise, employment, Property and sales tax
returns, and (b) all other material tax returns and reports required to be filed
except where failure to file could not reasonably be expected to have a Material
Adverse Effect, and has paid all federal and other material taxes (shown on such
returns or reports to be due and payable), assessments, fees and other
governmental charges levied or imposed upon it or its Properties, income or
assets otherwise due and payable before they become delinquent, except those
which are being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP and no notice of
Lien has been filed or recorded. There is no proposed tax assessment against any
Loan Party which could, if the assessment were made, reasonably be expected to
have a Material Adverse Effect.
Section 7.12 Margin Securities. None of the Loan Parties is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T, U or X of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying margin stock.
Section 7.13 ERISA. None of the Loan Parties or any ERISA Affiliate
maintains or contributes to, or has any obligation under, any Pension Plan other
than the Pension Plans identified on Schedule 7.13. Each Plan of the Loan
Parties is in compliance in all material respects with all applicable provisions
of ERISA and the Code. Neither a Reportable Event nor a Prohibited Transaction
has occurred within the last 60 months with respect to any Plan that could
reasonably be expected have a Material Adverse Effect. No notice of intent to
terminate a Pension Plan has been filed, nor has any Pension Plan been
terminated. No circumstances exist which constitute grounds entitling the PBGC
to institute proceedings to terminate, or appoint a trustee to administer, a
Pension Plan, nor has the PBGC instituted any such proceedings. Neither any Loan
Party nor any ERISA Affiliate has completely or partially withdrawn from a
Multiemployer Plan. Each of the Loan Parties and each ERISA Affiliate have met
their minimum funding requirements under ERISA and the Code or with respect to
all of their Pension Plans subject to such requirements, and, as of the Closing
Date except as specified on Schedule 7.13, the present value of all vested
benefits under each funded Plan
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(exclusive of any Multiemployer Plan) does not and will not exceed the fair
market value of all such Plan assets allocable to such benefits, as determined
on the most recent valuation date of such Plan and in accordance with ERISA.
Neither any Loan Party nor any ERISA Affiliate has incurred any liability to the
PBGC under ERISA. No litigation is pending or, to any Loan Party's knowledge,
threatened concerning or involving any Plan that could reasonably be expected to
have a Material Adverse Effect. There are no unfunded or unreserved liabilities
(on either a going-concern basis or a wind-up basis) relating to any Plan that
could, individually or in the aggregate, have a Material Adverse Effect if the
Borrower were required to fund or reserve such liability in full. As of the
Closing Date, no funding waivers have been or will have been requested or
granted under Section 412 of the Code with respect to any Plan. No unfunded or
unreserved liability for benefits under any Plan or Plans (exclusive of any
Multiemployer Plans) exceeds $500,000, with respect to any such Plan, or
$1,000,000 with respect to all such Plans, in the aggregate as of the Closing
Date, on either a going-concern basis or a wind-up basis.
Section 7.14 Disclosure. No written statement, information, report,
representation or warranty made by any Loan Party in any Loan Document or
furnished to the Administrative Agent or any Lender by or on behalf of any Loan
Party in connection with the Loan Documents or any transaction contemplated
hereby or thereby contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances in which made, not misleading. There is no fact known
to any Loan Party which has had a Material Adverse Effect, and there is no fact
known to any Loan Party which might in the future have a Material Adverse Effect
except as may have been disclosed in writing to the Administrative Agent.
Section 7.15 Loan Parties; Capitalization. The Borrower is a
Wholly-Owned Subsidiary of Holdings and all issued and outstanding Capital Stock
of the Borrower is owned, beneficially and of record, by Holdings. Except for
the issued and outstanding Capital Stock of Alamosa Texas which is owned,
beneficially and of record, by Alamosa Texas GP as of the Closing Date (as
specified in Schedule 7.15), Alamosa Texas is a Wholly-Owned Subsidiary of the
Borrower and all issued and outstanding Capital Stock of Alamosa Texas is owned,
beneficially and of record, by the Borrower. Except for the issued and
outstanding Capital Stock of Alamosa Wisconsin which is owned, beneficially and
of record, by Alamosa Wisconsin GP and certain Wisconsin telephone companies as
of the Closing Date (as specified in Schedule 7.15), Alamosa Wisconsin is a
Wholly-Owned Subsidiary of the Borrower and all issued and outstanding Capital
Stock of Alamosa Wisconsin is owned, beneficially and of record, by the
Borrower. Each of Alamosa Texas GP and Alamosa Wisconsin GP is a Wholly-Owned
Subsidiary of the Borrower and all issued and outstanding Capital Stock of each
of Alamosa Texas GP and Alamosa Wisconsin GP is owned, beneficially and of
record, by the Borrower. Schedule 7.15 attached hereto contains, as of the
Closing Date, complete and accurate information regarding (a) the identities of
each of the Subsidiaries of Holdings and the Borrower, (b) the number of issued
and outstanding shares (or other units) of each class of Capital Stock issued by
each of the Loan Parties and the identities of, and number and percentage of
each of such shares (or other units) held by, (i) with respect to the Capital
Stock of Holdings, the Former Members and (ii) with respect to the Capital Stock
of each of the other Loan Parties, the owner(s) (both of record and
beneficially) of such Capital Stock, and (c) the jurisdiction of incorporation
or other organization of each of the Loan Parties.
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Section 7.16 Compliance with Laws. None of the Loan Parties is in
violation of any Governmental Requirement (including, without limitation, the
Communications Act, any rule or regulation of the FCC or any rule or regulation
of any state public utility commission), except for instances of non-compliance
that could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
Section 7.17 Investment Company Act. None of the Loan Parties is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.18 Public Utility Holding Company Act. None of the Loan
Parties is a "holding company" or a "subsidiary company" of a "holding company"
or an "affiliate" of a "holding company" or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.19 Environmental Matters.
(a) Except for instances of noncompliance with or exceptions to any of
the following representations and warranties that could not have, individually
or in the aggregate, a Material Adverse Effect:
(i) Each of the Loan Parties and all of their respective
Properties and operations are in full compliance with all Environmental
Laws. No Loan Party is aware of, and no Loan Party has received written
notice of, any past, present or future conditions, events, activities,
practices or incidents which may interfere with or prevent the
compliance or continued compliance by the Loan Parties with all
Environmental Laws;
(ii) Each of the Loan Parties has obtained all Permits that
are required under applicable Environmental Laws, and all such Permits
are in good standing and all such Persons are in compliance with all of
the terms and conditions thereof;
(iii) No Hazardous Materials exist on, about or within or have
been (to the knowledge of any Loan Party) or are being used, generated,
stored, transported, disposed of on or Released from any of the
Properties of any of the Loan Parties except in compliance with
applicable Environmental Laws. The use which each of the Loan Parties
make and intend to make of its Properties will not result in the use,
generation, storage, transportation, accumulation, disposal or Release
of any Hazardous Material on, in or from any of their currently owned
Properties except in compliance with applicable Environmental Laws;
(iv) There are no conditions or circumstances associated with
the currently owned or leased Properties or operations of any of the
Loan Parties that could reasonably be expected to give rise to any
Environmental Liabilities or claims resulting in any Environmental
Liabilities;
(v) None of the Loan Parties and none of its currently or
previously owned or leased Properties or operations is subject to any
outstanding or, to the knowledge of any Loan
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Party, threatened order from or agreement with any Governmental
Authority or other Person or subject to any judicial or administrative
proceeding with respect to (A) any failure to comply with Environmental
Laws, (B) any Remedial Action, or (C) any Environmental Liabilities;
(vi) None of the Loan Parties is subject to, or has received
written notice of any claim from any Person alleging that it is or will
be subject to, any Environmental Liabilities;
(vii) None of the Properties of any of the Loan Parties is a
treatment facility (except for the recycling of Hazardous Materials
generated on-site and the treatment of liquid wastes subject to the
Clean Water Act or other applicable Environmental Law for temporary
storage of Hazardous Materials generated on-site prior to their
disposal off-site) or disposal facility requiring a permit under the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.,
regulations thereunder or any comparable provision of state law. Each
of the Loan Parties is in compliance with all applicable financial
responsibility requirements of all Environmental Laws; and
(viii) None of the Loan Parties has failed to file any notice
required under applicable Environmental Law reporting a Release.
(b) No Lien arising under any Environmental Law that could have,
individually or in the aggregate, a Material Adverse Effect has attached to any
Property or revenues of any of the Loan Parties.
Section 7.20 Year 2000 Compliance. The Borrower has (a) initiated a
review and assessment of all areas within the businesses and operations
(including those affected by suppliers and vendors) of the Loan Parties that
could reasonably be expected to be relevant to whether the Loan Parties are Year
2000 Compliant, (b) developed a plan and timeline for ensuring that the Loan
Parties are Year 2000 Compliant on a timely basis, and (c) to date, implemented
that plan in accordance with that timetable. Based upon the foregoing, the
Borrower believes that each of the Loan Parties is Year 2000 Compliant as of the
Closing Date except to the extent as may be described in Schedule 8.15 and
except for instances of noncompliance that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 7.21 Labor Disputes and Acts of God. Neither the business nor
the Properties of any of the Loan Parties are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that is having or could reasonably be
expected to have a Material Adverse Effect.
Section 7.22 Material Contracts. Attached hereto as Schedule 7.22 is a
complete list, as of the Closing Date, of all Material Contracts of each of the
Loan Parties, other than the Loan Documents, which list sets forth each of the
parties to each of the Material Contracts. All of the Material Contracts are in
full force and effect and none of the Loan Parties is in default under any
Material Contract and, to the knowledge of the Loan Parties after due inquiry,
no other Person that
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is a party thereto is in default under any of the Material Contracts. Each of
the Loan Parties is in compliance with the terms and provisions of the Sprint
Agreements. None of the Material Contracts prohibits the transactions
contemplated under the Loan Documents. Except as may be provided on Schedule
7.22, (a) each of the Material Contracts has been transferred or assigned to, or
is currently in the name of, a Loan Party and (b) subject to the provisions of
the Sprint Agreements, as the same may be modified or superseded by the Consent
and Agreement, each of the Material Contracts is assignable to the
Administrative Agent as collateral and is assignable by the Administrative Agent
to a transferee if an Event of Default were to occur. The Borrower has delivered
to the Administrative Agent a complete and current copy of each Material
Contract of any Loan Party (other than purchase orders entered into in the
ordinary course of business) existing on the Closing Date.
Section 7.23 Bank Accounts. As of the Closing Date, Schedule 7.23 sets
forth the account numbers and location of all bank accounts (including lock box
and special deposit accounts) of each of the Loan Parties.
Section 7.24 Outstanding Securities. As of the Closing Date, all
outstanding securities (as defined in the Securities Act of 1933, as amended, or
any successor thereto, and the rules and regulations of the Securities and
Exchange Commission thereunder) of the Loan Parties have been offered, issued,
sold and delivered in compliance with all applicable Governmental Requirements.
Section 7.25 Solvency. Each of the Loan Parties, as a separate entity,
is Solvent, both before and after giving effect to the Loans.
Section 7.26 Employee Matters. Except as set forth on Schedule 7.26, as
of the Closing Date (a) none of the Loan Parties nor any of their employees is
subject to any collective bargaining agreement, and (b) no petition for
certification or union election is pending with respect to the employees of any
Loan Party, and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of any Loan Party.
There are no strikes, slowdowns, work stoppages or controversies pending or, to
the best knowledge of the Loan Parties after due inquiry, threatened against,
any of the Loan Parties or their respective employees which could have, either
individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 7.26, as of the Closing Date, none of the Loan Parties is subject to
an employment contract.
Section 7.27 Insurance. Schedule 7.27 sets forth a complete and
accurate description of all policies of insurance that will be in effect as of
the Closing Date for the Loan Parties and their Properties. To the extent such
policies have not been replaced, no notice of cancellation has been received for
such policies and each of the Loan Parties which is the owner or holder of each
such policy is in compliance with all of the terms and conditions of such
policy.
Section 7.28 Common Enterprise. Holdings and its Subsidiaries
(including, without limitation, the Borrower) are members of an affiliated group
with each other such Person and are collectively engaged in a common enterprise
with one another. Each of the Loan Parties expects to derive substantial benefit
(and may reasonably be expected to derive substantial benefit), directly and
indirectly, from the Loans contemplated by this Agreement, both in its separate
capacity and as a member of an affiliated and integrated group.
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Section 7.29 Reorganization Transactions. Each of the Reorganization
Transactions has been, on or before the Closing Date, consummated in accordance
with the terms and provisions of the agreements and documents governing such
transactions, and true and correct copies of such agreements and documents have
been delivered to the Administrative Agent.
ARTICLE 8
Affirmative Covenants
Each of the Borrower, Holdings and each Operating Subsidiary hereby
covenants and agrees that, as long as the Obligations or any part thereof are
outstanding or any Lender has any Commitment hereunder, it will perform and
observe, or cause to be performed and observed, the following covenants:
Section 8.1 Reporting Requirements. The Loan Parties will furnish (or
will cause to be furnished) to the Administrative Agent and each Lender:
(a) Annual Financial Statements. As soon as available, and in any event
within 90 days after the end of each fiscal year of Holdings, beginning with the
fiscal year ended December 31, 1999, either a copy of the form 10-K (including
all financial statements contained therein) filed by Holdings as of the end of
and for such fiscal year then ended, together with audited consolidating
schedules for each of Holdings and its Consolidated Subsidiaries (including,
without limitation, the Borrower) with respect to the financial statements
contained therein, or a copy of the annual audit report (including the
consolidated balance sheet) of Holdings and its Consolidated Subsidiaries
(including, without limitation, the Borrower) as of the end of such year and the
related audited consolidated statements of income or operations, shareholders'
equity and cash flows for such fiscal year, together with audited consolidating
schedules for Holdings and its Consolidated Subsidiaries, (including, without
limitation, the Borrower) with respect to each of such financial statements, in
each case setting forth in comparative form the figures for the previous fiscal
year, and accompanied by the opinion of independent certified public accountants
of recognized standing reasonably acceptable to the Administrative Agent, which
opinion shall state that such consolidated financial statements present fairly
the financial position and results of operations for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and which
opinion shall not be qualified or limited because of a restricted or limited
examination by such accountant of any material portion of such Person's records;
(b) Quarterly Financial Statements. As soon as available, and in any
event within 45 days after the end of each of the quarters of each fiscal year
of Holdings, beginning with the fiscal quarter ending March 31, 1999, either a
copy of the form 10-Q (including all financial statements contained therein)
filed by Holdings as of the end of and for such fiscal quarter then ended,
together with consolidating schedules for each of Holdings and its Consolidated
Subsidiaries (including, without limitation, the Borrower) with respect to each
of the financial statements contained therein, or a copy of the unaudited
consolidated balance sheet of Holdings and its Consolidated Subsidiaries
(including, without limitation, the Borrower) as of the end of such quarter and
the related consolidated statements of income or operations, shareholders'
equity and cash flows and quarterly operating
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budgets (or such other information comparable to operating budgets as Holdings
or the Borrower prepares for its own internal purposes) for the period
commencing on the first day and ending on the last day of such quarter, together
with unaudited consolidating schedules for Holdings and its Consolidated
Subsidiaries (including, without limitation, the Borrower) with respect to each
of such financial statements, in each case setting forth in comparative form the
information or figures for the corresponding period of the preceding fiscal
year, and certified by an appropriate Responsible Officer of Holdings as fairly
presenting, in accordance with GAAP, the financial position and the results of
operations of Holdings and its Consolidated Subsidiaries (including, without
limitation, the Borrower) (except for year-end adjustments and financial
statement footnotes required by GAAP);
(c) Compliance Certificate. Concurrently with the delivery of each of
the financial statements referred to in Sections 8.1(a) and 8.1(b), a Compliance
Certificate of a Responsible Officer of the Borrower substantially in the form
of Exhibit D hereto, appropriately completed, stating that, to the best of such
officer's knowledge, no Default has occurred and is continuing or, if a Default
has occurred and is continuing, stating the nature thereof and the action that
has been taken and is proposed to be taken with respect thereto;
(d) Notice of Actions, Suits or Proceedings. Promptly after the
commencement thereof, notice of all actions, suits and proceedings before any
Governmental Authority (including the FCC) or arbitrator affecting any Loan
Party, any Sprint Agreement or any PCS License or material Permit, which, if
determined adversely to any Loan Party, Sprint Spectrum or Sprint PCS, could
reasonably be expected to have a Material Adverse Effect;
(e) Notice of Default, etc.. As soon as possible and in any event
immediately upon any Loan Party's knowledge of the occurrence of any Default, a
written notice setting forth the details of such Default and the action that any
Loan Party has taken and, if and to the extent known, proposes to take with
respect thereto;
(f) ERISA Plan Reports. Promptly after the filing or receipt thereof,
copies of all reports, including annual reports, and notices which any Loan
Party or any of its respective ERISA Affiliates files with or receives from the
PBGC or the U.S. Department of Labor under ERISA with respect to a Pension Plan
or for which any Loan Party has any potential liability; and as soon as possible
and in any event within five days after any Loan Party knows or has reason to
know that any such Pension Plan is insolvent, or that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or Multiemployer
Plan, or that the PBGC, or any Loan Party or any of its respective ERISA
Affiliates has instituted or will institute proceedings under ERISA to terminate
or withdraw from or reorganize any Pension Plan, a certificate of a Responsible
Officer of the Borrower setting forth the details as to such insolvency,
withdrawal, Reportable Event, Prohibited Transaction or termination and the
action that any Loan Party has taken and proposes to take with respect thereto;
(g) Proxy Statements, Etc. As soon as available, one copy of each (if
any) financial statement, report, notice or proxy statement sent by any Loan
Party to its stockholders or other security holders generally, one copy of each
(if any) regular, periodic or special report (including, without limitation,
reports on forms 10-K, 10-Q and 8-K), registration statement or prospectus filed
by any Loan Party with any securities exchange or the Securities and Exchange
Commission or any
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successor agency and one copy of each press release or other statement made by
any Loan Party to the public containing material developments relating to its
business, operations or prospects;
(h) Insurance. Within 60 days prior to the end of each fiscal year of
the Borrower, a report in form and substance reasonably satisfactory to the
Administrative Agent summarizing all material insurance coverage maintained by
the Loan Parties as of the date of such report and all material insurance
coverage planned to be maintained by such Persons in the subsequent fiscal year;
(i) Plan Information. From time to time, as reasonably requested by the
Administrative Agent or any Lender, such books, records and other documents
relating to any Pension Plan as the Administrative Agent or any Lender shall
specify; prior to any termination, partial termination or merger of a Pension
Plan covering employees of any Loan Party or any of its ERISA Affiliates, or a
transfer of assets of a Pension Plan covering employees of any Loan Party or any
of its ERISA Affiliates, written notification thereof; promptly upon any Loan
Party's receipt thereof, a copy of any determination letter or advisory opinion
regarding any Pension Plan received from any Governmental Authority and any
amendment or modification thereto as may be necessary as a condition to
obtaining a favorable determination letter or advisory opinion; and promptly
upon the occurrence thereof, written notification of any action requested by any
Governmental Authority to be taken as a condition to any such determination
letter or advisory opinion;
(j) Business Plan, etc. Not later than 15 days prior to the end of each
year, an update of the Business Plan in reasonable detail generally consistent
with the form and substance of the Business Plan provided to the Administrative
Agent on or before the Closing Date, which update shall reflect the
corresponding information for the prior year;
(k) Permitted Third-Party Expenses Borrowing Base Reports. As soon as
available and in any event within 45 days after the end of each fiscal quarter,
and, in any event concurrently with the making of each Loan hereunder and from
time to time upon the request of the Administrative Agent after the occurrence
of a Default, a Permitted Third-Party Expenses Borrowing Base Report duly
completed; provided, however, no Permitted Third-Party Expenses Borrowing Base
Report shall be required to be delivered with respect to the Permitted
Third-Party Expenses Borrowing Base at any time after six months after the
termination of the later to occur of the Tranche B Commitment Termination Date
or the Tranche C Commitment Termination Date;
(l) Management Letters. Promptly upon each receipt thereof by any Loan
Party, a copy of any management letter or other written report submitted to such
Person by independent certified public accountants with respect to the business,
condition (financial or otherwise), operations, prospects or Properties of any
such Person;
(m) Reports to Other Creditors. Promptly after the furnishing thereof,
a copy of any financial or other material statement or report furnished by any
Loan Party to any other party pursuant to the terms of any indenture, loan,
stock purchase or credit or similar agreement and not otherwise required to be
furnished to the Administrative Agent and the Lenders pursuant to any other
clause of this Section 8.1;
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(n) Notice of Material Adverse Effect. Within three Business Days after
any Loan Party becomes aware thereof, written notice of any matter that could
reasonably be expected to have a Material Adverse Effect;
(o) Environmental Assessments and Notices. Promptly after the receipt
thereof, a copy of each environmental assessment (including any analysis
relating thereto) prepared with respect to any Property of any Loan Party and
each notice sent by any Governmental Authority relating to any failure or
alleged failure to comply with any Environmental Law or any liability with
respect thereto;
(p) Notices Under Sprint Agreements. Promptly after the receipt by any
Loan Party and promptly after the delivery by any Loan Party, a copy of each
written notice delivered under any Sprint Agreement which notice (i) relates to
an "Event of Termination" as defined in the Sprint Management Agreement, (ii)
relates to the FCC or a PCS License or is delivered in connection with Section
2.2 (Compliance with Regulatory Rules) or Section 16 of the Sprint Management
Agreement (Regulatory Compliance), (iii) relates to a dispute resolution
proceeding under Section 16 of the Sprint Management Agreement (Dispute
Resolution), (iv) relates to performance or status of completion of the
Build-out Plan, or (v) otherwise relates to matter under the Sprint Agreements
which could give rise to Material Adverse Effect [UPDATE?];
(q) Quarterly Performance Statistics. As soon as available and in any
event within 45 days after the end of each fiscal quarter, a summary of (i) the
number of cell sites constructed during such fiscal quarter, (ii) the total
number of Wireless Subscribers as of the end of such fiscal quarter, (iii) the
number of Wireless Subscribers acquired and terminated during such fiscal
quarter, (iv) the average monthly charges billed to Wireless Subscribers during
such fiscal quarter, (v) the average number of minutes used by Wireless
Subscribers per month during such fiscal quarter and (vi) such other performance
statistics as the Administrative Agent or any Lender may from time to time
reasonably request;
(r) Operating Subsidiary Equity. As soon as available and in any event
within 45 days after the end of each fiscal quarter, a report identifying the
aggregate amount of all Loan proceeds contributed as equity capital to each
Operating Subsidiary or invested in, advanced to or otherwise used by each
Operating Subsidiary.
(s) Accounts Receivable and Payable. As soon as available and in any
event within 45 days after the end of each fiscal quarter, an aged trial balance
of all then-existing Receivables and all then existing accounts payable of each
Loan Party, provided, however, that, with respect to Receivables of the Borrower
or an Operating Subsidiary collected by Sprint PCS, the Borrower may promptly
deliver to the Administrative Agent a copy of the information relating thereto
delivered by Sprint PCS to the Borrower or such Operating Subsidiary and such
delivery shall satisfy the requirements of this clause (s) relating to such
Receivables;
(t) Accountant's Letter. On or before the Closing Date, a letter from
Holdings and the Borrower authorizing their independent public accountants to
communicate with the Administrative Agent and the Lenders and acknowledging
reliance with the Administrative Agent and the Lenders on past, present and
future financial statements; and
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(u) General Information. Promptly, such other business, financial,
corporate affairs and other similar information concerning any Loan Party and/or
any Collateral as the Administrative Agent or any Lender may from time to time
reasonably request.
Section 8.2 Maintenance of Existence; Conduct of Business. Each of the
Loan Parties will preserve and maintain its entity existence and all of its
leases, privileges, licenses, Permits, franchises, qualifications, Intellectual
Property, intangible Property and rights that are necessary or appropriate in
the ordinary course of its business, except to the extent that failure to
preserve or maintain the same could not reasonably be expected to have a
Material Adverse Effect. Without limiting the generality of the foregoing, each
of the Borrower and its Operating Subsidiaries (a) has entered into, or will
timely enter into, such long-distance carrier and interconnection agreements (or
agreements with third parties, such as the Sprint Agreements, which provide such
long-distance carrier and interconnection rights indirectly) as are, at any time
of determination, then necessary to the conduct of its business in accordance
with the Business Plan and (b) will conduct its business generally in accordance
with the Business Plan, in each case except to the extent that the failure to do
so could not reasonably be expected to cause a Material Adverse Effect. Each of
the Loan Parties will conduct its business in an orderly and efficient manner in
accordance with good business practices and the Business Plan.
Section 8.3 Maintenance of Properties and Permits. Each of the Loan
Parties will maintain, keep and preserve all of its Properties and Permits
necessary in the proper conduct of its businesses in good repair, working order
and condition (ordinary wear and tear excepted) and make all necessary repairs,
renewals and replacements and improvements thereof.
Section 8.4 Taxes and Claims. Each of the Loan Parties will pay or
discharge before becoming delinquent (a) all taxes, levies, assessments and
governmental charges imposed on it or its income or profits or any of its
Property and (b) all lawful claims for labor, material and supplies, which, if
unpaid, might become a Lien upon any of its Property; provided, however, that
none of the Loan Parties shall be required to pay or discharge any tax, levy,
assessment or governmental charge, or claim for labor, material or supplies,
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings being diligently pursued and for which adequate reserves
have been established under GAAP.
Section 8.5 Insurance.
(a) Each of the Loan Parties will keep insured by financially sound and
reputable insurers all Property of a character usually insured by responsible
entities engaged in the same or a similar business similarly situated against
loss or damage of the kinds and in the amounts customarily insured against by
such corporations or entities and carry such other insurance as is usually
carried by such corporations or entities, provided that in any event each of the
Loan Parties (if and to the extent that it has Properties that are capable of
being covered by the following insurance) will maintain:
(i) Property Insurance. Insurance against loss or damage
covering substantially all of the tangible real and personal Property
(including, without limitation, the Service Area Network and related
equipment) and improvements of such Person by reason of any Peril (as
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defined below) in such amounts (subject to any deductibles as shall be
satisfactory to the Administrative Agent) as shall be reasonable and
customary and sufficient to avoid the insured named therein from
becoming a co-insurer of any loss under such policy, but in any event
in such amounts as are reasonably available as determined by the
Borrower's independent insurance broker reasonably acceptable to the
Administrative Agent.
(ii) Automobile Liability Insurance for Bodily Injury and
Property Damage. Insurance in respect of all vehicles (whether owned,
hired or rented by such Person) at any time located at, or used in
connection with, its Properties or operations against liabilities for
bodily injury and Property damage in such amounts as are then customary
for vehicles used in connection with similar Properties and businesses,
but in any event to the extent required by applicable law.
(iii) Comprehensive General Liability Insurance. Insurance
against claims for bodily injury, death or Property damage occurring
on, in or about the Property (and adjoining streets, sidewalks and
waterways) of such Person, in such amounts as are then customary for
Property similar in use in the jurisdictions where such Properties are
located.
(iv) Worker's Compensation Insurance. Worker's compensation
insurance (including employers' liability insurance) to the extent
required by applicable law, which may be self-insurance to the extent
permitted by applicable law.
Without limiting the generality of the foregoing, the Borrower and its
Subsidiaries shall purchase and maintain in effect all-risk, property and
casualty insurance (including casualty insurance covering earthquake and flood
damage) covering all tangible, real and personal Property (including, without
limitation, the Service Area Network and Nortel Networks Equipment and related
equipment) and liability insurance covering the operations of the Borrower and
its Subsidiaries, in each case in such amounts (not to exceed the greater of
original cost or fair market value) and as otherwise reasonably acceptable to
the Administrative Agent and the Required Lenders. Such insurance shall be
written by financially responsible companies selected by the Borrower and having
an A.M. Best Rating of "A- " or better and being in a financial size category of
"VI" or larger, or by other companies reasonably acceptable to the
Administrative Agent. Each policy referred to in this Section 8.5 shall name the
Administrative Agent (for the benefit of itself and the other Lenders) as loss
payee (with respect to casualty insurance policies) and additional insured (with
respect to liability insurance policies) and shall provide that it will not be
canceled, amended or reduced except after not less than 30 days' prior written
notice to the Administrative Agent and shall also provide that the interests of
the Administrative Agent and the Lenders shall not be invalidated or reduced by
any act, omission or negligence of the Borrower or any of its Subsidiaries. The
Borrower will advise the Administrative Agent promptly of any policy
cancellation, reduction or amendment. For purposes hereof, the term "Peril"
shall mean, collectively, fire, lightning, flood, windstorm, hail, explosion,
riot and civil commotion, vandalism and malicious mischief, damage from
aircraft, vehicles and smoke and other perils covered by the "all-risk"
endorsement then in use in the jurisdictions where the Properties of the Loan
Parties are located.
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(b) Each of the Loan Parties will cause each Insurance Recovery (other
than any portion of an Insurance Recovery payable to a landlord to repair or
replace Property leased by the Borrower or any of its Subsidiaries) payable by
any insurance company to be deposited promptly with the Administrative Agent as
security for the Obligations if a Default has then occurred and is continuing,
and will promptly pay all Insurance Recoveries to the Administrative Agent for
application against the Obligations if and to the extent required in accordance
with Section 2.7(a).
(c) If a Default shall have occurred and be continuing, each of the
Loan Parties will cause all proceeds of insurance paid on account of the loss of
or damage to any Property of any Loan Party and all awards of compensation for
any Property of any Loan Party taken by condemnation or eminent domain to be
promptly paid directly to the Administrative Agent to be applied against or held
as security for the Obligations, at the election of the Administrative Agent and
the Required Lenders.
Section 8.6 Inspection Rights. Each of the Loan Parties will permit
representatives and agents of the Administrative Agent and each Lender, during
normal business hours and upon reasonable notice to the Borrower, to examine,
copy and make extracts from its books and records, to visit and inspect its
Properties and to discuss its business, operations and financial condition with
its officers and independent certified public accountants. Each of the Loan
Parties will authorize its accountants in writing (with a copy to the
Administrative Agent) to comply with this Section 8.6. The Administrative Agent
or its representatives may, at any time and from time to time at the Borrower's
expense, conduct field exams to verify the Permitted Third-Party Expenses
Borrowing Base and for such other purposes as the Administrative Agent may
reasonably request, provided, however, that such exams shall be at the
Borrower's expense only if a Default has then occurred and is continuing.
Without limiting the generality of the foregoing, the Administrative Agent may
retain outside auditors to evaluate and monitor Permitted Third-Party Expenses
Borrowing Base Reports, inventory valuations and other matters relevant to the
determination of the Permitted Third-Party Expenses Borrowing Base, all at the
expense of Borrower after the occurrence and during the continuance of a
Default.
Section 8.7 Keeping Books and Records. Each of the Loan Parties will
maintain appropriate books of record and account in accordance with GAAP
consistently applied in which true, full and correct entries will be made of all
their respective dealings and business affairs. If any changes in accounting
principles from those used in the preparation of the financial statements
referenced in Section 8.1 are hereafter required or permitted by GAAP and are
adopted by the Borrower with the concurrence of its independent certified public
accountants and such changes in GAAP result in a change in the method of
calculation or the interpretation of any of the covenants, standards or terms
contained in this Agreement, the Loan Parties and the Required Lenders agree to
amend any such affected terms and provisions so as to reflect such changes in
GAAP with the result that the criteria for evaluating the financial condition or
performance of the Loan Parties shall be the same after such changes in GAAP as
if such changes in GAAP had not been made.
Section 8.8 Compliance with Laws. Each of the Loan Parties will comply
with all Governmental Requirements applicable to the operation of its business
(including, without limitation, the Communications Act, any rule or regulation
of the FCC or any rule or regulation of any state
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public utility commission), except for instances of noncompliance that could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
Section 8.9 Compliance with Agreements. Each of the Loan Parties will
comply with all agreements, documents and instruments binding on it or affecting
its Properties or business, including, without limitation, all Material
Contracts, except for instances of noncompliance that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 8.10 Further Assurances. Each of the Loan Parties will execute
and deliver such further agreements, documents and instruments (including,
without limitation, financing statements and amendments to financing statements
specifying each item of the Collateral and the serial number therefor) and take
such further action as may be reasonably requested by the Administrative Agent
to carry out the provisions and purposes of this Agreement and the other Loan
Documents, to evidence the Obligations and to create, preserve, maintain and
perfect the Liens of the Administrative Agent for the benefit of itself and the
Lenders in and to the Collateral and the required priority of such Liens. Each
of the Loan Parties will make available to the Administrative Agent appropriate
personnel reasonably necessary to discuss the Business Plan and any updates
thereto and other information to be provided to the Administrative Agent in
accordance with Section 8.1.
Section 8.11 ERISA. Each of the Loan Parties will, and will cause each
of their respective ERISA Affiliates to, comply with all minimum funding
requirements and all other material requirements of ERISA so as not to give rise
to any material liability thereunder.
Section 8.12 Interest Rate Protection. The Borrower will, commencing on
or before the thirtieth (30th) day after the Closing Date, maintain in full
force and effect through the Maturity Date one or more Interest Rate Protection
Agreements reasonably satisfactory to the Administrative Agent with one or more
of the Lenders or Affiliates of the Lenders or with other counterparties
reasonably acceptable to the Administrative Agent, which Lenders or Affiliates
or other counterparties shall in each case be rated in one of the two of the
highest rating categories of Standard & Poor's Corporation or Moody's Investors
Services, Inc. and otherwise reasonably acceptable to the Administrative Agent,
that enable the Borrower, for a period of the lesser of three years or six
months after the Maturity Date, to fix or place a limit upon a rate of interest
with respect to not less than an aggregate notational amount (not less than
zero) equal to fifty percent (50%) of the aggregate principal amount of the
Total Debt that does not have a fixed interest rate.
Section 8.13 Sprint Agreements. Each of the Loan Parties will comply
with all provisions of each Sprint Agreement except to the extent that such
noncompliance may have been waived or cured within the applicable grace period
(if any) set forth in such Sprint Agreement.
Section 8.14 Non-Consolidation. Each of the Loan Parties will: (a)
maintain entity records and books of account separate from those of any other
entity which is an Affiliate of such Loan Party; (b) not commingle its funds or
assets with those of any other entity which is an Affiliate of such Loan Party;
and (c) provide that its board of directors or other analogous governing body
will hold all appropriate meetings to authorize and approve such Person's entity
actions, which meetings will be separate from those of other Loan Parties.
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Section 8.15 Year 2000 Compliance. Except as may be set forth in
Schedule 8.15 and except for instances of noncompliance that the Borrower
believes could not, individually or in the aggregate, reasonably be expected to
cause a Material Adverse Effect, each of the Loan Parties will take commercially
reasonable efforts to determine that all of the material computer software,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized or software systems that are used or
relied upon by any Loan Party in the conduct of its business is and will
continue to be Year 2000 Compliant and, without limiting the generality of the
foregoing, will not malfunction, will not cease to function, will not generate
incorrect data and will not produce incorrect results when processing, providing
or receiving (a) date-related data into and between the twentieth and
twenty-first centuries and (b) date-related data in connection with any valid
date in the twentieth and twenty-first centuries. Each of the Loan Parties will
promptly notify the Administrative Agent in the event it discovers or determines
that any computer application (including those of its suppliers and vendors)
that is material to any Loan Party's business and operations will not be Year
2000 Compliant on a timely basis.
Section 8.16 Trade Accounts Payable. Each of the Loan Parties will pay
all trade accounts payable before the same become more than 90 days past due,
except (a) trade accounts payable contested in good faith or (b) trade accounts
payable in an aggregate amount not to exceed $100,000 at any time outstanding
and with respect to which no proceeding to enforce collection has been commenced
or, to the knowledge of such Loan Party, threatened.
Section 8.17 Delivery of Certain Amendments and Material Contracts.
Each of the Loan Parties will promptly deliver to the Administrative Agent any
amendment, modification, or supplement to (a) the certificate of incorporation,
articles of incorporation, certificate of formation, certificate of
organization, partnership agreement, regulations, bylaws or other constitutional
documents of any Loan Party, (b) the Sprint Agreements, or (c) any other
Material Contract to which it is a party or any Permit which it possesses;
provided, however, that any such amendment, modification or supplement to be
subject to the provisions of Section 9.15 hereof. With respect to each Material
Contract (other than purchase orders entered into in the ordinary course of
business) of any Loan Party entered into after the Closing Date, the Borrower
will deliver to the Administrative Agent a complete and current copy of such
Material Contract in a reasonably prompt fashion after the creation thereof.
Section 8.18 Ownership of Borrower-Owned Operating Assets. The Borrower
or an Operating Subsidiary of the Borrower will have, at all times, good legal
title of all the Borrower- Owned Operating Assets subject to no Lien other than
Permitted Liens.
Section 8.19 Observation Rights. Until such time as the earlier to
occur of (a) Nortel Networks no longer holds any Loans or Commitments hereunder
or (b) the Debt Service Coverage Ratio of the Borrower or its Consolidated
Subsidiaries has equaled or exceeded 1.00 to 1.00 (if calculated prior to the
Amortization Commencement Date, determined on a pro forma basis as if the
Amortization Commencement Date had occurred four fiscal quarters prior to such
date of calculation) for a period of four consecutive fiscal quarters, the
Borrower and/or Holdings shall give Nortel Networks notice of each meeting of
the Board of Directors of Holdings and each meeting of any committee of the
Board of Directors of Holdings not less than ten Business Days prior to the
dates
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of any such meetings and allow a Person designated by Nortel Networks to serve
as an observer (the "Observer") who may attend all such meetings of the Board of
Directors of Holdings and any committee of the Board of Directors of Holdings.
The Observer will not be a director, nor entitled to vote on any matter
submitted to the Board of Directors of Holdings (or any committee of such
board), and will have no rights, duties, liabilities or obligations of a
director. The Observer may be excused at the request of a majority of the
directors present at any such meetings for discussions involving sensitive
information regarding competitors of Nortel Networks or Nortel Networks itself.
The Observer may share any information gained from presence at such meetings
with the employees, officers, directors, attorneys and advisors of Nortel
Networks who have a need to know such information in the performance of their
duties (collectively, the "Representatives"), but such information shall
otherwise be kept confidential by Nortel Networks and its Representatives to the
same extent that financial information with regard to Holdings is required to be
kept confidential in accordance with the terms of this Agreement.
Section 8.20 Contributions to the Equity Capital of the Borrower. In
the event of the issuance of any Holdings Senior Notes, Holdings shall, and the
Borrower shall cause Holdings to, substantially concurrently with the issuance
of the Holdings Senior Notes, contribute at least $75,000,000 of the Net
Proceeds of the issuance of the Holdings Senior Notes to the Borrower as
additional equity capital in a manner reasonably satisfactory to the
Administrative Agent.
ARTICLE 9
Negative Covenants
Each of the Borrower, Holdings and each Operating Subsidiary hereby
covenants and agrees that, as long as the Obligations or any part thereof are
outstanding or any Lender has any Commitment hereunder, it will perform and
observe, or cause to be performed and observed, the following covenants:
Section 9.1 Debt. The Borrower and the Operating Subsidiaries will not,
and will not permit any Subsidiary of the Borrower to, incur, create, assume or
permit to exist any Debt, except:
(a) Debt to the Lenders pursuant to the Loan Documents;
(b) intercompany Debt between or among the Borrower and any of its
Operating Subsidiaries or Wholly-Owned Subsidiaries incurred in the ordinary
course of business (including, without limitation, Debt owed by the Operating
Subsidiaries or Wholly-Owned Subsidiaries of the Borrower to the Borrower in
connection with loans of proceeds of the Loans made by the Borrower to such
Subsidiaries, the proceeds of which loans are used for the purposes permitted by
Section 2.10), subject to the following requirements: any and all of the Debt
permitted pursuant to this Section 9.1(b) shall be unsecured, shall be evidenced
by instruments satisfactory to the Administrative Agent which will be pledged to
the Administrative Agent for the benefit of the Administrative Agent and the
Lenders and, if payable by the Borrower, shall be subordinated to the
Obligations pursuant to a subordination agreement in form and substance
satisfactory to the Administrative Agent, provided, however, that temporary
advances made from time to time in the ordinary course of
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business not to exceed $100,000 in aggregate principal amount at any time owing
by any Operating Subsidiary or Wholly-Owned Subsidiary of the Borrower to the
Borrower shall not be required to be so evidenced, pledged or subordinated;
(c) unsecured Debt under the Interest Rate Protection Agreements
required to be maintained by Section 8.12, provided, however, that Debt
thereunder may be secured if such Debt constitutes a part of the Obligations;
(d) (i) existing Debt in the principal amounts and as otherwise
described on Schedule 7.10 hereto and renewals, extensions or refinancings of
such Debt which do not increase the outstanding principal amount of such Debt,
which do not shorten the maturity of any principal of such Debt and the terms
and provisions of which are not materially more onerous than the terms and
conditions of such Debt on the Closing Date, (ii) purchase money Debt (including
Capital Lease Obligations) secured by purchase money Liens, which Debt and Liens
are permitted under and meet all of the requirements of clause (g) of the
definition of Permitted Liens contained in Section 1.1, and (iii) additional
unsecured Debt; provided, however, that the aggregate principal amount of the
Debt referred to in this Section 9.1(d) shall not exceed $15,000,000 in
aggregate amount at any time outstanding;
(e) liabilities of the Borrower in respect of unfunded vested benefits
under any Plan if and to the extent that the existence of such liabilities will
not constitute, cause or result in a Default; and
(f) Debt of the Borrower and its Subsidiaries to the Trustee and the
Noteholders under (and evidenced and governed by) the Subordinated Guarantees;
provided, however, that such debt may not be initially incurred (and the
Holdings Senior Notes may not be issued) after August 1, 2000.
Section 9.2 Limitation on Liens. None of the Loan Parties will (a)
incur, create, assume or permit to exist any Lien upon any of its Property or
revenues, whether now owned or hereafter acquired, except Permitted Liens or (b)
enter into any negative pledge or similar arrangement in favor of other
creditors, other than such negative pledge or similar arrangement (i) in favor
of the Administrative Agent and the Lenders under the Loan Documents, (ii)
approved by the Administrative Agent and the Required Lenders and contained in
the Holdings Senior Notes Indenture, (iii) relating to the Capital Stock of
Unrestricted Subsidiaries required by creditors of such Unrestricted
Subsidiaries in connection with Debt incurred by them, or (iv) if and to the
extent that such purchase money Debt and Capital Lease Obligations are permitted
hereunder, in favor of other creditors under purchase money Debt and Capital
Lease Obligations with respect to the assets financed or secured thereby.
Section 9.3 Mergers, Etc. None of the Loan Parties will (a) become a
party to a merger or consolidation, (b) wind-up, dissolve or liquidate itself,
or (c) purchase or acquire all or a material or substantial part of the business
or Properties of any Person (except for Investments permitted under Section
9.5); provided, however, that any Subsidiary of the Borrower, other than an
Operating Subsidiary, may merge with and into the Borrower or an Operating
Subsidiary of the Borrower if the Borrower or an Operating Subsidiary of the
Borrower is the surviving entity, provided that no consideration is given by the
surviving entity in such merger other than the issuance of any Capital
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Stock of the surviving entity and such Capital Stock is pledged to the
Administrative Agent, on behalf of the Administrative Agent and Lenders, as
security for the Obligations pursuant to Section 9.6. The surviving entity in
any such merger shall ratify the Security Documents and other obligations of the
non-surviving entity under the Loan Documents.
Section 9.4 Restricted Payments. The Borrower and the Operating
Subsidiaries will not, and will not permit any Subsidiary of the Borrower to,
make any Restricted Payments, except:
(a) Subsidiaries of the Borrower may make Restricted Payments to the
Borrower, and Subsidiaries of the Borrower may pay pro rata dividends or (in the
case of entities other than corporations) equivalent distributions to the
holders of their Capital Stock on the basis of the respective ownership
interests of such holders in such Subsidiaries;
(b) each of the Subsidiaries of the Borrower that are pass-through
entities for U.S. federal income tax purposes may pay dividends or (in the case
of entities other than corporations) equivalent distributions to the holders of
its Capital Stock in an aggregate amount not to exceed the U.S. federal income
tax liabilities of such holders that is directly attributable to their income
derived from such Subsidiary;
(c) commencing on or after __________, [2005] (but not prior thereto),
if and to the extent permitted by applicable law, the Borrower may declare and
pay dividends to Holdings during any fiscal year in an aggregate amount not to
exceed the accrued interest on the Holdings Senior Notes required to be paid in
cash in accordance with the Holdings Senior Notes Indenture and actually paid in
cash by Holdings, provided, however, that the entirety of the proceeds of such
dividends must be used, substantially concurrently with the payment of such
dividends by the Borrower, by Holdings to pay the same amount of accrued
interest on the Holdings Senior Notes required to be paid in accordance with the
Holdings Senior Notes Indenture, and actually paid, by Holdings in cash (and no
such dividends may be paid by the Borrower to Holdings more than 30 days prior
to the applicable date upon which such accrued interest is required to be paid
and is actually paid by Holdings or in amounts exceeding the amounts of such
accrued interest required to be paid and actually paid by Holdings in cash);
(d) commencing on or after ___________, [2005] (but not prior thereto),
if and to the extent permitted by applicable law, the Borrower may declare and
pay dividends to Holdings during any fiscal year in an aggregate amount not to
exceed 50% of Excess Cash Flow for the fiscal year then most recently ended,
provided, however, that the entirety of the proceeds of such dividends must be
used, substantially concurrently with the payment of such dividends by the
Borrower, by Holdings to pay a redemption price of the same amount actually paid
by Holdings in cash in connection with an optional redemption of the Holdings
Senior Notes in accordance with Section ____ of the Holdings Senior Notes
Indenture (and no such dividends may be paid by the Borrower to Holdings more
than 30 days prior to the applicable date upon which such redemption payments
are actually paid by Holdings or in amounts exceeding the amounts of such
redemption payments actually paid by Holdings in cash); and
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(e) the Borrower and its Subsidiaries may make temporary loans or
advances to employees, officers and directors of the Loan Parties in the
ordinary course of business that do not exceed $200,000 in aggregate amount at
any time outstanding;
provided, however, that no Restricted Payments may be made pursuant to clause
(a), clause (b) or clause (c) preceding if a Default exists at the time of such
Restricted Payment or would result therefrom.
Section 9.5 Investments. None of the Loan Parties will make or permit
to remain outstanding any advance, loan, extension of credit or capital
contribution to or investment in any Person, or purchase or own any stock,
bonds, notes, debentures or other securities of any Person, or be or become a
joint venturer with or partner of any Person (all such transactions being herein
called "Investments"), except:
(a) Investments in obligations or securities received in settlement of
debts (created in the ordinary course of business) owing to a Loan Party;
(b) existing Investments identified on Schedule 9.5 hereto;
(c) Investments in securities issued or guaranteed by the U.S. or any
agency thereof with maturities of one year or less from the date of acquisition;
(d) Investments in certificates of deposit and Eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any Lender or with any domestic commercial bank
having capital and surplus in excess of $500,000,000;
(e) Investments in repurchase obligations with a term of not more than
seven days for securities of the types described in clause (c) preceding with
any Lender or with any domestic commercial bank having capital and surplus in
excess of $500,000,000;
(f) Investments in commercial paper of a domestic issuer rated A-1 or
better or P-1 or better by Standard & Poor's Corporation or Moody's Investors
Services, Inc., respectively, maturing not more than 270 days from the date of
acquisition;
(g) (i) Investments (other than intercompany Debt referred to in clause
(h) below) by Holdings in its Subsidiaries and by the Borrower in its
Subsidiaries, in each case existing on the Closing Date or required to occur in
accordance with this Agreement, (ii) Investments made by Holdings in the
Borrower, including, without limitation, contributions to the equity capital of
the Borrower required to be made by Holdings pursuant to this Agreement, (iii)
Investments by Holdings in its Unrestricted Subsidiaries, and (iv) additional
Investments by the Borrower in its Subsidiaries made after the Closing Date in
an aggregate amount not to exceed $1,000,000 with respect to all Subsidiaries
other than the Operating Subsidiaries;
(h) intercompany Debt permitted pursuant to Section 9.1(b);
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(i) Interest Rate Protection Agreements permitted by Section 9.1; or
(j) temporary loans or advances to employees, officers and directors of
the Loan Parties in the ordinary course of business that do not exceed $200,000
at any time outstanding in aggregate amount;
provided, however, that no Investments may be made by any Loan Party pursuant to
subclause (iii) or (iv) of clause (g) or clause (h) preceding if a Default
exists at the time of such Investment or would result therefrom. Furthermore,
Holdings and the Borrower agree that Holdings will not own, directly or
indirectly, any Subsidiary of Holdings other than (i) the Borrower and the
Subsidiaries of the Borrower and (ii) Unrestricted Subsidiaries of Holdings.
Section 9.6 Limitation on Issuance of Capital Stock. The Borrower and
the Operating Subsidiaries will not, and will not permit any Subsidiary of the
Borrower to, at any time issue, sell, assign or otherwise dispose of (a) any of
its Capital Stock, (b) any securities exchangeable for or convertible into or
carrying any rights to acquire any of its Capital Stock, or (c) any option,
warrant or other right to acquire any of its Capital Stock, in each case to any
Person other than Holdings (with respect to the Capital Stock of the Borrower)
or the Borrower (with respect to Capital Stock of the Subsidiaries of the
Borrower). All such Capital Stock, securities, options, warrants and other
rights issued, sold, assigned or otherwise disposed of shall be, and shall
continue to be, subject to a perfected, first priority Lien in favor of the
Administrative Agent as security for the payment and performance of the
Obligations.
Section 9.7 Transactions with Affiliates. None of the Loan Parties will
enter into any transaction, including, without limitation, the purchase, sale or
exchange of Property or the rendering of any service, with any Affiliate of the
Borrower or other Loan Party except in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's or such other Loan Party's (as
applicable) business and upon fair and reasonable terms no less favorable to the
Borrower or such other Loan Party (as applicable) than would be obtained in a
comparable arms-length transaction with a Person not an Affiliate of the
Borrower or such other Loan Party (as applicable); provided, however, that
transactions between or among the Borrower and its Affiliates may be on terms
more favorable to the Borrower than would be obtained in a comparable
arms-length transaction with a Person not an Affiliate of the Borrower. In
addition to the foregoing, no transactions between or among (a) Affiliates of
the Borrower and (b) the Borrower and its Subsidiaries relating to the purchases
of equipment from any such Affiliate or the provision of services by any such
Affiliate for the Service Area Network shall be permitted unless the same are
purchased or provided at the cost to such Affiliate.
Section 9.8 Disposition of Property. The Borrower and the Operating
Subsidiaries will not, and will not permit any Subsidiary of the Borrower to,
sell, lease, assign, transfer or otherwise dispose of any of its Property
(including, without limitation, the Nortel Networks Goods and Services and the
Borrower-Owned Operating Assets) except that the following are permitted if (but
only if) no Event of Default has occurred and is continuing:
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(a) dispositions of Inventory (other than equipment) in the ordinary
course of business, and expenditures of money (including, without limitation,
money held in deposit accounts) (i) made in the ordinary course of business or
(ii) for the purpose of making Restricted Payments expressly permitted in
accordance with this Agreement or Investments expressly permitted in accordance
with this Agreement;
(b) Asset Dispositions of Property, other than accounts and
Receivables, by made in the ordinary course of business if each of the following
conditions has been satisfied: (i)(A) the Net Proceeds from any single Asset
Disposition or series of related Asset Dispositions in any calendar year do not
exceed $500,000 and (B) the Loan Party disposing of such Property receives fair
consideration for such assets (unless the transfers of such Property and the
beneficiary of such bargain Asset Disposition is the Borrower) and (ii) no
Default exists at the time of or will result from such Asset Disposition;
(c) Asset Dispositions of Property by the Borrower to any Operating
Subsidiary of the Borrower or by any Operating Subsidiary of the Borrower to the
Borrower or another Operating Subsidiary of the Borrower, in each case if each
of the following conditions has been satisfied: (i) the assets sold, disposed of
or otherwise transferred to such Operating Subsidiary or the Borrower shall
continue to be subject to a perfected, first priority Lien (except for Permitted
Liens, if any, which are expressly permitted by the Loan Documents to have
priority over the Liens in favor of the Administrative Agent) in favor of the
Administrative Agent and the Lenders, and (ii) no Default exists at the time of
or will result from such Asset Disposition; and
(d) dispositions of Property no longer used or useful in the ordinary
course of business, including, without limitation, dispositions of equipment
being exchanged or replaced with comparable or better equipment;
provided, however, that, except to the limited extent expressly permitted in
clauses (b) and (d) of this Section 9.8, the Borrower and its Operating
Subsidiaries may not sell, lease, assign, transfer or otherwise dispose of the
Service Area Network (including, without limitation, the Nortel Networks
Equipment and the Nortel Networks Software) or the "Operating Assets" as such
term is defined or used in the Sprint Management Agreement pursuant to the
Sprint Agreements or otherwise unless the Obligations are paid in full and all
Commitments have terminated or expired.
Section 9.9 Sale and Leaseback. None of the Loan Parties will enter
into any arrangement with any Person pursuant to which it leases from such
Person real or personal Property that has been or is to be sold or transferred,
directly or indirectly, by it to such Person; provided, however, that the
Borrower and its Operating Subsidiaries may enter into such sale/leaseback
transactions with respect to towers pursuant to which the aggregate amount of
rent payable during any calendar year does not exceed $3,000,000 if the
agreements evidencing and governing such transactions have been approved by the
Administrative Agent, which approval shall not be unreasonably conditioned,
withheld or delayed.
Section 9.10 Lines of Business. None of the Borrower or any of its
Subsidiaries will (a) engage in any line or lines of business activity other
than the construction and operation of the
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Service Area Network, the performance of the Sprint Agreements and the conduct
of related telecommunications businesses described in and contemplated by the
Business Plan or (b) build-out any area other than the Service Area or engage in
operations outside the Service Area, in each case as contemplated by the
Business Plan; provided, however, that, for all purposes of this Section 9.10,
the term "Service Area," as such term is used in the definition of the term
"Service Area Network" and as such term is used in clause (b) preceding, shall
exclude all New Areas. Holdings and the Borrower agree that Holdings will not
(i) engage in any business other than the ownership of the Capital Stock of the
Borrower and the Unrestricted Subsidiaries and matters incidental thereto,
including the raising of capital, or (ii) own any material Properties or assets
other than the Capital Stock of the Borrower and the Unrestricted Subsidiaries.
Section 9.11 Environmental Protection. None of the Loan Parties will
(a) use (or permit any tenant to use) any of its Properties for the handling,
processing, storage, transportation or disposal of any Hazardous Material except
in compliance with applicable Environmental Laws, (b) generate any Hazardous
Material except in compliance with applicable Environmental Laws, (c) conduct
any activity that is likely to cause a Release or threatened Release of any
Hazardous Material in violation of any Environmental Law, or (d) otherwise
conduct any activity or use any of its Properties in any manner, that violates
or is likely to violate any Environmental Law or create any Environmental
Liabilities for which any Loan Party would be responsible, except for
circumstances or events described in clauses (a) through (d) preceding that
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 9.12 Intercompany Transactions. Except as may be expressly
permitted or required by the Loan Documents and except as may be contained in
the Holdings Senior Notes Indenture as approved by the Administrative Agent and
the Required Lenders, none of the Loan Parties will create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Subsidiary of Holdings or the Borrower to (a) pay
dividends or make any other distribution to Holdings or the Borrower or any of
their Subsidiaries in respect of such Subsidiary's Capital Stock or with respect
to any other interest or participation in, or measured by, its profits, (b) pay
any indebtedness owed to Holdings or the Borrower or any of their Subsidiaries,
(c) make any loan or advance to Holdings or the Borrower or any of their
Subsidiaries, or (d) sell, lease or transfer any of its Property to Holdings or
the Borrower or any of their Subsidiaries.
Section 9.13 Management Fees. None of the Loan Parties will pay any
management fees (other than the Sprint PCS Fees permitted to be paid in
accordance with Section 9.17).
Section 9.14 Supply Agreement. None of the Loan Parties will terminate
the Supply Agreement prior to the later to occur of the Amortization
Commencement Date or the satisfaction in full of the Borrower's purchase
commitments under the Supply Agreement.
Section 9.15 Modification of Certain Agreements. None of the Loan
Parties will consent to or implement any termination, amendment, modification,
supplement or waiver of (a) the certificate of incorporation, articles of
incorporation, certificate of formation, certificate of organization,
partnership agreement, regulations, bylaws or other constitutional documents of
any Loan Party,
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(b) the Sprint Agreements, (c) the Business Plan, (d) the Holdings Senior Notes
Indenture or the other Holdings Senior Notes Documents, or (e) any other
Material Contract to which it is a party or any Permit which it possesses;
provided, however, that the Loan Parties may amend or modify (i) the documents
referred to in clause (a) and clause (d) preceding if and to the extent that
such amendment or modification is not substantive or material and could not
reasonably be expected to be adverse to the Administrative Agent or the Lenders,
provided, however, that none of such documents referred to in clause (a)
preceding may be amended or modified as they relate to, in any way, any capital
contribution to Holdings or the Borrower or any obligation or agreement relating
thereto and (ii) the Sprint Agreements and the Material Contracts referred to in
clauses (b) and (e) preceding, respectively, if and to the extent that such
amendment or modification could not reasonably be expected to be materially
adverse to any Loan Party or the Administrative Agent or any of the Lenders.
Section 9.16 ERISA. None of the Loan Parties will:
(a) allow, or take (or permit any ERISA Affiliate to take) any action
which would cause, any unfunded or unreserved liability for benefits under any
Plan (exclusive of any Multiemployer Plan) to exist or to be created that
exceeds $200,000 with respect to any such Plan or $500,000 with respect to all
such Plans in the aggregate on either a going concern or a wind-up basis; or
(b) with respect to any Multiemployer Plan, allow, or take (or permit
any ERISA Affiliate to take) any action which would cause, any unfunded or
unreserved liability for benefits under any Multiemployer Plan to exist or to be
created, either individually as to any such Plan or in the aggregate as to all
such Plans, that could, upon any partial or complete withdrawal from or
termination of any such Multiemployer Plan or Plans, have a Material Adverse
Effect.
Section 9.17 Sprint PCS Fees. None of the Loan Parties will make any
prepayment of any Sprint PCS Fees prior to the regularly scheduled due date for
the payment of such fees.
Section 9.18 No Prepayment of Debt, Etc. None of the Loan Parties will
make any optional prepayment or distribution on account of, or voluntarily
purchase, acquire, redeem or retire, any Debt prior to 30 days before its
originally stated maturity (or its stated maturity as of the Closing Date in the
case of Debt outstanding on the Closing Date), or in the case of interest, its
stated due date, or directly or indirectly become obligated to do any of the
foregoing by amending the terms thereof or otherwise, except for:
(a) prepayments of the Loans or other Obligations pursuant to or as
permitted by the Loan Documents;
(b) prepayments of intercompany Debt referred to in clause (b) of
Section 9.1 if the obligor with respect to such Debt is a Subsidiary of the
Borrower and if the payee of such Debt is the Borrower or a parent entity of
such obligor;
(c) prepayments of the Debt referred to in clauses (ii) and (iii) of
clause (d) of Section 9.1;
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(d) prepayments made with the proceeds of new Debt incurred for the
purpose of refinancing the Debt being prepaid, provided that (i) no portion of
such new Debt matures or is required to be prepaid, purchased or otherwise
retired earlier than the corresponding portion of the Debt being prepaid
(including as a result of any prepayment or redemption upon the occurrence of a
condition), (ii) such new Debt (A) is subordinated to the Obligations to at
least the same extent as the Debt being refinanced if such Debt is subordinated
debt or (B) is permitted in accordance with this Agreement, and (iii) no Default
then exists or would result from such prepayment or refinancing;
(e) prepayments of trade payables incurred in the ordinary course of
any Loan Party's business (other than Sprint PCS Fees) and not overdue by more
than 120 days;
(f) commencing on or after _________, 2005 (but not prior thereto)
optional redemptions of the Holdings Senior Notes by Holdings in accordance with
Section ____ of the Holdings Senior Notes Indenture; of the Holdings Senior
Notes by Holdings in accordance with Section _____ of the Holdings Senior Notes
Indenture; and
(g) optional redemptions of the Holdings Senior Notes by Holdings with
the proceeds of equity offerings, other than the Holdings Public Offering, in
accordance with Section _____ of the Holdings Senior Notes Indenture.
In addition, none of the Loan Parties will prepay any rent or other obligations
under any operating lease or any other Material Contract prior to 90 days before
the originally stated due date therefor (or the due date therefor as of the
Closing Date in the case of operating leases or Material Contracts in existence
on the Closing Date).
ARTICLE 10
Financial Covenants
Section 10.1 Total Debt to Total Capitalization.
(a) Borrower. The Borrower and the Operating Subsidiaries will not
permit the ratio of (i) the Total Debt of the Borrower and its Consolidated
Subsidiaries (exclusive of the Debt to the Trustee and the Noteholders under,
and evidenced and governed by, the Subordinated Guarantees) outstanding at the
end of any of the calendar quarters set forth on Schedule 10.1 to (ii) the Total
Capitalization of the Borrower on such date, to exceed the ratio set forth
opposite such date on such Schedule.
(b) Holdings. The Loan Parties will not permit the ratio of (i) the
Total Debt of Holdings and its Consolidated Subsidiaries outstanding at the end
of any calendar quarter to (ii) the Total Capitalization of Holdings on such
date, to exceed (A) 0.75 to 1.00. at all times during which the Senior Debt of
Holdings and its Consolidated Subsidiaries is equal to or greater than 40% of
the Total Debt of Holdings and its Consolidated Subsidiaries and (B) 0.80 to
1.00 at all times during which the Senior Debt of Holdings and its Consolidated
Subsidiaries is less than 40% of the Total Debt of Holdings and its Consolidated
Subsidiaries.
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Section 10.2 Total Debt to Annualized EBITDA. The Borrower and the
Operating Subsidiaries will not permit the ratio of (a) the Total Debt of the
Borrower and its Consolidated Subsidiaries (exclusive of the Debt to the Trustee
and the Noteholders under, and evidenced and governed by, the Subordinated
Guarantees) outstanding at the end of any of the calendar quarters set forth on
Schedule 10.2 to (b) Annualized EBITDA for the calendar quarter ending on such
date, to exceed the ratio set forth opposite such date on such Schedule.
Section 10.3 Annualized EBITDA. The Borrower and the Operating
Subsidiaries will not permit Annualized EBITDA at the end of any of the calendar
quarters set forth on Schedule 10.3 to be less than the amount set forth
opposite such date on such Schedule.
Section 10.4 Fixed Charge Coverage. The Borrower and the Operating
Subsidiaries will not permit the ratio of (a) EBITDA for any of the calendar
quarters ending on any of the dates set forth on Schedule 10.4 plus cash
balances and Availability on such date to (b) Consolidated Fixed Charges for the
immediately succeeding calendar quarter, to be less than the ratio set forth
opposite such date on such Schedule.
Section 10.5 Capital Expenditures. The Borrower and the Operating
Subsidiaries will not permit cumulative Capital Expenditures for the period
beginning on January 1, 1999 and ending on any of the dates set forth on
Schedule 10.5 to exceed the amount set forth opposite such date on such
Schedule.
Section 10.6 Quarterly Minimum Revenue Levels. The Borrower and the
Operating Subsidiaries will not permit Gross Revenues for any calendar quarter
ending on any of the dates set forth on Schedule 10.6 to be less than the amount
set forth opposite such date on such Schedule.
Section 10.7 Wireless Subscribers. The Borrower and the Operating
Subsidiaries will not permit Wireless Subscribers at the end of any calendar
quarter ending on any of the dates set forth in Schedule 10.7 to be less than
the amount set forth opposite such date on such Schedule.
Section 10.8 Operating Leases. The Borrower and the Operating
Subsidiaries will not, and will not permit its Subsidiaries to, enter into or
become party to Operating Leases, other than tower leases and transport facility
leases, that in the aggregate provide for payments during any calendar year in
excess of $3,000,000. The Borrower and the Operating Subsidiaries will not, and
will not permit its Subsidiaries to, enter into or become party to Operating
Leases which are tower leases that in the aggregate provide for payments during
any calendar year in excess of $13,000,000.
ARTICLE 11
Default
Section 11.1 Events of Default. Each of the following shall be deemed an
"Event of Default":
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(a) (i) The Borrower shall fail to pay, repay or prepay when due, any
amount of principal or interest owing to the Administrative Agent or any Lender
pursuant to this Agreement or any other Loan Document, or (ii) the Borrower
shall fail to pay, within two Business Days after the due date thereof, any fee,
expense or other amount or other Obligation owing to the Administrative Agent or
any Lender pursuant to this Agreement or any other Loan Document.
(b) Any representation or warranty made or deemed made by or on behalf
of any Loan Party in any Loan Document or in any certificate, report, notice or
financial statement furnished at any time in connection with this Agreement or
any other Loan Document shall be false, misleading or erroneous in any material
respect when made or deemed to have been made.
(c) Any Loan Party shall fail to perform, observe or comply with any
covenant, agreement or term contained in Section 5.1, 8.1(e), 8.2, Article 9 or
Article 10; any Loan Party shall fail to perform, observe or comply with any
covenant, agreement or term contained in Article 5 or Section 8.1, 8.3, 8.5,
8.6, 8.7, 8.8, 8.9, 8.10, 8.13, 8.14 and 8.19, and such failure is not remedied
or waived within ten days after such failure commenced; or any Loan Party shall
fail to perform, observe or comply with any other covenant, agreement or term
contained in this Agreement or any other Loan Document (other than covenants to
pay the Obligations) and such failure is not remedied or waived within the
earlier to occur of 30 days after such failure commenced or, if a different
grace period is expressly made applicable in such other Loan Documents, such
applicable grace period.
(d) Any Loan Party or any Sprint PCS signatory to the Sprint Management
Agreement ceases to be Solvent or shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due.
(e) Any Loan Party or any Sprint PCS signatory to the Sprint Management
Agreement shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or administrator of
itself or of all or a substantial part of its Property, (ii) admit in writing
its inability to, or be generally unable to, pay its debts as such debts become
due, subject to any applicable grace periods, (iii) make a general assignment
for the benefit of its creditors, (iv) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect, the "Bankruptcy
Code"), (v) file a petition or take any other action seeking to take advantage
of any other law providing for the relief of debtors, the marshaling of assets
or relating to bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding up, or composition or readjustment of debts, (vi) fail to
controvert in a timely or appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Bankruptcy Code or
other applicable Governmental Requirement, (vii) dissolve, or (viii) take any
entity action for the purpose of effecting any of the foregoing.
(f) A proceeding or case shall be commenced, without the application or
consent of any Loan Party or any Sprint PCS signatory to the Sprint Management
Agreement, in any court of competent jurisdiction, seeking (i) the liquidation,
reorganization, dissolution, arrangement, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, examiner, liquidator, administrator or the like of it or of all or
any substantial part of its Property, or (iii) similar relief in respect of it,
under any law providing for the relief of debtors or relating to
CREDIT AGREEMENT - Page 87
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bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or
winding up, or composition or readjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days; or an order for relief shall be entered
in an involuntary case under the Bankruptcy Code against any Loan Party and
shall continue unstayed and in effect for any period of 60 consecutive days.
(g) Any Loan Party shall fail to discharge within a period of 30 days
after the commencement thereof any attachment, sequestration, forfeiture or
similar proceeding or proceedings involving an aggregate amount in excess of
$500,000 against any of its Properties.
(h) A final judgment or judgments for the payment of money in excess of
$500,000 in the aggregate shall be rendered by a court or courts against any
Loan Party on claims not covered by insurance and the same shall not be
discharged, bonded or a stay of execution thereof shall not be procured, within
30 days from the date of entry thereof and such Loan Party shall not, within
said period of 30 days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
(i) Any Loan Party shall fail to pay when due any principal of or
interest on any Debt of such Loan Party (other than the Obligations) having
(either individually or in the aggregate) a principal amount of at least
$500,000 or the maturity of any such Debt shall have been accelerated, or any
such Debt shall have been required to be prepaid prior to the stated maturity
thereof, or any event shall have occurred (and shall not have been waived or
otherwise cured) that permits (or, with the giving of notice or lapse of time or
both, would permit) any holder or holders of such Debt or any Person acting on
behalf of such holder or holders to accelerate the maturity thereof or require
any such prepayment.
(j) This Agreement or any other Loan Document shall cease to be in full
force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be successfully contested or challenged by any Loan
Party and the effect thereof shall be materially adverse to the Administrative
Agent and/or the Lenders; or any Lien created or purported to be created by the
Loan Documents shall for any reason cease to be or fail to be a valid, first
priority perfected Lien upon any of the Collateral purported to be covered
thereby.
(k) Any of the following events shall occur or exist with respect to
any Loan Party or any ERISA Affiliate: (i) any Prohibited Transaction involving
any Plan; (ii) any Reportable Event with respect to any Pension Plan; (iii) the
filing under Section 4041 of ERISA of a notice of intent to terminate any
Pension Plan or the termination of any Pension Plan; (iv) any event or
circumstance that could reasonably be expected to constitute grounds entitling
the PBGC to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any Pension
Plan, or the institution by the PBGC of any such proceedings; (v) any
"accumulated funding deficiency" (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, shall exist with respect to any Pension
Plan; or (vi) complete or partial withdrawal under Section 4201 or 4204 of ERISA
from a Multiemployer Plan or the reorganization, insolvency or termination of
any Pension Plan; and in each case above, such event or condition, together with
all other events
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or conditions, if any, have subjected or could in the reasonable opinion of
Required Lenders subject any Loan Party or any ERISA Affiliate to any tax,
penalty or other liability to a Plan, a Multiemployer Plan, the PBGC or
otherwise (or any combination thereof) which in the aggregate exceed or could
reasonably be expected to exceed $500,000.
(l) The occurrence of any breach or default by the Borrower or any
other Loan Party under the Supply Agreement (after giving effect to any grace or
cure period specified therein) which breach or default entitles Nortel Networks
to exercise a right or remedy under or in connection with the Supply Agreement.
(m) The termination of any Sprint Agreement, or the occurrence of (i)
any breach or default under any Sprint Agreement which constitutes an "Event of
Termination" as defined in the Sprint Management Agreement, or (ii) any breach
or default under the Consent and Agreement (other than a default of the
Administrative Agent) which breach or default entitles the Administrative Agent
to exercise a right or remedy under or in connection with the Consent and
Agreement.
(n) Any termination, revocation or non-renewal by the FCC of one or
more of the PCS Licenses or by Sprint PCS of any right of any Loan Party to use
any PCS Licenses, or any termination, revocation or non-renewal by any state
public utility commission of any other material Permit of any Loan Party.
(o) The occurrence of any Material Adverse Effect.
(p) The occurrence of any Change in Control.
(q) The breach by any Loan Party of, or the termination, invalidity or
unenforceability of, the Consent and Agreement.
(r) Any sale, transfer or other disposition of the Service Area Network
or any material portion thereof.
(s) If, at any time, the subordination provisions of any of the
Approved Subordinated Debt Documents shall be invalidated or shall otherwise
cease to be in full force and effect.
(t) If, at any time, any event or circumstance shall occur that gives
(i) any holder of any Approved Subordinated Debt the right to request or require
Holdings or the Borrower or any other Loan Party to redeem, purchase, repurchase
or prepay any Approved Subordinated Debt or (ii) any holder of any of the
Holdings Senior Notes the right to require Holdings to redeem, purchase,
repurchase or prepay any of the Holdings Senior Notes.
(u) The occurrence of (i) a default under (including, without
limitation, a "Default" as such term is used or defined in) any Approved
Subordinated Debt Document, unless (A) such default has been waived, cured or
consented to in accordance with such documents, (B) such default is not a
payment default, (C) the maturity of the Debt affected thereby has not been
accelerated, (D) a blockage under such Approved Subordinated Debt Document has
not been invoked, and (E) such
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waiver or consent is not made in connection with any amendment or modification
of any such Approved Subordinated Debt Documents or in connection with any
payment to the holders of any Approved Subordinated Debt, (ii) a payment default
under (including, without limitation, a payment "Default" as such term is used
or defined in) any Approved Subordinated Debt Document, (iii) an event of
default under (including, without limitation, an "Event of Default" as such term
is used or defined in) any Approved Subordinated Debt Document, or (iv) any
acceleration of the maturity of any Approved Subordinated Debt.
(v) The occurrence of any Holdings Senior Notes Event of Default or any
"Change of Control" as such term is defined in the Holdings Senior Notes
Indenture.
Section 11.2 Remedies. If any Event of Default shall occur and be
continuing, the Administrative Agent may and, if directed by the Required
Lenders, the Administrative Agent shall do any one or more of the following:
(a) Acceleration. Declare all outstanding principal of and accrued and
unpaid interest on the Loans and all other amounts payable by the Borrower or
any other Loan Party under the Loan Documents immediately due and payable, and
the same shall thereupon become immediately due and payable, without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrower and the other Loan Parties;
(b) Termination of Commitments. Terminate each of the Commitments
without notice to the Borrower or any other Loan Party;
(c) Judgment. Reduce any claim to judgment;
(d) Foreclosure. Foreclose or otherwise enforce any Lien granted to the
Administrative Agent for the benefit of the Administrative Agent and the Lenders
to secure payment and performance of the Obligations in accordance with the
terms of the Loan Documents; or
(e) Rights. Exercise any and all rights and remedies afforded by the
laws of the State of New York or any other jurisdiction, by any of the Loan
Documents, by equity or otherwise;
provided, however, that upon the occurrence of an Event of Default under Section
11.1(e) or Section 11.1(f), the Commitments of all of the Lenders shall
immediately and automatically terminate, and the outstanding principal of and
accrued and unpaid interest on the Loans and all other amounts payable by the
Borrower or any other Loan Party under the Loan Documents shall thereupon become
immediately and automatically due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, protest or other formalities of any kind, all of which are hereby
expressly waived by the Borrower and the other Loan Parties.
Section 11.3 Performance by the Administrative Agent, etc.. If the
Borrower or any other Loan Party shall fail to perform any covenant or agreement
in accordance with the terms of the Loan Documents, the Administrative Agent may
perform or attempt to perform, or may cause any Lender
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(with the consent of such Lender) to perform or attempt to perform, such
covenant or agreement on behalf of the Borrower or such other Loan Party (as
applicable). In such event, the Borrower shall, at the request of the
Administrative Agent, promptly pay any amount expended by the Administrative
Agent or the Lenders in connection with such performance or attempted
performance to the Administrative Agent at its Principal Office, together with
interest thereon at the applicable Default Rate from and including the date of
such expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that neither the
Administrative Agent nor any Lender shall have any liability or responsibility
for the performance of any obligation of the Borrower or any other Loan Party or
any other Person under this Agreement or any of the other Loan Documents.
ARTICLE 12
The Administrative Agent
Section 12.1 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Neither the Administrative Agent nor any of its
Affiliates, officers, directors, employees, attorneys or agents shall be liable
for any action taken or omitted to be taken by any of them hereunder or
otherwise in connection with this Agreement or any of the other Loan Documents
except for its or their own gross negligence or willful misconduct. Without
limiting the generality of the preceding sentence, the Administrative Agent (a)
may treat the payee of any Note as the holder thereof until the Administrative
Agent receives written notice of the assignment or transfer thereof signed by
such payee and in form satisfactory to the Administrative Agent, (b) shall have
no duties or responsibilities except those expressly set forth in this Agreement
and the other Loan Documents, and shall not by reason of this Agreement or any
other Loan Document be a trustee or fiduciary for any Lender, (c) shall not be
required to initiate any litigation or collection proceedings hereunder or under
any other Loan Document except to the extent requested by the Required Lenders,
(d) shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or any other Loan
Document, or any certificate or other document referred to or provided for in,
or received by any of them under, this Agreement or any other Loan Document, or
for the value, validity, effectiveness, enforceability or sufficiency of this
Agreement or any other Loan Document or any other document referred to or
provided for herein or therein or for any failure by any Person to perform any
of its obligations hereunder or thereunder, (e) may consult with legal counsel
(including counsel for any Loan Party), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, and (f) shall incur no liability under or in respect of
any Loan Document by acting upon any notice, consent, certificate or other
instrument or writing reasonably believed by it to be genuine and signed or sent
by the proper party or parties. As to any matters not expressly provided for by
this Agreement, the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Required Lenders, and such instructions of the
Required Lenders and any action taken or failure to act pursuant thereto shall
be
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binding on all of the Lenders; provided, however, that the Administrative Agent
shall not be required to take any action which exposes the Administrative Agent
to liability or which is contrary to this Agreement or any other Loan Document
or applicable law. The Administrative Agent shall not be deemed to have any
fiduciary relationship with any Lender or any Loan Party, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Administrative Agent.
Without limiting the generality of the foregoing, the use of the term "agent" in
this Agreement with respect to the Administrative Agent is not intended to
connote any fiduciary or other express or implied obligation arising under
agency doctrine of any applicable law; instead, such term is used merely as a
matter of market custom and is intended to create or reflect only an
administrative relationship among independent contracting parties.
Section 12.2 Rights of Administrative Agent as a Lender. With respect
to its Commitments, the Loans made by it and the Note(s) issued to it, Nortel
Networks (and any successor acting as Administrative Agent) in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, act as
trustee under indentures of, provide merchant banking services to, own
securities of, and generally engage in any kind of banking, trust or other
business with, any Loan Party or any of its Affiliates and any other Person who
may do business with or own securities of any Loan Party or any of its
Affiliates, all as if it were not acting as the Administrative Agent and without
any duty to account therefor to the Lenders. Without limiting the generality of
the foregoing, it is contemplated that (a) Nortel Networks will be the holder of
the warrants issued by Holdings and (b) Nortel Networks and/or an Affiliate of
Nortel Networks may purchase equity securities of Holdings.
Section 12.3 Defaults. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of a Default (other than the
non-payment of principal of or interest on the Loans or of commitment fees)
unless the Administrative Agent has received notice from a Lender or the
Borrower specifying such Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice of
the occurrence of a Default, the Administrative Agent shall give prompt notice
thereof to the Lenders (and shall give each Lender prompt notice of each such
non-payment). The Administrative Agent shall (subject to Section 12.1) take such
action with respect to such Default as shall be directed by the Required
Lenders, provided that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall seem advisable and in the best interest of the
Lenders.
SECTION 12.4 INDEMNIFICATION. EACH LENDER HEREBY AGREES TO INDEMNIFY
THE ADMINISTRATIVE AGENT FROM AND HOLD THE ADMINISTRATIVE AGENT HARMLESS AGAINST
(TO THE EXTENT NOT REIMBURSED UNDER SECTIONS 13.1 AND 13.2, BUT WITHOUT LIMITING
THE OBLIGATIONS OF THE BORROWER UNDER SECTIONS 13.1 AND 13.2), RATABLY IN
ACCORDANCE WITH ITS PRO RATA SHARE (CALCULATED ON THE BASIS OF ITS COMMITMENT
PERCENTAGE OF THE AGGREGATE COMMITMENTS), ANY AND
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ALL LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES),
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES,
SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND
OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST
THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY THE ADMINISTRATIVE
AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED, THAT NO LENDER
SHALL BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE EXTENT CAUSED BY THE
ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT
LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF THE LENDERS THAT THE
ADMINISTRATIVE AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS
AGAINST ALL OF SUCH LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL
LIABILITIES), OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND
DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE ADMINISTRATIVE AGENT
(EXCEPT TO THE EXTENT THE SAME ARE CAUSED BY THE ADMINISTRATIVE AGENT'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT). WITHOUT LIMITING ANY OTHER PROVISION OF THIS
SECTION 12.4, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT PROMPTLY
UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON THE BASIS OF ITS COMMITMENT
PERCENTAGE OF THE AGGREGATE COMMITMENTS) OF ANY AND ALL OUT-OF-POCKET EXPENSES
(INCLUDING ATTORNEYS' FEES) INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION
WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION,
AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS OR
OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER,
THE LOAN DOCUMENTS, TO THE EXTENT THAT THE ADMINISTRATIVE AGENT IS NOT PROMPTLY
REIMBURSED FOR SUCH EXPENSES BY THE BORROWER.
Section 12.5 Independent Credit Decisions. Each Lender agrees that it
has independently and without reliance on the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrower and the other Loan
Parties and its own decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by any Loan Party of this Agreement
or any other Loan Document or to inspect the Properties or books of any Loan
Party (or any other Person). Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
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Administrative Agent hereunder or under the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other financial information concerning the affairs,
financial condition or business of any Loan Party which may come into the
possession of the Administrative Agent or any of its Affiliates.
Section 12.6 Several Commitments. The Commitments and other obligations
of the Lenders under this Agreement are several. The default by any Lender in
making a Loan in accordance with any of its Commitments shall not relieve the
other Lenders of their obligations under this Agreement. In the event of any
default by any Lender in making any Loan, each nondefaulting Lender shall be
obligated to make its Loan but shall not be obligated to advance the amount
which the defaulting Lender was required to advance hereunder. In no event shall
any Lender be required to advance an amount or amounts with respect to any of
the Loans which would in the aggregate exceed such Lender's Commitment with
respect to such Loans. No Lender shall be responsible for any act or omission of
any other Lender.
Section 12.7 Successor Administrative Agent. Subject to the appointment
and acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving notice thereof to the
Lenders and the Borrower. Upon any such resignation, the Required Lenders will
have the right to appoint another Lender as a successor Administrative Agent. If
no successor Administrative Agent shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank organized under the laws
of the U.S. or any state thereof or of a foreign country if acting through its
U.S. branch and having combined capital and surplus of at least $100,000,000.
Upon the acceptance of its appointment as successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all rights, powers, privileges, immunities and duties of the resigning
Administrative Agent, and the resigning Administrative Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents. After any Administrative Agent's resignation as Administrative Agent,
the provisions of this Article 12 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was the
Administrative Agent. Each Administrative Agent (including each successor
Administrative Agent) agrees that, so long as it is acting as Administrative
Agent under this Agreement, it shall be a Lender under this Agreement.
ARTICLE 13
Miscellaneous
Section 13.1 Expenses. The Borrower hereby agrees, on demand, to pay or
reimburse the Administrative Agent and each of the Lenders for paying: (a) all
reasonable out-of-pocket costs and expenses of the Administrative Agent accrued
in connection with the drafting, preparation, negotiation, execution and/or
delivery of this Agreement and the other Loan Documents, and any and all
waivers, amendments, modifications, renewals, extensions and supplements of or
to the Loan Documents, and the syndication of the Commitments and the Loans,
including, without limitation,
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the reasonable fees and expenses of legal counsel (including all local counsel)
for the Administrative Agent, (b) all out-of-pocket costs and expenses of the
Administrative Agent and the Lenders in connection with any Default, the
exercise of any right or remedy and the enforcement of this Agreement or any
other Loan Document or any term or provision hereof or thereof, including,
without limitation, the fees and expenses of all legal counsel for the
Administrative Agent and/or any Lender, (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any Governmental Authority
in respect of this Agreement or any of the other Loan Documents, (d) all costs,
expenses, assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any Lien contemplated by this Agreement
or any other Loan Document, and (e) all reasonable out-of-pocket costs and
expenses incurred by the Administrative Agent in connection with due diligence,
computer services, copying, appraisals, environmental audits, collateral audits,
field exams, insurance, consultants and search reports. Notwithstanding the
foregoing provisions of this Section 13.1, the legal fees and related expenses
of counsel to the Administrative Agent shall be subject to the limitations
therefor specified in the Administrative Agent's Letter.
SECTION 13.2 INDEMNIFICATION. EACH OF THE LOAN PARTIES HEREBY JOINTLY
AND SEVERALLY AGREES TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH LENDER AND
EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES),
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES
(INCLUDING REASONABLE ATTORNEYS' AND CONSULTANTS' FEES) TO WHICH ANY OF THEM MAY
BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION OR ENFORCEMENT OF
ANY OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE EXERCISE OF ANY
FORECLOSURE RIGHT OR OTHER RIGHT OR REMEDY WHETHER OR NOT SUCH EXERCISE IS IN
COMPLIANCE WITH LAWS AFFECTING OTHER PERSONS OR RESULTS IN DAMAGES PAYABLE TO
OTHER PERSONS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS,
(C) ANY BREACH BY ANY LOAN PARTY OF ANY MATERIAL REPRESENTATION, WARRANTY,
COVENANT OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE USE
OR PROPOSED USE OF ANY LOAN, (E) THE PRESENCE, RELEASE, THREATENED RELEASE,
DISPOSAL, REMOVAL OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN
OR AFFECTING ANY OF THE PROPERTIES OF ANY LOAN PARTY OR ANY OF THEIR AFFILIATES,
EXCEPT TO THE EXTENT THAT THE LOSS, DAMAGE OR CLAIM IS THE DIRECT RESULT OF
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED, OR (F)
ANY INVESTIGATION, LITIGATION OR OTHER PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING
RELATING TO ANY OF THE FOREGOING; BUT EXCLUDING ANY OF THE FOREGOING TO THE
EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE
INDEMNIFIED. WITHOUT LIMITING ANY PROVISION OF THIS
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AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION 13.2 SHALL
BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES
(INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF SUCH PERSON. WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER TERM
OR PROVISION OF THIS AGREEMENT, THE OBLIGATIONS OF THE LOAN PARTIES UNDER THIS
SECTION 13.2 SHALL SURVIVE THE REPAYMENT OF THE LOANS AND OTHER OBLIGATIONS AND
TERMINATION OF THE COMMITMENTS.
Section 13.3 Limitation of Liability. None of the Administrative Agent,
any Lender or any Affiliate, officer, director, employee, attorney or agent
thereof shall be liable for any error of judgment or act done in good faith, or
be otherwise liable or responsible under any circumstances whatsoever (including
such Person's negligence), except for such Person's gross negligence or willful
misconduct. None of the Administrative Agent, any Lender or any Affiliate,
officer, director, employee, attorney or agent thereof shall have any liability
with respect to, and each of the Borrower and the other Loan Parties hereby
waives, releases and agrees not to sue any of them upon, any claim for any
special, indirect, incidental or consequential damages suffered or incurred by
any Loan Party or any of its Affiliates in connection with, arising out of or in
any way related to this Agreement or any of the other Loan Documents, or any of
the transactions contemplated by this Agreement or any of the other Loan
Documents. Each of the Loan Parties hereby waives, releases and agrees not to
sue the Administrative Agent or any Lender or any of their respective
Affiliates, officers, directors, employees, attorneys or agents for exemplary or
punitive damages in respect of any claim in connection with, arising out of or
in any way related to this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the other Loan
Documents.
Section 13.4 No Duty. All attorneys, accountants, appraisers and other
professional Persons and consultants retained by the Administrative Agent and
the Lenders shall have the right to act exclusively in the interest of the
Administrative Agent and the Lenders and shall have no duty of disclosure, duty
of loyalty, duty of care or other duty or obligation of any type or nature
whatsoever to any Loan Party or any of its Affiliates or any other Person.
Section 13.5 No Fiduciary Relationship. The relationship between each
Loan Party and each Lender is solely that of debtor and creditor, and neither
the Administrative Agent nor any Lender has any fiduciary or other special
relationship with any Loan Party or any of its Affiliates, and no term or
condition of any of the Loan Documents shall be construed so as to deem the
relationship between any Loan Party and any Lender, or such Affiliate and any
Lender, to be other than that of debtor and creditor. No joint venture or
partnership is created by this Agreement among the Lenders or among any Loan
Party or any of its Affiliates and the Lenders.
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Section 13.6 Equitable Relief. Each of the Loan Parties recognizes
that, in the event it fails to pay, perform, observe or discharge any or all of
the Obligations, any remedy at law may prove to be inadequate relief to the
Administrative Agent and the Lenders. Each of the Loan Parties therefore agrees
that the Administrative Agent and the Lenders, if the Administrative Agent or
the Lenders so request, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
Section 13.7 No Waiver; Cumulative Remedies. No failure on the part of
the Administrative Agent or any Lender to exercise and no delay in exercising,
and no course of dealing with respect to, any right, power or privilege under
this Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under this
Agreement or any other Loan Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided for in this Agreement and the other Loan Documents are
cumulative and not exclusive of any rights and remedies provided by law.
Section 13.8 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Neither the
Borrower nor any other Loan Party may assign or transfer any of its rights or
obligations under this Agreement or any other Loan Document without the prior
written consent of the Administrative Agent and the Lenders. Any Lender may sell
participations in all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Commitments and the Loans owing to it); provided, however, that
(i) such Lender's obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitments) shall remain unchanged, (ii)
such Lender shall remain solely responsible to the Borrower for the performance
of such obligations, (iii) such Lender shall remain the holder of its Notes for
all purposes of this Agreement, (iv) the Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents, and (v) the
Lenders shall not grant any participation under which the participant shall have
the right to approve (or under which the consent of the participant must be
obtained prior to the Lenders' being able to approve) any amendment or waiver of
this Agreement or the other Loan Documents, except to the extent that such
amendment or waiver (A) increases any Commitment, (B) reduces the interest rate
or the amount of principal or fees applicable to the Loans or Commitments in
which such participant is participating, (C) extends any Maturity Date, (D)
releases any of the Collateral (except as provided for herein or in any other
Loan Document) or any guaranty of the Obligations, or (E) releases any Loan
Party from its monetary Obligations under any of the Loan Documents.
(b) The Loan Parties and each of the Lenders agree that any Lender (the
"Assigning Lender") may at any time assign to one or more Eligible Assignees all
or any part of its rights and/or obligations under this Agreement and the other
Loan Documents (including, without limitation, its Commitments and/or Loans)
(each an "Assignee"); provided, however, that (i) each such assignment may be of
a varying percentage of the Assigning Lender's rights and/or obligations under
this Agreement and the other Loan Documents and may relate to some but not all
of such rights and/or
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obligations, (ii) except in the case of (A) an assignment of all of a Lender's
rights and obligations under this Agreement and the other Loan Documents or (B)
an assignment by a Lender to an Affiliate of such Lender, to another Lender or
to an Approved Fund, the amount of the Commitment(s) and/or Loans of the
Assigning Lender being assigned pursuant to each assignment (determined as of
the date of the Assignment and Acceptance with respect to such assignment) shall
in no event be less than $5,000,000 calculated based upon the aggregate amount
of the Commitment(s) and/or Loans assigned and (iii) the parties to each such
assignment shall execute and deliver to the Administrative Agent for its
acceptance and recording in the Register (as defined below), an Assignment and
Acceptance, together with the Note subject to such assignment, and a processing
and recordation fee of $3,500. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five Business Days after the
execution thereof or such other date as may be approved by the Administrative
Agent, (1) the Assignee thereunder shall be a party hereto as a "Lender" and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder and under the other Loan Documents, and (2) the Assigning
Lender thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement and the
other Loan Documents (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of a Lender's rights and obligations under the Loan
Documents, such Lender shall cease to be a party thereto, provided that such
Lender's rights under Article 4, Section 13.1 and Section 13.2 accrued through
the date of assignment shall continue). Holdings and the Borrower will provide
full and prompt assistance to each Lender as it may reasonably request from time
to time in connection with such Lender's efforts to assign its Commitments
and/or Loans or sell any participation interest therein. Such assistance shall
include, without limitation, making senior officers of Holdings and the Borrower
available for meetings with prospective Lenders and participants and providing
(in a timely manner) such assistance as may be reasonably requested by such
Lender and/or its advisors, including, without limitation, providing information
to and responding to inquiries from such prospective Lenders and participants
with respect to the businesses, operations, business plan, financial condition
and results of operations of the Loan Parties.
(c) By executing and delivering an Assignment and Acceptance, the
Assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such Assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any other instrument or document
furnished pursuant thereto; (ii) such Assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition or results of operations of any Loan Party or any of its Affiliates or
the performance or observance by any Loan Party or any of its Affiliates of its
obligations under the Loan Documents; (iii) such Assignee confirms that it has
received a copy of the Loan Documents, together with copies of the financial
statements referred to in Section 7.2 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such Assignee will,
independently and without reliance upon the Administrative
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Agent or such Assigning Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents;
(v) such Assignee confirms that it is an Eligible Assignee; (vi) such Assignee
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and exercise such powers under the Loan Documents as are delegated to
the Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; and (vii) such Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Loan Documents are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at its Principal Office a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Loan Parties, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes under the Loan
Documents. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
Assigning Lender and Assignee representing that it is an Eligible Assignee,
together with the Note(s) subject to such assignment, the Administrative Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit A hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register, and
(iii) give prompt written notice thereof to the Borrower. Within five Business
Days after its receipt of such notice, the Borrower, at its expense, shall
execute and deliver to the Administrative Agent in exchange for each surrendered
Note evidencing the Loans assigned, a new Note evidencing such Loans payable to
the order of such Eligible Assignee in an amount equal to such Loans assigned to
it and, if the Assigning Lender has retained any Loans, a new Note evidencing
each such Loans payable to the order of the Assigning Lender in the amount of
such Loans retained by it (each such promissory note shall constitute a "Note"
for purposes of the Loan Documents). Such new Notes shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be in substantially
the form of Exhibit B hereto.
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 13.8, disclose
to the Assignee or participant or proposed Assignee or participant any
information relating to any Loan Party or any of its Affiliates furnished to
such Lender by or on behalf of the any Loan Party or any of its Affiliates;
provided that each such actual or proposed Assignee or participant shall agree
to be bound by the provisions of Section 13.20.
(g) Any Lender may assign and pledge any Note held by it to any Federal
Reserve Bank or the U.S. Treasury as collateral security pursuant to Regulation
A of the Board of Governors of the Federal Reserve System and any operating
circular issued by such Federal Reserve System and/or Federal Reserve Bank;
provided, however, that any payment made by the Borrower for the benefit of such
assigning and/or pledging Lender in accordance with the terms of the Loan
Documents shall
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satisfy the Borrower's obligations under the Loan Documents in respect thereof
to the extent of such payment. No such assignment and/or pledge shall release
the assigning and/or pledging Lender from its obligations hereunder.
(h) The Borrower shall maintain, or cause to be maintained, a register
(the "Registered Note Register") (which, at the request of the Borrower (which
request the Borrower makes by the execution of this Agreement) shall be kept by
the Administrative Agent on behalf of the Borrower at no extra charge to the
Borrower at the address to which notices to the Administrative Agent are to be
sent hereunder) on which it shall enter the name of the registered owner of each
of the Loans which is evidenced by a Registered Note. Notwithstanding anything
to the contrary contained in this Section 13.8, a Registered Note and the Loans
evidenced thereby may be assigned or otherwise transferred in whole or in part
only by registration of such assignment or transfer of such Registered Note and
the Loans evidenced thereby on the Registered Note Register (and each Registered
Note shall expressly so provide). Any assignment or transfer of all or part of
such Loans and the Registered Note evidencing the same shall be registered on
the Registered Note Register only upon surrender for registration of assignment
or transfer of the Registered Note evidencing such Loans, duly endorsed by (or
accompanied by a written instrument of assignment or transfer duly executed by)
the registered noteholder thereof, and thereupon one or more new Registered
Notes in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the due presentment for registration of
transfer of any Registered Note, the Borrower and the Administrative Agent shall
treat the Person in whose name such Loans and the Registered Note(s) evidencing
the same are registered as the owner thereof for the purpose of receiving all
payments thereon and for all other purposes, notwithstanding any notice to the
contrary. The Registered Note Register shall be available for inspection by the
Borrower and any Lender at any reasonable time upon reasonable prior notice.
(i) The Loan Parties will not become a party to any loan agreement,
credit agreement or similar agreement which restricts or prohibits the right or
ability of any lender which is a party thereto to become a Lender under this
Agreement.
(j) Holdings and the Borrower shall provide prompt assistance to the
Administrative Agent and the Lenders in connection with their respective efforts
in syndicating the Loans and Commitments. Such assistance shall include making
senior officers and other representatives of Holdings and the Borrower and their
Affiliates available for meetings with prospective Lenders and providing, in a
timely manner, such assistance as may be reasonably requested by the
Administrative Agent or its advisors, including, without limitation, providing
information to and responding to inquiries from prospective Lenders with respect
to the business, operations, Business Plan, results and other matters relating
to the business of Holdings, the Borrower and the other Loan Parties.
Section 13.9 Survival. All representations and warranties made or
deemed made in this Agreement or any other Loan Document or in any document,
statement or certificate furnished in connection with this Agreement shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making of the Loans, and no investigation by the
Administrative Agent or any Lender or any closing shall affect the
representations and warranties or the right of the Administrative Agent or any
Lender to rely upon them. Without prejudice to the survival of any
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other obligation of any of the Loan Parties hereunder or under the other Loan
Documents, the obligations of the Borrower and the other Loan Parties under
Article 4 and Sections 13.1 and 13.2 shall survive repayment of the Loans and
the Reimbursement Obligations and the other Obligations.
SECTION 13.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, TERM SHEETS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG
(A) ANY ONE OR MORE OF THE LOAN PARTIES AND (B) ANY ONE OR MORE OF THE
ADMINISTRATIVE AGENT AND/OR THE LENDERS.
Section 13.11 Amendments. No amendment or waiver of any provision of
this Agreement, the Notes or any other Loan Document to which any Loan Party is
a party, nor any consent to any departure by any Loan Party therefrom, shall in
any event be effective unless the same shall be agreed or consented to by the
Required Lenders and such Loan Party in writing, and each such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all of the Lenders and the Borrower, do any of
the following: (a) increase the Commitments of the Lenders (or any Lender) or
subject the Lenders to any additional obligations; (b) reduce the principal of,
or interest on, the Loans or any fees or other amounts payable hereunder; (c)
postpone any date fixed for any payment (including, without limitation, any
mandatory prepayment) of principal of, or interest on, the Loans or any fees or
other amounts payable hereunder; (d) change the Commitment Percentages or the
aggregate unpaid principal amount of the Loans or the number or interests of the
Lenders which shall be required for the Lenders or any of them to take any
action under this Agreement; (e) change any provision contained in Section 3.2,
3.3 or 5.1 or this Section 13.11 or modify the definition of "Required Lenders,"
or "Permitted Third-Party Expenses Borrowing Base" contained in Section 1.1; or
(f) except as expressly authorized by this Agreement, release any Collateral
from any of the Liens created by the Security Documents; and provided further,
however, that no amendment, waiver or consent relating to Sections 12.1, 12.2,
12.3, 12.4 or 12.5 shall require the agreement of the Borrower or any other Loan
Party. Notwithstanding anything to the contrary contained in this Section 13.11,
no amendment, waiver or consent shall be made with respect to (i) Article 12
hereof without the prior written consent of the Administrative Agent, (ii) the
definitions of "Nortel Networks Equipment", "Nortel Networks Goods and
Services", "Nortel Networks Software", "Permitted Third-Party Expenses",
"Permitted Third-Party Expenses Borrowing Base", "Supply Agreement" or Section
2.5, 2.9 or 2.10 hereof without the prior written consent of Nortel Networks
(whether or not Nortel Networks is then a Lender hereunder), or (iii) any
condition precedent set forth in Article 6 with respect to the making of any
Tranche A Loans, Tranche B Loans or Tranche C Loans without the prior written
consent of the Lenders that hold, at the time of such amendment, waiver or
consent, at least a majority (in Dollar amount) of the Tranche A Commitments,
Tranche B Commitments or Tranche C Commitments, respectively.
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Section 13.12 Maximum Interest Rate.
(a) No interest rate specified in this Agreement or any other Loan
Document shall at any time exceed the Maximum Rate. If at any time the interest
rate (the "Contract Rate") for any Obligation shall exceed the Maximum Rate,
thereby causing the interest accruing on such Obligation to be limited to the
Maximum Rate, then any subsequent reduction in the Contract Rate for such
Obligation shall not reduce the rate of interest on such Obligation below the
Maximum Rate until the aggregate amount of interest accrued on such Obligation
equals the aggregate amount of interest which would have accrued on such
Obligation if the Contract Rate for such Obligation had at all times been in
effect.
(b) Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, none of the terms and provisions of this
Agreement or the other Loan Documents shall ever be construed to create a
contract or obligation to pay interest at a rate in excess of the Maximum Rate;
and neither the Administrative Agent nor any Lender shall ever charge, receive,
take, collect, reserve or apply, as interest on the Obligations, any amount in
excess of the Maximum Rate. The parties hereto agree that any interest, charge,
fee, expense or other obligation provided for in this Agreement or in the other
Loan Documents which constitutes interest under applicable law shall be, ipso
facto and under any and all circumstances, limited or reduced to an amount equal
to the lesser of (i) the amount of such interest, charge, fee, expense or other
obligation that would be payable in the absence of this Section 13.12(b) or (ii)
an amount, which when added to all other interest payable under this Agreement
and the other Loan Documents, equals the Maximum Rate. If, notwithstanding the
foregoing, the Administrative Agent or any Lender ever contracts for, charges,
receives, takes, collects, reserves or applies as interest any amount in excess
of the Maximum Rate, such amount which would be deemed excessive interest shall
be deemed a partial payment or prepayment of principal of the Obligations and
treated hereunder as such; and if the Obligations, or applicable portions
thereof, are paid in full, any remaining excess shall promptly be paid to the
Borrower. In determining whether the interest paid or payable, under any
specific contingency, exceeds the Maximum Rate, the Borrower and the other Loan
Parties, the Administrative Agent and the Lenders shall, to the maximum extent
permitted by applicable law, (i) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the Obligations, or applicable portions thereof, so
that the interest rate does not exceed the Maximum Rate at any time during the
term of the Obligations; provided that, if the unpaid principal balance is paid
and performed in full prior to the end of the full contemplated term thereof,
and if the interest received for the actual period of existence thereof exceeds
the Maximum Rate, the Administrative Agent and/or the Lenders, as appropriate,
shall refund to the Borrower the amount of such excess and, in such event, the
Administrative Agent and the Lenders shall not be subject to any penalties
provided by any laws for contracting for, charging, receiving, taking,
collecting, reserving or applying interest in excess of the Maximum Rate.
Section 13.13 Notices. All notices and other communications provided
for in this Agreement and the other Loan Documents to which the Borrower,
Holdings or any Operating
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Subsidiary is a party shall be given or made by telecopy or in writing and
telecopied, mailed by certified mail return receipt requested or delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof (or, with respect to a Lender that becomes a party to
this Agreement pursuant to an assignment made in accordance with Section 13.8,
in the Assignment and Acceptance executed by it); or, as to any party, at such
other address as shall be designated by such party in a notice to each other
party given in accordance with this Section 13.13. Except as otherwise provided
in this Agreement, all such communications shall be deemed to have been duly
given when transmitted by telecopy or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as aforesaid;
provided, however, that notices to the Administrative Agent shall be deemed
given when received by the Administrative Agent.
SECTION 13.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS. EXCEPT AS MAY BE EXPRESSLY STATED TO THE CONTRARY IN CERTAIN LOAN
DOCUMENTS, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND EACH OF THE PARTIES HERETO
CHOOSE THE LAWS OF THE STATE OF NEW YORK TO GOVERN THIS AGREEMENT PURSUANT TO
N.Y. GEN. OBLIG. LAW SECTION 5-1401 (CONSOL. 1995) AND APPLICABLE LAWS OF THE
U.S. EACH OF THE LOAN PARTIES HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF EACH OF (1) THE U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK,
(2) ANY NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK, (3) THE U.S.
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, AND (4) ANY TEXAS STATE COURT
SITTING IN DALLAS COUNTY, TEXAS, FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH OF THE LOAN PARTIES HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS
ADDRESS FOR NOTICES SET FORTH UNDERNEATH ITS SIGNATURE HERETO OR SET FORTH IN
ANY OTHER LOAN DOCUMENT. EACH OF THE LOAN PARTIES HEREBY 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 PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
Section 13.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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Section 13.16 Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 13.17 Headings. The headings, captions and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 13.18 Construction. Each of the Loan Parties, the
Administrative Agent and the Lenders acknowledges that it has had the benefit of
legal counsel of its own choice and has been afforded an opportunity to review
this Agreement and the other Loan Documents with its legal counsel and that this
Agreement and the other Loan Documents shall be construed as if jointly drafted
by the parties hereto and thereto.
Section 13.19 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
Section 13.20 Confidentiality.
(a) Lenders' Obligations. Each Lender agrees to exercise its best
efforts to keep any information delivered or made available by the Borrower to
it which is clearly indicated to be confidential information, confidential from
anyone other than Persons employed or retained by such Lender who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided, however, that nothing herein shall prevent
any Lender from disclosing such information (a) to any other Lender, (b) to any
Person if reasonably incidental to the administration of the Loans, (c) upon the
order of any court or administrative agency, (d) upon the request or demand of
any regulatory agency or authority having jurisdiction over such Lender, (e)
which has been publicly disclosed, (f) in connection with any litigation to
which the Administrative Agent, any Lender or their respective Affiliates may be
a party, (g) to the extent reasonably required in connection with the exercise
of any right or remedy under the Loan Documents, (h) to such Lender's legal
counsel, independent auditors and affiliates, and (i) to any actual or proposed
participant or Assignee of all or part of its rights hereunder, so long as such
actual or proposed participant or Assignee agrees to be bound by the provisions
of this Section 13.20; provided, further, however, that each Lender shall not
disclose any "Confidential Information" (as such term is defined in the Sprint
Management Agreement) except as permitted by Section 12.2 of the Sprint
Management Agreement as amended by Addendum II thereto dated as of June 10, 1999
and as modified by Section 14 of the Consent and Agreement. [UPDATE?]
(b) Loan Parties' and Affiliates' Obligations. Each of the Loan Parties
will, and will cause its Affiliates to, keep the terms and provisions of this
Agreement and the other Loan Documents confidential from anyone other than
individuals employed or retained by the Loan Parties who are or are expected to
become engaged in financial matters or matters relating to compliance with the
Loan Documents, provided that nothing herein shall prevent any such Person from
disclosing such
CREDIT AGREEMENT - Page 104
<PAGE> 112
information (i) to any other Loan Party, (ii) upon the order of any court or
administrative agency, (iii) upon the request or demand of any Governmental
Authority having jurisdiction over any Loan Party, (iv) which has been publicly
disclosed, and (v) to a Loan Party's legal counsel and independent auditors;
provided, however, that the Borrower and the other Loan Parties will deliver to
the Administrative Agent written notice of any intention or obligation of any
Loan Party to deliver or provide a copy of this Agreement or any other Loan
Document or any term or provision hereof or thereof to any Governmental
Authority at least ten Business Days prior to the initial date upon which any
such delivery or provision occurs and each of the Loan Parties shall use all
reasonable efforts to redact or delete from such copy or such term or provision
such terms or provisions or language relating to rates of interest, fees,
financial covenants, availability and other terms or provisions of a sensitive
nature as may be requested by the Administrative Agent to be so redacted or
deleted before the same is so delivered or provided. Without limiting the
generality of the foregoing, each of the Loan Parties agrees that it will not,
and will not permit any of its Affiliates to, without the prior written consent
of the Administrative Agent, issue or publish a press release, tombstone or
other similar announcement or publication relating to this Agreement or any
other Loan Document or the transactions contemplated hereby unless it is
required to do so by the order of any court or administrative agency or in
accordance with applicable law.
SECTION 13.21 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE LOAN PARTIES, THE ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF ANY LOAN PARTY, THE
ADMINISTRATIVE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION OR
ENFORCEMENT THEREOF.
Section 13.22 Approvals and Consent. Except as may be expressly
provided to the contrary in this Agreement or in the other Loan Documents (as
applicable), in any instance under this Agreement of the other Loan Documents
where the approval, consent or exercise of judgment of the Administrative Agent
or any Lender is requested or required, (a) the granting or denial of such
approval or consent and the exercise of such judgment shall be within the sole
discretion of the Administrative Agent or such Lender, respectively, and the
Administrative Agent and such Lender shall not, for any reason or to any extent,
be required to grant such approval or consent or to exercise such judgment in
any particular manner, regardless of the reasonableness of the request or the
action or judgment of the Administrative Agent or such Lender, and (b) no
approval or consent of the Administrative Agent or any Lender shall in any event
be effective unless the same shall be in writing and the same shall be effective
only in the specific instance and for the specific purpose for which given.
Section 13.23 Service of Process. Each of the Loan Parties irrevocably
consents to the service of process by the mailing thereof by the Administrative
Agent or the Required Lenders by registered or certified mail, postage prepaid,
to such Loan Party at its address listed on the signature pages hereof. Nothing
in this Section 13.23 shall affect the right of the Administrative Agent or the
CREDIT AGREEMENT - Page 105
<PAGE> 113
Lenders to serve legal process in any other manner permitted by law or affect
the right of the Administrative Agent or any Lender to bring any action or
proceeding against such Loan Party or its Property in the court of any
jurisdiction.
Section 13.24 Reaffirmation of Supply Agreement. Each of the Borrower,
the Operating Subsidiaries and Nortel Networks hereby reaffirms, ratifies and
confirms all of its indebtedness, liabilities and obligations under the Supply
Agreement as if the Supply Agreement were executed and delivered by the
Borrower, the Operating Subsidiaries and Nortel Networks as of the Closing Date.
Section 13.25 Amendment and Restatement of the Original Credit
Agreement. Effective as of the Closing Date, this Agreement shall constitute an
amendment and restatement of all, but not an extinguishment, discharge,
satisfaction or novation of any, indebtedness liabilities and/or obligations
(including, without limitation, the Obligations) of the Loan Parties under the
Original Credit Agreement.
Section 13.26 Assignments of Original Loans. The Lenders hereby agree
among themselves (and the Borrower and each of the other Loan Parties hereby
consents to such agreement) that, immediately prior to but substantially
concurrently with the Closing Date, there shall be deemed to have occurred
assignments with respect to the outstanding Original Tranche A Loans, Original
Tranche B Loans and Original Tranche C Loans such that, after giving effect to
such assignments, the outstanding Tranche A Loans, Tranche B Loans and Tranche C
Loans is as stated in Section 2.1 and that, as of the Closing Date, each of the
Lenders is the holder of such Tranche A Loans, Tranche B Loans and Tranche C
Loans in an amount equal to the product of its Commitment Percentage of the
Tranche A Commitments, the Tranche B Commitments and the Tranche C Commitments,
respectively, multiplied by the principal amount of the Tranche A Loans, Tranche
B Loans and Tranche C Loans, respectively, outstanding as of the Closing Date.
Section 13.27 No Requirement of Assumption or Payment of Another
Person's Debt. Each of the Loan Parties acknowledges and agrees that neither the
Administrative Agent nor any Lender has required, as a condition to the Loans
made or to be made under this Agreement, that the Borrower or any other Loan
Party assume or agree to pay any Debt of another Person.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
CREDIT AGREEMENT - Page 106
<PAGE> 114
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ALAMOSA PCS, INC.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Address for Notices:
4403 Brownfield Highway
Lubbock, Texas 79407
Attention:
-------------------------------------
Telecopy No.:
----------------------------------
Telephone No.:
---------------------------------
CREDIT AGREEMENT - Page 107
<PAGE> 115
ALAMOSA PCS HOLDINGS, INC.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Address for Notices:
-----------------------------------------------
-----------------------------------------------
Attention:
-------------------------------------
Telecopy No.:
----------------------------------
Telephone No.:
---------------------------------
CREDIT AGREEMENT - Page 108
<PAGE> 116
TEXAS TELECOMMUNICATIONS, LP
By: Alamosa Delaware GP, LLC
Title: General Partner
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Address for Notices:
-----------------------------------------------
-----------------------------------------------
Attention:
-------------------------------------
Telecopy No.:
----------------------------------
Telephone No.:
---------------------------------
CREDIT AGREEMENT - Page 109
<PAGE> 117
ALAMOSA WISCONSIN LIMITED PARTNERSHIP
By: Alamosa Delaware GP, LLC
Title: General Partner
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Address for Notices:
-----------------------------------------------
-----------------------------------------------
Attention:
-------------------------------------
Telecopy No.:
----------------------------------
Telephone No.:
---------------------------------
CREDIT AGREEMENT - Page 110
<PAGE> 118
ADMINISTRATIVE AGENT:
NORTEL NETWORKS INC.,
as Administrative Agent
By:
--------------------------------------------
Name: Robert D. Beiter
Title: Director, Customer Finance
Address for Notices:
Nortel Networks Inc.
GMS 991 15 A40
2221 Lakeside Blvd.
Richardson, Texas 75082-4399
Attention: Director, Customer Finance
Telecopy No.: (972) 684-3679
Telephone No.: (972) 685-1525
and
Nortel Networks Inc.
PO Box 833858
Richardson, Texas 75083-3858
Mail Stop 04D/02/A40
Attention: Kimberly Poe, Loan Administration
Telecopy No.: (972) 684-3808
Telephone No.:(972) 684-7687
CREDIT AGREEMENT - Page 111
<PAGE> 119
LENDERS:
NORTEL NETWORKS INC.
Tranche A Commitment: $
----------
Tranche B Commitment: $ By:
---------- -----------------------------------
Name: Robert D. Beiter
Tranche C Commitment: $ Title: Director, Customer Finance
----------
Address for Notices:
Total Commitments: $ Nortel Networks Inc.
========== GMS 991 15 A40
2221 Lakeside Blvd.
Richardson, Texas 75082-4399
Attention: Director, Customer Finance
Telecopy No.: (972) 684-3679
Telephone No.: (972) 685-1525
and
Nortel Networks Inc.
PO Box 833858
Richardson, Texas 75083-3858
Mail Stop 04D/02/A40
Attention: Kimberly Poe,
Loan Administration
Telecopy No.: (972) 684-3808
Telephone No.: (972) 684-7687
Lending Office for Base Rate Loans:
Nortel Networks Inc.
2221 Lakeside Blvd.
Richardson, Texas 75082
Lending Office for Eurodollar Loans:
Nortel Networks Inc.
2221 Lakeside Blvd.
Richardson, Texas 75082
[ADD SIGNATURE PAGES OF OTHER LENDERS, IF APPLICABLE]
CREDIT AGREEMENT - Page 112
<PAGE> 1
EXHIBIT 10.17
FORM OF
ALAMOSA PCS HOLDINGS, INC.
1999 LONG TERM INCENTIVE PLAN
The Alamosa PCS Holdings, Inc. 1999 Long-Term Incentive Plan
(hereinafter called the "Plan") was adopted by the Board of Directors of Alamosa
PCS Holdings, Inc., a Delaware corporation (hereinafter called the "Company"),
effective as of November 12, 1999, and was approved by the Company's
stockholders on ____________, 2000.
ARTICLE 1
PURPOSE
The purpose of the Plan is to attract and retain the services of key
management employees, Outside Directors and consultants of the Company and its
Subsidiaries and to provide such persons with a proprietary interest in the
Company through the granting of incentive stock options, non-qualified stock
options, stock appreciation rights, or restricted stock, whether granted singly,
or in combination, or in tandem, that will
(a) increase the interest of such persons in the Company's
welfare;
(b) furnish an incentive to such persons to continue their
services for the Company; and
(c) provide a means through which the Company may attract able
persons as employees, Outside Directors and consultants.
With respect to Reporting Participants, the Plan and all transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934 Act"). To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee.
ARTICLE 2
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
<PAGE> 2
2.1 "Award" means the grant of any Incentive Stock Option,
Non-qualified Stock Option, Restricted Stock or SAR whether granted singly, in
combination or in tandem (each individually referred to herein as an
"Incentive").
2.2 "Award Agreement" means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.
2.3 "Award Period" means the period during which one or more Incentives
granted under an Award may be exercised.
2.4 "Board" means the board of directors of the Company.
2.5 "Change of Control" means any of the following: (i) Continuing
Directors cease to constitute at least fifty percent (50%) of the members of the
Board; (ii) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; (iii) any consolidation, merger or
share exchange of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the Company's Common Stock
would be converted into cash, securities or other property; or (iv) any sale,
lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all or
substantially all of the assets of the Company; provided, however, that a
transaction described in clause (iii) or (iv) shall not constitute a Change in
Control hereunder if after such transaction (I) Continuing Directors constitute
at least fifty percent (50%) of the members of the Board of Directors of the
continuing, surviving or acquiring entity, as the case may be or, if such entity
has a parent entity directly or indirectly holding at least a majority of the
voting power of the voting securities of the continuing, surviving or acquiring
entity, Continuing Directors constitute at least fifty percent (50%) of the
members of the Board of Directors of the entity that is the ultimate parent of
the continuing, surviving or acquiring entity, and (II) the continuing,
surviving or acquiring entity (or the ultimate parent of such continuing,
surviving or acquiring entity) assumes all outstanding Stock Options under this
Plan; provided, further, that a transaction described in clause (iv) shall not
constitute a Change in Control hereunder if such transaction occurs upon or as a
result of a default by the Company or any of its affiliates under (a) any credit
agreement or related agreement among the Company or any of its affiliates or
successors and Nortel Networks Inc. or any other lender, whether or not such
credit agreement or related agreement exists on the date of this Plan, or (b)
any management agreement or related agreement among the Company any or any of
its affiliates or successors and Sprint Spectrum, LP, SprintCom, Inc.,
WirelessCo, LP, Sprint Communications Company, LP or any of their affiliates or
successors, whether or not such management agreement or related agreement exists
on the date of this Plan. "Continuing Directors" means Board members who (x) at
the date of this Plan were directors or (y) become directors after the date of
this Plan and
2
<PAGE> 3
whose election or nomination for election by the Company's stockholders was
approved by a vote of a majority of the directors then in office who were
directors at the date of this Plan or whose election or nomination for election
was previously so approved.
2.6 "Code" means the Internal Revenue Code of 1986, as amended.
2.7 "Committee" means the committee appointed or designated by the
Board to administer the Plan in accordance with Article 3 of this Plan.
2.8 "Common Stock" means the common stock, par value $0.01 per share,
which the Company is currently authorized to issue or may in the future be
authorized to issue.
2.9 "Company" means Alamosa PCS Holdings, Inc., a Delaware corporation,
and any successor entity.
2.10 "Date of Grant" means the effective date on which an Award is made
to a Participant as set forth in the applicable Award Agreement; provided,
however, that solely for purposes of Section 16 of the 1934 Act and the rules
and regulations promulgated thereunder, the Date of Grant of an Award shall be
the date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
2.11 "Employee" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.
2.12 "Fair Market Value" means, as of a particular date, (a) if the
shares of Common Stock are listed on a national securities exchange, the closing
sales price per share of Common Stock on the consolidated transaction reporting
system for the principal securities exchange for the Common Stock on that date,
or, if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (b) if the shares of Common
Stock are not so listed but are quoted on the Nasdaq National Market System, the
closing sales price per share of Common Stock on the Nasdaq National Market
System on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported, (c)
if the Common Stock is not so listed or quoted, the mean between the closing bid
and asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available, as
reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation
Bureau, Inc., or (d) if none of the above is applicable, such amount as may be
determined by the Committee (acting on the advice of an Independent Third Party,
should the Committee elect in its sole discretion to utilize an Independent
Third
3
<PAGE> 4
Party for this purpose), in good faith, to be the fair market value per share of
Common Stock.
"Independent Third Party" means an individual or entity independent of
the Company having experience in providing investment banking or similar
appraisal or valuation services and with expertise generally in the valuation of
securities or other property for purposes of this Plan. The Committee may
utilize one or more Independent Third Parties.
2.13 "Incentive Stock Option" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.14 "Non-qualified Stock Option" or "NQSO" means a non-qualified stock
option, granted pursuant to this Plan.
2.15 "Option Price" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.
2.16 "Outside Director" means a director of the Company who is not an
Employee.
2.17 "Participant" shall mean an Employee or Outside Director of, or a
consultant to, the Company or a Subsidiary to whom an Award is granted under
this Plan.
2.18 "Plan" means this Alamosa PCS Holdings, Inc. 1999 Long-Term
Incentive Plan, as amended from time to time.
2.19 "Reporting Participant" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.
2.20 "Restricted Stock" means shares of Common Stock issued or
transferred to a Participant pursuant to Section 6.4 of this Plan which are
subject to restrictions or limitations set forth in this Plan and in the related
Award Agreement.
2.21 "Retirement" means any Termination of Service solely due to
retirement upon attainment of age sixty-five (65), or permitted early retirement
as determined by the Committee.
2.22 "SAR" or "stock appreciation right" means the right to receive a
payment, in cash and/or Common Stock, equal to the excess of the Fair Market
Value of a specified number of shares of Common Stock on the date the SAR is
exercised over the SAR Price for such shares.
4
<PAGE> 5
2.23 "SAR Price" means the exercise price of each share of Common Stock
covered by a SAR, determined on the Date of Grant of the SAR.
2.24 "Stock Option" means a Non-qualified Stock Option or an Incentive
Stock Option.
2.25 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "Subsidiaries" means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.
2.26 "Termination of Service" occurs when: a Participant who is an
Employee of the Company or any Subsidiary shall cease to serve as an Employee of
the Company and its Subsidiaries, for any reason; or, a Participant who is an
Outside Director of the Company shall cease to serve as a director of the
Company for any reason.
2.27 "Total and Permanent Disability" means a Participant is qualified
for long-term disability benefits under the Company's disability plan or
insurance policy; or, if no such plan or policy is then in existence, that the
Participant, because of ill health, physical or mental disability or any other
reason beyond his or her control, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee; provided that, with respect to any Incentive Stock
Option, Total and Permanent Disability shall have the meaning given it under the
rules governing Incentive Stock Options under the Code.
ARTICLE 3
ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board
(the "Committee"). The Committee shall consist of not fewer than two persons.
Any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
5
<PAGE> 6
Membership on the Committee shall be limited to those members of the
Board who are "outside directors" under Section 162(m) of the Code. The
Committee shall select one of its members to act as its Chairman. A majority of
the Committee shall constitute a quorum, and the act of a majority of the
members of the Committee present at a meeting at which a quorum is present shall
be the act of the Committee.
The Committee shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are approved by
the Committee, but not inconsistent with the Plan. The Committee shall determine
whether an Award shall include one type of Incentive, two or more Incentives
granted in combination, or two or more Incentives granted in tandem (that is, a
joint grant where exercise of one Incentive results in cancellation of all or a
portion of the other Incentive).
The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.
With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "applicable law"),
to the extent that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.
ARTICLE 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an
officer), Outside Director, or consultant of the Company whose judgment,
initiative, and efforts contributed or may be expected to contribute to the
successful performance of the Company is eligible to participate in the Plan;
provided that only Employees shall be eligible to receive Incentive Stock
Options. The Committee, upon its own action, may grant, but shall not be
required to grant, an Award to any Employee, Outside Director, or consultant of
the Company or any Subsidiary. Awards may be granted by the Committee at any
time and from time to time to new Participants, or to then
6
<PAGE> 7
Participants, or to a greater or lesser number of Participants, and may include
or exclude previous Participants, as the Committee shall determine. Except as
required by this Plan, Awards granted at different times need not contain
similar provisions. The Committee's determinations under the Plan (including
without limitation determinations of which Employees, Outside Directors, or
consultants, if any, are to receive Awards, the form, amount and timing of such
Awards, the terms and provisions of such Awards and the agreements evidencing
same) need not be uniform and may be made by it selectively among Participants
who receive, or are eligible to receive, Awards under the Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
Subject to adjustment as provided in Articles 13 and 14, the maximum
number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is seven million (7,000,000) shares; plus (a) shares of
Common Stock previously subject to Awards which are forfeited, terminated,
settled in cash in lieu of Common Stock, or exchanged for Awards that do not
involve Common Stock, or expired unexercised; plus (b) any shares of Common
Stock surrendered to the Company in payment of the exercise price of options
issued under the Plan; provided, however, that in no event shall the number of
shares of Common Stock subject to Incentive Stock Options exceed, in the
aggregate, seven million (7,000,000) shares of Common Stock plus shares subject
to Incentive Stock Options which are forfeited or terminated, or expire
unexercised.
Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan.
ARTICLE 6
GRANT OF AWARDS
6.1 IN GENERAL. The grant of an Award shall be authorized by the
Committee and shall be evidenced by an Award Agreement setting forth the
Incentive or Incentives being granted, the total number of shares of Common
Stock subject to the Incentive(s), the Option Price (if applicable), the Award
Period, the Date of Grant, and such other terms, provisions, limitations, and
performance objectives, as are approved by the Committee, but not inconsistent
with the Plan. The Company shall execute an Award Agreement with a Participant
after the Committee approves the issuance of an Award. Any Award granted
pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the
7
<PAGE> 8
Company's stockholders for approval; however, the Committee may grant Awards
under the Plan prior to the time of stockholder approval. Any such Award granted
prior to such stockholder approval shall be made subject to such stockholder
approval. The grant of an Award to a Participant shall not be deemed either to
entitle the Participant to, or to disqualify the Participant from, receipt of
any other Award under the Plan.
If the Committee establishes a purchase price for an Award, the
Participant must accept such Award within a period of thirty (30) days (or such
shorter period as the Committee may specify) after the Date of Grant by
executing the applicable Award Agreement and paying such purchase price.
6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an Incentive Stock Option exceeds this
limit or otherwise fails to qualify as an Incentive Stock Option, such Stock
Option (or any such portion thereof) shall be a Non-qualified Stock Option.
6.3 MAXIMUM INDIVIDUAL GRANTS. No Participant may receive during any
fiscal year of the Company Awards covering an aggregate of more than two million
(2,000,000) shares of Common Stock.
6.4 RESTRICTED STOCK. If Restricted Stock is granted to a Participant
under an Award, the Committee shall set forth in the related Award Agreement:
(i) the number of shares of Common Stock awarded, (ii) the price, if any, to be
paid by the Participant for such Restricted Stock, (iii) the time or times
within which such Award may be subject to forfeiture, (iv) specified performance
goals of the Company, a Subsidiary, any division thereof or any group of
Employees of the Company, or other criteria, which the Committee determines must
be met in order to remove any restrictions (including vesting) on such Award,
and (v) all other terms, limitations, restrictions, and conditions of the
Restricted Stock, which shall be consistent with this Plan. The provisions of
Restricted Stock need not be the same with respect to each Participant.
(a) LEGEND ON SHARES. Each Participant who is awarded Restricted Stock
shall be issued a stock certificate or certificates in respect of such shares of
Common Stock. Such certificate(s) shall be registered in the name of the
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and
8
<PAGE> 9
restrictions applicable to such Restricted Stock, substantially as provided in
Section 17.9 of the Plan.
The Committee may require that the stock certificates evidencing shares
of Restricted Stock be held in custody by the Company until the restrictions
thereon shall have lapsed, and that the Participant deliver to the Committee a
stock power or stock powers, endorsed in blank, relating to the shares of
Restricted Stock.
(b) RESTRICTIONS AND CONDITIONS. Shares of Restricted Stock shall be
subject to the following restrictions and conditions:
(i) Subject to the other provisions of this Plan and the terms
of the particular Award Agreements, during such period as may be
determined by the Committee commencing on the Date of Grant (the
"Restriction Period"), the Participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock. Except for these
limitations, the Committee may in its sole discretion, remove any or
all of the restrictions on such Restricted Stock whenever it may
determine that, by reason of changes in applicable laws or other
changes in circumstances arising after the date of the Award, such
action is appropriate.
(ii) Except as provided in sub-paragraph (i) above, the
Participant shall have, with respect to his or her Restricted Stock,
all of the rights of a stockholder of the Company, including the right
to vote the shares, and the right to receive any dividends thereon.
Certificates for shares of Common Stock free of restriction under this
Plan shall be delivered to the Participant promptly after, and only
after, the Restriction Period shall expire without forfeiture in
respect of such shares of Common Stock. Certificates for the shares of
Common Stock forfeited under the provisions of the Plan and the
applicable Award Agreement shall be promptly returned to the Company by
the forfeiting Participant. Each Award Agreement shall require that (x)
each Participant, by his or her acceptance of Restricted Stock, shall
irrevocably grant to the Company a power of attorney to transfer any
shares so forfeited to the Company and agrees to execute any documents
requested by the Company in connection with such forfeiture and
transfer, and (y) such provisions regarding returns and transfers of
stock certificates with respect to forfeited shares of Common Stock
shall be specifically performable by the Company in a court of equity
or law.
(iii) The Restriction Period of Restricted Stock shall
commence on the Date of Grant and, subject to Article 14 of the Plan,
unless otherwise established by the Committee in the Award Agreement
setting forth the terms of the Restricted Stock, shall expire upon
satisfaction of the conditions set forth in the Award Agreement; such
conditions may provide for vesting based on (i)
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length of continuous service, (ii) achievement of specific business
objectives, (iii) increases in specified indices, (iv) attainment of
specified growth rates, or (v) other comparable measurements of Company
performance, as may be determined by the Committee in its sole
discretion.
(iv) Subject to the provisions of the particular Award
Agreement, upon Termination of Service for any reason during the
Restriction Period, the nonvested shares of Restricted Stock shall be
forfeited by the Participant. In the event a Participant has paid any
consideration to the Company for such forfeited Restricted Stock, the
Company shall, as soon as practicable after the event causing
forfeiture (but in any event within five (5) business days), pay to the
Participant, in cash, an amount equal to the total consideration paid
by the Participant for such forfeited shares. Upon any forfeiture, all
rights of a Participant with respect to the forfeited shares of the
Restricted Stock shall cease and terminate, without any further
obligation on the part of the Company.
6.5 SAR. An SAR shall entitle the Participant at his election to
surrender to the Company the SAR, or portion thereof, as the Participant shall
choose, and to receive from the Company in exchange therefor cash in an amount
equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of a SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.
6.6 TANDEM AWARDS. The Committee may grant two or more Incentives in
one Award in the form of a "tandem award," so that the right of the Participant
to exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and a SAR are issued in a
tandem Award, and the Participant exercises the SAR with respect to 100 shares
of Common Stock, the right of the Participant to exercise the related Stock
Option shall be canceled to the extent of 100 shares of Common Stock.
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ARTICLE 7
OPTION PRICE; SAR PRICE
The Option Price for any share of Common Stock which may be purchased
under a Non-qualified Stock Option and the SAR Price for any share of Common
Stock subject to a SAR may be less than, equal to, or greater than the Fair
Market Value of the share on the Date of Grant. The Option Price for any share
of Common Stock which may be purchased under an Incentive Stock Option must be
at least equal to the Fair Market Value of the share on the Date of Grant; if an
Incentive Stock Option is granted to an Employee who owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company (or any parent or Subsidiary), the Option Price shall be at least 110%
of the Fair Market Value of the Common Stock on the Date of Grant.
ARTICLE 8
AWARD PERIOD; VESTING
8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service in accordance with this Article 8 and Article 9. No Incentive granted
under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10)
years from its Date of Grant. However, if an Employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company (or any parent or Subsidiary) and an Incentive Stock Option is granted
to such Employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five (5) years
from the Date of Grant.
8.2 VESTING. The Committee, in its sole discretion, may determine that
an Incentive will be immediately exercisable, in whole or in part, or that all
or any portion may not be exercised until a date, or dates, subsequent to its
Date of Grant, or until the occurrence of one or more specified events, subject
in any case to the terms of the Plan. If the Committee imposes conditions upon
exercise, then subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may
be exercised.
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ARTICLE 9
TERMINATION OF SERVICE
In the event of Termination of Service of a Participant, an Incentive
may only be exercised as determined by the Committee and provided in the Award
Agreement.
ARTICLE 10
EXERCISE OF INCENTIVE
10.1 IN GENERAL. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth in the Award Agreement
and in Article 9. A vested Incentive may be exercised at such times and in such
amounts as provided in this Plan and the applicable Award Agreement, subject to
the terms, conditions, and restrictions of the Plan.
In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares of
Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been accomplished. No Incentive may be exercised for a
fractional share of Common Stock. The granting of an Incentive shall impose no
obligation upon the Participant to exercise that Incentive.
(a) STOCK OPTIONS. Subject to such administrative regulations as the
Committee may from time to time adopt, a Stock Option may be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Common Stock with respect to which the Stock Option is to be exercised and
the date of exercise thereof (the "Exercise Date") which shall be at least three
(3) days after giving such notice unless an earlier time shall have been
mutually agreed upon. On the Exercise Date, the Participant shall deliver to the
Company consideration with a value equal to the total Option Price of the shares
to be purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company, (b) Common Stock (including Restricted
Stock) owned by the Participant on the Exercise Date, valued at its Fair Market
Value on the Exercise Date, (c) by delivery (including by FAX) to the Company or
its designated agent of an executed irrevocable option exercise form together
with irrevocable instructions from the Participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of Common
Stock purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other form
of valid consideration that is acceptable to the Committee in its sole
discretion. In the event that shares of Restricted Stock are tendered as
consideration for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock
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Option equal to the number of shares of Restricted Stock used as consideration
therefor shall be subject to the same restrictions and provisions as the
Restricted Stock so submitted.
Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered as
directed by the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date; provided that if the Participant has exercised an
Incentive Stock Option, the Company may at its option retain physical possession
of the certificate evidencing the shares acquired upon exercise until the
expiration of the holding periods described in Section 422(a)(1) of the Code.
The obligation of the Company to deliver shares of Common Stock shall, however,
be subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration, or qualification of the Stock
Option or the Common Stock upon any securities exchange or inter-dealer
quotation system or under any state or federal law, or the consent or approval
of any governmental regulatory body, is necessary as a condition of, or in
connection with, the Stock Option or the issuance or purchase of shares of
Common Stock thereunder, the Stock Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent, or approval
shall have been effected or obtained free of any conditions not reasonably
acceptable to the Committee.
If the Participant fails to pay for any of the Common Stock specified
in such notice or fails to accept delivery thereof, the Participant's right to
purchase such Common Stock may be terminated by the Company.
(b) SARS. Subject to the conditions of this Section 10.1(b) and such
administrative regulations as the Committee may from time to time adopt, a SAR
may be exercised by the delivery (including by FAX) of written notice to the
Committee setting forth the number of shares of Common Stock with respect to
which the SAR is to be exercised and the date of exercise thereof (the "Exercise
Date") which shall be at least three (3) days after giving such notice unless an
earlier time shall have been mutually agreed upon. On the Exercise Date, the
Participant shall receive from the Company in exchange therefor cash in an
amount equal to the excess (if any) of the Fair Market Value (as of the date of
the exercise of the SAR) per share of Common Stock over the SAR Price per share
specified in such SAR, multiplied by the total number of shares of Common Stock
of the SAR being surrendered. In the discretion of the Committee, the Company
may satisfy its obligation upon exercise of a SAR by the distribution of that
number of shares of Common Stock having an aggregate Fair Market Value (as of
the date of the exercise of the SAR) equal to the amount of cash otherwise
payable to the Participant, with a cash settlement to be made for any fractional
share interests, or the Company may settle such obligation in part with shares
of Common Stock and in part with cash.
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10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock
acquired upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years from the Date of
Grant of such Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of the
Code, such Participant shall notify the Company in writing of the date and terms
of such disposition. A disqualifying disposition by a Participant shall not
affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.
ARTICLE 11
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article 11, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Sections 162(m), 421, and 422 of the Code, including any successors to such
Sections, shall be effective unless such amendment shall be approved by the
requisite vote of the stockholders of the Company entitled to vote thereon. Any
such amendment shall, to the extent deemed necessary or advisable by the
committee, be applicable to any outstanding Incentives theretofore granted under
the Plan, notwithstanding any contrary provisions contained in any stock option
agreement. In the event of any such amendment to the Plan, the holder of any
Incentive outstanding under the Plan shall, upon request of the Committee and as
a condition to the exercisability thereof, execute a conforming amendment in the
form prescribed by the Committee to any Award Agreement relating thereto.
Notwithstanding anything contained in this Plan to the contrary, unless required
by law, no action contemplated or permitted by this Article 11 shall adversely
affect any rights of Participants or obligations of the Company to Participants
with respect to any Incentive theretofore granted under the Plan without the
consent of the affected Participant.
ARTICLE 12
TERM
The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on November 11, 2009, but Incentives granted before that date will
continue to be effective in accordance with their terms and conditions.
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ARTICLE 13
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect, or Incentives are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from (1) the declaration or payment
of a stock dividend, (2) any recapitalization resulting in a stock split-up,
combination, or exchange of shares of Common Stock, or (3) other increase or
decrease in such shares of Common Stock effected without receipt of
consideration by the Company, then and in such event:
(i) An appropriate adjustment shall be made in the maximum
number of shares of Common Stock then subject to being awarded under
the Plan and in the maximum number of shares of Common Stock that may
be awarded to a Participant to the end that the same proportion of the
Company's issued and outstanding shares of Common Stock shall continue
to be subject to being so awarded.
(ii) Appropriate adjustments shall be made in the number of
shares of Common Stock and the Option Price thereof then subject to
purchase pursuant to each such Stock Option previously granted and
unexercised, to the end that the same proportion of the Company's
issued and outstanding shares of Common Stock in each such instance
shall remain subject to purchase at the same aggregate Option Price.
(iii) Appropriate adjustments shall be made in the number of
SARs and the SAR Price thereof then subject to exercise pursuant to
each such SAR previously granted and unexercised, to the end that the
same proportion of the Company's issued and outstanding shares of
Common Stock in each instance shall remain subject to exercise at the
same aggregate SAR Price.
(iv) Appropriate adjustments shall be made in the number of
outstanding shares of Restricted Stock with respect to which
restrictions have not yet lapsed prior to any such change.
Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to (i) the number of or Option Price of shares of Common
Stock then subject to outstanding Stock Options granted under the Plan, (ii) the
number of or SAR Price or SARs then subject to outstanding
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SARs granted under the Plan, or (iii) the number of outstanding shares of
Restricted Stock.
Upon the occurrence of each event requiring an adjustment with respect
to any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.
ARTICLE 14
RECAPITALIZATION, MERGER AND
CONSOLIDATION; CHANGE IN CONTROL
(a) The existence of this Plan and Incentives granted
hereunder shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's
capital structure and its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or preference
stocks ranking prior to or otherwise affecting the Common Stock or the
rights thereof (or any rights, options, or warrants to purchase same),
or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
(b) Subject to any required action by the stockholders, if the
Company shall be the surviving or resulting corporation in any merger,
consolidation or share exchange, any Incentive granted hereunder shall
pertain to and apply to the securities or rights (including cash,
property, or assets) to which a holder of the number of shares of
Common Stock subject to the Incentive would have been entitled.
(c) In the event of any merger, consolidation or share
exchange pursuant to which the Company is not the surviving or
resulting corporation, there shall be substituted for each share of
Common Stock subject to the unexercised portions of such outstanding
Incentives, that number of shares of each class of stock or other
securities or that amount of cash, property, or assets of the
surviving, resulting or consolidated company which were distributed or
distributable to the stockholders of the Company in respect to each
share of Common Stock held by them, such outstanding Incentives to be
thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms. Notwithstanding the foregoing, however,
all such Incentives may be canceled by the Company as of the effective
date of any such reorganization, merger, consolidation, share exchange
or any dissolution or liquidation of the Company by giving notice to
each holder thereof or his personal representative of its intention to
do so and by permitting the purchase during the thirty (30)
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day period next preceding such effective date of all of the shares of
Common Stock subject to such outstanding Incentives.
(d) In the event of a Change of Control, then, notwithstanding
any other provision in this Plan to the contrary, all unmatured
installments of Incentives outstanding shall thereupon automatically be
accelerated and exercisable in full and all Restriction Periods
applicable to Awards of Restricted Stock shall automatically expire.
The determination of the Committee that any of the foregoing conditions
has been met shall be binding and conclusive on all parties.
ARTICLE 15
LIQUIDATION OR DISSOLUTION
In case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices or SAR Prices then in effect with
respect to each Stock Option or SAR shall be reduced, on the payment date of
such distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in accordance
with generally accepted accounting principles) resulting by reason of such
distribution.
ARTICLE 16
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees or directors of a
corporation, partnership, or limited liability company who become or are about
to become management Employees or Outside Directors of the Company or any
Subsidiary as a result of a merger or consolidation of the employing corporation
with the Company, the acquisition by the Company of equity of the employing
entity, or any other similar transaction pursuant to which the Company becomes
the successor employer. The terms and conditions of the substitute Incentives so
granted may vary from the terms and conditions set forth
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in this Plan to such extent as the Board at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the Incentives
in substitution for which they are granted.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 INVESTMENT INTENT. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.
17.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.
17.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or
the Committee, nor any officer or Employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.
17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance thereof
would constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority or any national
securities exchange or inter-dealer quotation system or other forum in which
shares of Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act and Section 162(m) of the Code); and, as a condition
of any sale or issuance of shares of Common Stock under an Incentive, the
Committee may require such agreements or undertakings, if any, as the Committee
may deem necessary or advisable to assure
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compliance with any such law or regulation. The Plan, the grant and exercise of
Incentives hereunder, and the obligation of the Company to sell and deliver
shares of Common Stock, shall be subject to all applicable federal and state
laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required.
17.6 TAX REQUIREMENTS. The Company shall have the right to deduct from
all amounts hereunder paid in cash or other form, any Federal, state, or local
taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock.
Notwithstanding the foregoing, in the event of an assignment of a Non-qualified
Stock Option or SAR pursuant to Section 17.7, the Participant who assigns the
Non-qualified Stock Option or SAR shall remain subject to withholding taxes upon
exercise of the Non-qualified Stock Option or SAR by the transferee to the
extent required by the Code or the rules and regulations promulgated thereunder.
Such payments shall be required to be made prior to the delivery of any
certificate representing such shares of Common Stock. Such payment may be made
in cash, by check, or through the delivery of shares of Common Stock owned by
the Participant but not acquired from the Company within six (6) months prior to
such payment (which may be effected by the actual delivery of shares of Common
Stock by the Participant or by the Company's withholding a number of shares to
be issued upon the exercise of a Stock Option, if applicable), which shares have
an aggregate Fair Market Value equal to the required minimum withholding
payment, or any combination thereof.
17.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative, and each Award Agreement in
respect of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock Option.
The Committee may waive or modify any limitation contained in the preceding
sentences of this Section 17.7 that is not required for compliance with Section
422 of the Code.
The Committee may, in its discretion, authorize all or a portion of a
Non-qualified Stock Option or SAR to be granted to a Participant to be on terms
which permit transfer by such Participant to (i) the spouse, children or
grandchildren of the Participant ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, (iii) a
partnership in which such Immediate Family Members are the only partners, (iv)
an entity exempt from federal income tax pursuant to Section 501(c)(3) of the
Code or any successor provision, or (v) a split interest trust or pooled income
fund described in Section 2522(c)(2) of the Code
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or any successor provision, provided that (x) there shall be no consideration
for any such transfer, (y) the Award Agreement pursuant to which such
Non-qualified Stock Option or SAR is granted must be approved by the Committee
and must expressly provide for transferability in a manner consistent with this
Section, and (z) subsequent transfers of transferred Non-qualified Stock Options
or SARs shall be prohibited except those by will or the laws of descent and
distribution. In addition, the Committee may, in its discretion, authorize all
or a portion of a Non-qualified Stock Option or SAR to be granted to an Outside
Director to be on terms which permit transfer by such Outside Director of a
portion or all of such an Award to his or her employer, provided that (x) the
Award Agreement pursuant to which such Non- qualified Stock Option or SAR is
granted must be approved by the Committee and must expressly provide for
transferability in a manner consistent with this Section, and (y) unless
specifically authorized in the Award Agreement, subsequent transfers of
transferred Non-qualified Stock Options or SARs shall be prohibited except those
by will or the laws of descent and distribution.
Following any transfer, any such Non-qualified Stock Option and SAR
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Articles 10, 11,
13, 15 and 17 hereof the term "Participant" shall be deemed to include the
transferee. The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Non-qualified
Stock Options and SARs shall be exercisable by the transferee only to the extent
and for the periods specified in the Award Agreement. The Committee and the
Company shall have no obligation to inform any transferee of a Non-qualified
Stock Option or SAR of any expiration, termination, lapse or acceleration of
such Option. The Company shall have no obligation to register with any federal
or state securities commission or agency any Common Stock issuable or issued
under a Non-qualified Stock Option or SAR that has been transferred by a
Participant under this Section 17.7.
17.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.
17.9 LEGEND. Each certificate representing shares of Restricted Stock
issued to a Participant shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):
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On the face of the certificate:
"Transfer of this stock is restricted in accordance
with conditions printed on the reverse of this
certificate."
On the reverse:
"The shares of stock evidenced by this certificate
are subject to and transferrable only in accordance
with that certain Alamosa PCS Holdings, Inc. 1999
Long- Term Incentive Plan, a copy of which is on file
at the principal office of the Company in Lubbock,
Texas. No transfer or pledge of the shares evidenced
hereby may be made except in accordance with and
subject to the provisions of said Plan. By acceptance
of this certificate, any holder, transferee or
pledgee hereof agrees to be bound by all of the
provisions of said Plan."
The following legend shall be inserted on a certificate evidencing
Common Stock issued under the Plan if the shares were not issued in a
transaction registered under the applicable federal and state securities laws:
"Shares of stock represented by this certificate have
been acquired by the holder for investment and not
for resale, transfer or distribution, have been
issued pursuant to exemptions from the registration
requirements of applicable state and federal
securities laws, and may not be offered for sale,
sold or transferred other than pursuant to effective
registration under such laws, or in transactions
otherwise in compliance with such laws, and upon
evidence satisfactory to the Company of compliance
with such laws, as to which the Company may rely upon
an opinion of counsel satisfactory to the Company."
A copy of this Plan shall be kept on file in the principal office of
the Company in Lubbock, Texas.
* * * * * * * * * * * * * * *
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IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as of ___________, 2000, by its Chief Executive Officer and Secretary
pursuant to prior action taken by the Board.
ALAMOSA PCS HOLDINGS, INC.
By:
------------------------------------------
David E. Sharbutt, Chief Executive Officer
Attest:
- --------------------------------
Secretary
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EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into this date by
and between ALAMOSA PCS, LLC, a Texas Limited Liability Company, having its
principal executive office located at 4403 Brownfield Highway, Lubbock, Texas
79407 (the "Company"), and DAVID E. SHARBUTT, an individual residing at Lubbock,
Texas (the "Employee").
WITNESSETH:
WHEREAS, the parties are entering into this Agreement to set forth and
confirm their respective rights and obligations with respect to the Employee's
employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto mutually agree as follows:
1. EMPLOYMENT; TERM; DUTIES. The Company hereby employs the Employee as
Chief Executive Officer ("CEO"). The term of the Employee's employment, pursuant
to this Agreement, will commence on October 1, 1999, (the "Commencement Date")
and will continue until September 30, 2002, or the termination of this Agreement
as described in Section 5 hereof, whichever shall occur first. The Employee
hereby accepts such employment, and agrees to devote his full time and effort to
the business and affairs of the Company with such duties consistent with the
Employee's position as may be assigned to him from time to time by the Board of
Managers of the Company. Notwithstanding the foregoing, the Company acknowledges
that the Employee has other business interests and ownerships as well as serving
on the Boards of Directors of other companies in which the Employee is a
stockholder or owner. Subject to the provisions of Sections 7 through 10 hereof,
the Company acknowledges and consents to the continuation of these ownerships
and relationships, provided they do not interfere with the Employee's duties
under this Agreement. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall be deemed to impose any obligation on
the Company or any of its subsidiaries to continue to employ the Employee, or on
the Employee to remain in the employ of the Company or any of its subsidiaries.
2. COMPENSATION. In consideration of all services rendered by the Employee
as CEO during the term of his employment, pursuant to this Agreement, the
Company will provide the Employee with the following compensation:
(a) BASE SALARY. The Company will pay the Employee a base salary at the
annual rate of $175,000.00, payable periodically but no less often than
semi-monthly, in substantially equal amounts, in accordance with the
Company's payroll practices from time to time in effect. The Company will
EMPLOYMENT AGREEMENT PAGE 1 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 2
review the Employee's base salary at least once each year and may, in its
discretion, increase the Employee's base salary.
(b) BONUS. In addition to the Employee's base salary, the Employee shall be
eligible to receive a bonus (a "Quarterly Bonus") for each calendar quarter
in an amount, if any, determined as follows: In each calendar quarter,
beginning with the quarter ending December 31, 1999, Employee's Quarterly
Bonus shall be equal to the sum of (1) plus (2) as follows:
(1) $21,875.00 multiplied by the percentage set forth opposite each
Expected Milestone set forth in the attached EXHIBIT "A", incorporated
herein by reference, which is achieved for that calender quarter.
(2) $21,875.00 multiplied by the percentage set forth opposite each
Exceptional Milestone set forth in EXHIBIT "A" which is achieved for
that calendar quarter.
If any particular Expected Milestone or Exceptional Milestone is not
achieved for any calendar quarter, that percentage share of the dollar
amount specified in (1) or (2) above, as the case may be, shall not be
payable as part of the Quarterly Bonus. The Expected Milestones,
Exceptional Milestones and percentages set forth on EXHIBIT "A" may be
changed by the Company at any time and from time to time, but any such
change shall not apply earlier than the calendar quarter following the
calendar quarter in which such change is made by the Company and
communicated to the Employee.
Any Quarterly Bonus owing to the Employee shall be paid within forty-five
(45) days following the end of the applicable calendar quarter.
(c) UNIT OPTIONS. If, on June 30, 2000, the Company has not become a
wholly-owned subsidiary of Alamosa PCS Holdings, Inc., a Delaware
corporation ("Holdings"), then on said date the Company will convert the
membership interests in the Company to forty-eight million five hundred
thousand (48,500,000) membership units, and shall grant to the Employee
options to purchase membership units in the Company as follows:
(1) First Option. An option (the "First Option") to purchase two
hundred forty-two thousand five hundred (242,500) membership units in
the Company at a per unit purchase price equal to One Dollar and
Fifteen Cents ($1.15), said First Option to be fully vested and
immediately exercisable by the Employee, and thereafter be exercisable
at any time until January 5, 2009, in accordance with
EMPLOYMENT AGREEMENT PAGE 2 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 3
the option agreement to be entered into between the Company and the
Employee as of June 30, 2000, upon terms and conditions substantially
similar to the terms and conditions of the Nonqualified Stock Option
Agreement entered into by the Employee pursuant to the Alamosa PCS
Holdings, Inc. 1999 Long-Term Incentive Plan.
(2) Second Option. An option (the "Second Option") to purchase one
million four hundred fifty-five thousand (1,455,000) membership units
in the Company at a per unit purchase price equal to Fifteen Dollars
($15.00), said Second Option, subject to Section 6 hereof, to vest and
be exercisable by the Employee in three (3) equal installments of four
hundred eighty-five thousand (485,000) membership units each on
September 30, 2000, September 30, 2001, and September 30, 2002,
respectively, and thereafter be exercisable at any time until January
5, 2009, in accordance with the option agreement to be entered into
between the Company and the Employee as of June 30, 2000, upon terms
and conditions substantially similar to the terms and conditions of
the Nonqualified Stock Option Agreement entered into by the Employee
pursuant to the Alamosa PCS Holdings, Inc. 1999 Long-Term Incentive
Plan.
(d) LIFE INSURANCE. The Company will provide at least $5,000,000.00 term
life insurance on the life of the Employee during the term of the
Employee's employment. The Company shall pay for all costs attributable to
such coverage. Such life insurance shall be at least ten (10) year level
premium term life insurance on the life of the Employee. The Employee shall
have the right to designate the beneficiary of such policy or policies.
Should the Employee not be insurable at the time of his employment under
this Agreement, there will be no obligation upon the Company to provide
such life insurance. If the Employee's employment terminates during the
term of this Agreement or at the termination of the Employee's employment
pursuant to this Agreement, the Employee may assume the premium obligations
of this policy, in which event the Company shall assign all its rights in
the policy to the Employee. In the event the Employee desires to assume the
premium obligations under this policy and at the time of the Employee's
termination of employment the Company has prepaid any premiums on the
policy, the Employee shall pay to the Company the amount of any prepayment
attributable to any period of coverage after the Employee's termination of
employment.
The Employee will receive no additional compensation for serving the Company in
any other capacity, such as Chairman of the Board of Directors or any similar
position.
EMPLOYMENT AGREEMENT PAGE 3 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 4
3. EMPLOYEE BENEFITS. The Employee will be entitled to participate in all
incentive, retirement, profit-sharing, life, medical, disability and other
benefit plans and programs (collectively "Benefit Plans") as are from time to
time generally available to other executives of the Company with comparable
responsibilities, subject to the provisions of those programs. Without limiting
the generality of the foregoing, the Company will provide the Employee with
basic health and medical benefits on the terms that such benefits are provided
to other executives of the Company with comparable responsibilities. The
Employee will also be entitled to holidays, sick leave and vacation in
accordance with the Company's policies as they may change from time to time, but
in no event shall the Employee be entitled to less than four (4) weeks paid
vacation per year.
4. EXPENSES.
(a) Reimbursement for Expenses. The Company will promptly reimburse the
Employee, in accordance with the Company's policies and practices in effect
from time to time, for all expenses reasonably incurred by the Employee in
performance of the Employee's duties under this Agreement, including
reimbursement for miles driven by the Employee in furtherance of the
Company's business ("Business Mileage").
(1) Reimbursement for Business Mileage shall be at the standard
mileage rate allowed by the Internal Revenue Service ("IRS") for the
taxable year and set forth in the appropriate IRS publication.
(2) Business mileage does not include commuting from Employee's
residence to the Company's headquarters.
(3) Employee is responsible for proper substantiation and reporting of
Business Mileage and/or actual expenses.
(4) Employee acknowledges that the payment to him of a monthly vehicle
allowance plus the standard mileage rate may result in taxable income
if the business portion of actual automobile expenses is less than the
total amount paid to employee under this subsection, or if employee
does not maintain the records required by the Internal Revenue Code
and the Regulations thereunder. Employee has been advised to consult a
tax advisor to determine the taxability of payments under this
subsection, and the record keeping requirements associated with the
travel and expenses associated with such payments.
EMPLOYMENT AGREEMENT PAGE 4 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 5
(b) Expense Allowance. In addition to reimbursed expenses, Employee is
entitled to $1,250.00 per month as a vehicle allowance and club dues
allowance.
5. TERMINATION. The Employee's employment by the Company: (a) shall
terminate upon the Employee's death or disability (as defined below); (b) may be
terminated by the Company for any reason other than cause or non-performance at
any time; (c) may be terminated by the Company for cause (as defined below) at
any time; (d) may be terminated by the Employee, without cause at any time upon
forty-five (45) days' prior written notice delivered by the Employee to the
Company; (e) may be terminated by the Employee for cause (as defined below) at
any time upon forty-five (45) days' prior written notice delivered by the
Employee to the Company; and (f) may be terminated by the Company for
non-performance by the Employee at any time.
(a) The term "disability" means the determination under the Company's
Long-Term Disability Plan that the Employee is eligible to receive a
disability benefit.
(b) The term "cause" in the event of termination of the Employee's
employment by the Company means (i) any breach of Sections 7 or 9 of this
Agreement by Employee which has a material adverse effect on the Company
and which is not or cannot be cured within thirty (30) days after notice
from the Board of Managers of the Company thereof; (ii) commission of any
act of fraud, embezzlement or dishonesty by the Employee that is materially
and demonstrably injurious to the Company; (iii) any act or omission by
Employee which constitutes a uncured default or breach of that certain
Sprint PCS Management Agreement dated July 17, 1998 and as it may be
amended from time to time or any other similar Sprint Management Agreement
to which the Company or any of its affiliates or subsidiaries may be a
party ("the Sprint Agreement"); or (iv) any other intentional misconduct by
the Employee adversely affecting the business or affairs of the Company in
a material manner. The term "intentional misconduct by the Employee
adversely affecting the business or affairs of the Company" shall mean such
misconduct that is detrimental to the business or the reputation of the
Company as it is perceived both by the general public and the
telecommunications industry.
(c) The term "cause" in the event of termination of the Employee's
employment by the Employee means (i) the change in job responsibilities of
the Employee resulting in the demotion of the Employee from the position of
CEO, which demotion is caused by something other than would be cause for
termination of the Employee's employment by the Company for cause and other
than the non-performance of the Employee as defined later herein; or (ii)
the removal of the Employee from the Board of
EMPLOYMENT AGREEMENT PAGE 5 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 6
Managers of the Company or, if the Company is a wholly-owned subsidiary of
Holdings, the Board of Directors of Holdings or the failure of the Employee
to be re-elected to said Board of Managers or said Board of Directors, as
the case may be.
(d) The term "non-performance by the Employee" in the event of termination
of the Employee's employment by the Company means the determination by a
super-majority (greater than 75%) of the members of the Board of Managers
of the Company, in their sole and absolute discretion, that the Employee is
not performing his duties under this Agreement after the Board of Managers
of the Company has delivered to the Employee written notice which
specifically identifies the manner in which the Board believes he is not
performing his duties and which is not or cannot be cured within 15 days
after such written notice is delivered to the Employee.
6. CONSEQUENCES OF TERMINATION.
(a) CONSEQUENCES OF TERMINATION ON EMPLOYEE'S DEATH OR DISABILITY. If the
Employee's employment is terminated prior to September 30,2002, because of
the Employee's death or disability, (i) subject to Section 6(h) hereof,
this Agreement terminates immediately; (ii) Employee or his legal
representative or estate, as the case may be, shall be eligible to exercise
any options granted and vested pursuant to Section 2(c) hereof at the time
of such death or disability, plus, if such death or disability does not
occur on September 30 of a given year, a fractional portion of those
options which would have vested and become exercisable pursuant to Section
2(c) hereof on the September 30 immediately following such death or
disability based on a fraction whose numerator is the number of months
(including the month in which the date of death or disability occurs) since
the previous September 30 and whose denominator is twelve (12), in
accordance with the provisions of Section 2(c) hereof and the option
agreement referred to therein, and any other options granted to the
Employee shall be forfeited; (iii) the Company will pay the Employee, or
his legal representative or estate, as the case may be, in full
satisfaction of all of its compensation (base salary and bonus) obligations
under this Agreement, an amount equal to the sum of any base salary due to
the Employee through the last day of employment, plus any accrued bonus to
which the Employee may have been entitled on the last day of employment,
but had not yet been received; and (iv) the Employee's benefits and rights
under any Benefit Plan shall be paid, retained or forfeited in accordance
with the terms of such plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for Employee from and
after termination.
EMPLOYMENT AGREEMENT PAGE 6 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 7
(b) CONSEQUENCES OF TERMINATION BY THE COMPANY FOR ANY REASON OTHER THAN
FOR CAUSE OR FOR NON-PERFORMANCE OF EMPLOYEE
(1) If the Employee's employment is terminated by the Company prior to
September 30, 2002, for any reason other than for cause or
non-performance of Employee, (i) subject to Section 6(h) hereof, this
Agreement terminates immediately; (ii) Employee or his legal
representative or estate, as the case may be, shall be eligible to
exercise any options granted but not exercised pursuant to Section
2(c) hereof, which options shall be deemed vested as of the date of
the Employee's termination of employment regardless of whether or not
they are in fact otherwise vested pursuant to Section 2(c) hereof on
said date, in accordance with the provisions of Section 2(c) hereof
and the option agreement referred to therein; (iii) the Company will
pay the Employee, in full satisfaction of all of its compensation
(base salary and bonus) obligations under this Agreement, an amount
equal to the sum of any base salary due to the Employee through the
last day of employment, plus any accrued bonus to which the Employee
may have been entitled on the last day of employment, but had not yet
been received; (iv) the Company will pay the Employee, within sixty
(60) days of such termination, a lump sum severance payment equal to
one (1) year's base salary as in effect at the date of employment
termination; and (v) the Employee's benefits and rights under any
Benefit Plan, other than any basic health and medical benefit plan,
shall be paid, retained or forfeited in accordance with the terms of
such plan; provided, however, that Employer shall have no obligation
to make any payments toward these benefits for Employee from and after
termination.
(2) Any payment pursuant to clause (b)(1)(iv) above (the "Termination
Payment"):
a. will be subject to offset for any advances, amounts
receivable, and loans, including accrued interest, outstanding on
the date of the employment termination; and
b. will not be subject to offset on account of any remuneration
paid or payable to the Employee for any subsequent employment the
Employee may obtain, whether during or after the period during
which the Termination Payment is made, and the Employee shall
have no obligation whatever to seek any subsequent employment.
EMPLOYMENT AGREEMENT PAGE 7 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 8
(c) CONSEQUENCES OF TERMINATION FOR CAUSE BY THE COMPANY. If the
Employee's employment is terminated by the Company prior to
September 30, 2002,for cause, (i) subject to Section 6(h) hereof,
this Agreement terminates immediately; (ii) Employee shall not be
eligible to exercise and shall forfeit any options granted
(whether or not vested) pursuant to Section 2(c) hereof at the
time of such employment termination that have not already been
exercised by the Employee at the time of such employment
termination; (iii) the Company will pay the Employee, in full
satisfaction of all of its compensation (base salary and bonus)
obligations under this Agreement, an amount equal to the sum of
any base salary due to the Employee through the last day of
employment, plus any accrued bonus to which the Employee may have
been entitled on the last day of employment, but had not yet been
received; and(iv) the Employee's benefits and rights under any
Benefit Plan shall be paid, retained or forfeited in accordance
with the terms of such plan; provided, however, that Employer
shall have no obligation to make any payments toward these
benefits for Employee from and after termination.
(d) CONSEQUENCES OF TERMINATION BY THE EMPLOYEE FOR ANY REASON
OTHER THAN FOR CAUSE OR EMPLOYEE'S DEATH OR DISABILITY. If, upon
forty-five (45) days' prior written notice to the Company by the
Employee, the Employee's employment is terminated by the Employee
prior to September 30, 2002, for any reason other than for cause
or Employee's death or disability, (i) subject to Section 6(h)
hereof, this Agreement terminates immediately; (ii) Employee or
his legal representative or estate, as the case may be, shall be
eligible to exercise any options granted and vested, but not
exercised pursuant to Section 2(c) hereof at the time of such
employment termination, in accordance with the provisions of
Section 2(c) hereof and the option agreement referred to therein,
and any other options granted to the Employee shall be forfeited;
(iii) the Company will pay the Employee, in full satisfaction of
all of its compensation (base salary and bonus) obligations under
this Agreement, an amount equal to the sum of any base salary due
to the Employee through the last day of employment, plus any
accrued bonus to which the Employee may have been entitled on the
last day of employment, but had not yet been received; and (iv)
the Employee's benefits and rights under any Benefit Plan, other
than any basic health and medical benefit plan, shall be retained
or forfeited in accordance with the terms of such plan; provided,
however, that Employer shall have no obligation to make any
payments toward these benefits for Employee from and after
termination.
(e) CONSEQUENCES OF TERMINATION BY THE EMPLOYEE FOR CAUSE .
EMPLOYMENT AGREEMENT PAGE 8 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 9
(1) If, upon forty-five (45) days' prior written notice to
the Company by the Employee, the Employee's employment is
terminated by the Employee prior to September 30, 2002, for
cause (i) subject to Section 6(h) hereof, this Agreement
terminates immediately; (ii) Employee or his legal
representative or estate, as the case may be, shall be
eligible to exercise any options granted and vested pursuant
to Section 2(c) hereof at the time of such employment
termination, plus, if such employment termination does not
occur on September 30 of a given year, those options which
would have vested and become exercisable pursuant to Section
2(c) hereof on the September 30 immediately following such
employment termination, in accordance with the provisions of
Section 2(c) hereof and the option agreement referred to
therein, and any other options granted to the Employee shall
be forfeited; (iii) the Company will pay the Employee, in
full satisfaction of all of its compensation (base salary
and bonus) obligations under this Agreement, an amount equal
to the sum of any base salary due to the Employee through
the last day of employment, plus any accrued bonus to which
the Employee may have been entitled on the last day of
employment, but had not yet been received; (iv) the Company
will pay the Employee, within sixty (60) days of such
termination, a lump sum severance payment equal to one (1)
year's base salary as in effect at the date of employment
termination or the unpaid balance of the annual base salary
which would have been payable to Employee through September
30, 2002, whichever amount shall be less; and (v) the
Employee's benefits and rights under any Benefit Plan, other
than any basic health and medical benefit plan, shall be
paid, retained or forfeited in accordance with the terms of
such plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for
Employee from and after termination.
(2) Any payment pursuant to clause (e)(1)(iv) above (the
"Termination Payment"):
a. will be subject to offset for any advances, amounts
receivable, and loans, including accrued interest,
outstanding on the date of the employment termination;
and
b. will not be subject to offset on account of any
remuneration paid or payable to the Employee for any
subsequent employment the Employee may obtain, whether
during or after the period during which the Termination
Payment is made, and the Employee shall have no
obligation whatever to seek any subsequent employment.
EMPLOYMENT AGREEMENT PAGE 9 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 10
(f) CONSEQUENCES OF TERMINATION BY THE COMPANY FOR
NON-PERFORMANCE BY THE EMPLOYEE. If the Employee's employment is
terminated by the Company prior to September 30, 2002, for
non-performance by the Employee (i) subject to Section 6(h)
hereof, this Agreement terminates immediately; (ii) Employee or
his legal representative or estate, as the case may be, shall be
eligible to exercise any options granted and vested but not
exercised pursuant to Section 2(c) hereof at the time of such
employment termination, in accordance with the provisions of
Section 2(c) hereof and the option agreement referred to therein,
and any other options granted to the Employee shall be forfeited;
(iii) the Company will pay the Employee, in full satisfaction of
all of its compensation (base salary and bonus) obligations under
this Agreement, an amount equal to the sum of any base salary due
to the Employee through the last day of employment, plus any
accrued bonus to which the Employee may have been entitled on the
last day of employment, but had not yet been received; and (iv)
the Employee's benefits and rights under any Benefit Plan, other
than any basic health and medical benefit plan, shall be paid,
retained or forfeited in accordance with the terms of such plan;
provided, however, that Employer shall have no obligation to make
any payments toward these benefits for Employee from and after
termination.
EMPLOYMENT AGREEMENT PAGE 10 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 11
(g) CONSEQUENCES OF TERMINATION BY THE COMPANY FOLLOWING A CHANGE
OF CONTROL.
(1) If the Employee's employment is terminated by the
Company prior to September 30, 2002, for any reason other
than for cause (as defined in Section 5(b) hereof) within
one (1) year following a Change of Control, (i) subject to
Section 6(h) hereof, this Agreement terminates immediately;
(ii) Employee or his legal representative or estate, as the
case may be, shall be eligible to exercise any options
granted but not exercised pursuant to Section 2(c) hereof
which options shall be deemed vested as of the date of the
Employee's termination of employment regardless of whether
or not they are in fact otherwise vested pursuant to Section
2(c) hereof on said date, in accordance with the provisions
of Section 2(c) hereof and the option agreement referred to
therein; (iii) the Company will pay the Employee, in full
satisfaction of all of its compensation (base salary and
bonus) obligations under this Agreement, an amount equal to
the sum of any base salary due to the Employee through the
last day of employment, plus any accrued bonus to which the
Employee may have been entitled on the last day of
employment, but had not yet been received; (iv) the Company
will pay the Employee, within sixty (60) days of such
termination, a lump sum severance payment equal to the
unpaid balance of the base salary which would have been
payable to Employee through September 30, 2002; and (v) the
Employee's benefits and rights under any Benefit Plan, other
than any basic health and medical benefit plan, shall be
paid, retained or forfeited in accordance with the terms of
such plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for
Employee from and after termination.
(2) The term "Change of Control" shall have the same meaning
as defined in the Alamosa PCS Holdings, Inc. 1999 Long-Term
Incentive Plan.
(3) Any payment pursuant to clause (g)(1)(iv) above (the
"Termination Payment"):
a. will be subject to offset for any advances, amounts
receivable, and loans, including accrued interest
outstanding on the date of the employment termination;
and
b. will not be subject to offset on account of any
remuneration paid or payable to the Employee for any
EMPLOYMENT AGREEMENT PAGE 11 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 12
subsequent employment the Employee may obtain, whether
during or after the period during which the Termination
Payment is made, and the Employee shall have no
obligation whatever to seek any subsequent employment.
(h) PRESERVATION OF CERTAIN PROVISIONS. Notwithstanding any
provisions of this Agreement to the contrary, the provisions of
Sections 7 through 12 hereof shall survive the expiration or
termination of this Agreement as necessary to give full effect to
all of the provisions of this Agreement.
7. NON-COMPETITION BY EMPLOYEE. During the term of this Agreement, the
Employee shall not, directly or indirectly, either as an Employee, Employer,
Consultant, Agent, Principal, Partner, Corporate Officer, Director, Shareholder,
Member, Investor or in any other individual or representative capacity, engage
or participate in any business that is in competition in any manner whatever
with the business of the Company. For these purposes, the business of the
Company is establishing and providing mobile wireless communications services
(the "Business"), including all aspects of the Business, within the Service Area
as that term is defined in the Schedule of Definitions referred to in and
incorporated by reference into the Sprint Agreement. Furthermore, upon the
expiration of this Agreement or the termination of this Agreement prior to
September 30, 2002, for any reason, the Employee expressly agrees not to engage
or participate, directly or indirectly, either as an Employee, Employer,
Consultant, Agent, Principal, Partner, Stockholder, Corporate Officer, Director,
Shareholder, Member, Investor or in any other individual or representative
capacity, for a period of two (2) years in any business that is in competition
with the Business and that is located within and/or doing business within the
Service Area as defined above as in existence during the term of the Employee's
employment with the Company. The parties agree that the Company has a legitimate
interest in protecting the Business and goodwill of the Company that has
developed in the areas of the Company's Business and in the geographical areas
of this Covenant Not To Compete as a result of the operations of the Company.
The parties agree that the Company is entitled to protection of its interests in
these areas. The parties further agree that the limitations as to time,
geographical area, and scope of activity to be restrained do not impose a
greater restraint upon Employee than is necessary to protect the goodwill or
other business interest of the Company. The parties further agree that in the
event of a violation of this Covenant Not To Compete, that the Company shall be
entitled to the recovery of damages from Employee and/or an injunction against
Employee for the breach or violation or continued breach or violation of this
Covenant. The Employee agrees that if a court of competent jurisdiction
determines that the length of time or any other restriction, or portion thereof,
set forth in this Section 7 is overly restrictive and unenforceable, the court
may reduce or modify such restrictions to those which it deems reasonable and
enforceable under the circumstances, and as so reduced or modified, the parties
hereto agree that the restrictions of this Section 7 shall remain in full force
EMPLOYMENT AGREEMENT PAGE 12 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 13
and effect. The Employee further agrees that if a court of competent
jurisdiction determines that any provision of this Section 7 is invalid or
against public policy, the remaining provisions of this Section 7 and the
remainder of this Agreement shall not be affected thereby, and shall remain in
full force and effect.
8. EXCEPTIONS TO NON-COMPETITION COVENANTS. Notwithstanding anything herein
to the contrary or apparently to the contrary, the following shall not be a
violation or breach of the non-competition covenants contained in this
Agreement. Employee may invest in the securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if (a) such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934 and
(b) the Employee does not beneficially own (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) in excess of 5% of the outstanding
capital stock of such enterprise. In addition, the employment of Employee by CHR
Solutions, Inc. ("CHR"), successor to Hicks & Ragland Engineering Co. Inc. or
any company or entity into which CHR may be merged or converted shall so long as
CHR or any such company into which CHR may be merged or converted is not in
competition with the Business also be an exception to the non-competition
covenants. Employee's investment in any company or entity in which Employer is
an owner or stockholder at the time of entering into this Agreement shall also
be an exception to the non-competition covenants. The names of these companies
or entities are shown on the attached Exhibit B, which is incorporated herein by
this reference as if copied at length. Notwithstanding the foregoing, the
Employee's relationship with other entities or business interests of Employee
shall in no way interfere with or detract from the duties of the Employee to the
Company as called for in this Agreement.
9. CONFIDENTIAL INFORMATION. The Employee recognizes and acknowledges that
he will have access to certain information of members of the Company Group (as
defined below) and that such information is confidential and constitutes
valuable, special and unique property of such members of the Company Group. The
parties agree that the Company has a legitimate interest in protecting the
Confidential Information, as defined below. The parties agree that the Company
is entitled to protection of its interests in the Confidential Information. The
Employee shall not at any time, either during or subsequent to the term of this
Agreement, disclose to others, use, copy or permit to be copied, except in
pursuance of his duties for an on behalf of the Company, it successors, assigns
or nominees, any Confidential Information of any member of the Company Group
(regardless of whether developed by the Employee) without the prior written
consent of the Company. Employee acknowledges that the use or disclosure of the
Confidential Information to anyone or any third party could cause monetary loss
and damages to the Company. The parties further agree that in the event of a
violation of this covenant against non-use and non-disclosure of Confidential
Information, that the Company shall be entitled to a recovery of damages from
Employee and/or an injunction against Employee for the breach or violation or
continued breach or violation of this covenant.
EMPLOYMENT AGREEMENT PAGE 13 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 14
As used herein, "Company Group" means the Company, and any entity that
directly or indirectly controls, is controlled by, or is under common control
with, the Company, and for purposes of this definition "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities, by contract or otherwise.
The term "Confidential Information" with respect to any person means any
secret or confidential information or know-how and shall include, but shall not
be limited to, the plans, financial and operating information, customers,
supplier arrangements, contracts, costs, prices, uses, and applications of
products and services, results of investigations, studies or experiments owned
or used by such person, and all apparatus, products, processes, compositions,
samples, formulas, computer programs, computer hardware designs, computer
firmware designs, and servicing, marketing or manufacturing methods and
techniques at any time used, developed, investigated, made or sold by such
person, before or during the term of this Agreement, that are not readily
available to the public or that are maintained as confidential by such person.
The Employee shall maintain in confidence any Confidential Information of third
parties received as a result of his employment with the Company in accordance
with the Company's obligations to such third parties and the policies
established by the Company.
10. DELIVERY OF DOCUMENTS UPON TERMINATION. The Employee shall deliver to
the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Employee, solely or jointly with others, that are in
the Employee's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company Group. In this regard, the Employee hereby grants and
conveys to the Company all right, title and interest in and to, including
without limitation, the right to possess, print, copy, and sell or otherwise
dispose of, any reports, records, papers, summaries, photographs, drawings or
other documents, and writings, and copies, abstracts or summaries thereof, that
may be prepared by the Employee or under his direction or that may come into his
possession in any way during the term of his employment with the Company that
relate in any manner to the past, present or anticipated business of any member
of the Company Group.
11. DISPUTES. The Company and Employee agree to the following in regard to
any disputes between them arising under any of the provisions of this Agreement
other than the provisions of Sections 7 through 10 hereof. Nothing in this
Section 11 applies to or governs disputes arising under Sections 7 through 10 of
this Agreement.
EMPLOYMENT AGREEMENT PAGE 14 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 15
(a) MEDIATION. The Company and Employee agree to mediate any dispute
arising under the applicable provisions of this Agreement. In the
event of any such dispute, the parties, within thirty (30) days of a
written request for mediation, shall attend, in good faith, a
mediation in order to make a good faith reasonable effort to resolve
such dispute arising under this Agreement. The parties shall attempt,
in good faith, to agree to a mediator. If unable to so agree, the
parties, in that event, will move to arbitration as provided in this
Agreement and there will be no mediation. If this good faith mediation
effort fails to resolve any dispute arising under this Agreement, the
Company and Employee agree to arbitrate any dispute arising under this
Agreement. This arbitration shall occur only after the mediation
process described herein.
(b) ARBITRATION. The Company and Employee agree, as concluded by the
parties to this Agreement on the advice of their counsel, and as
evidenced by the signatures of the parties and of their respective
attorneys, that all questions as to rights and obligations arising
under the terms of this Agreement are subject to arbitration and such
arbitration shall be governed by the provisions of the Texas General
Arbitration Act (Texas Civil Practice and Remedies Code Section
171.001 et seq as it may be amended from time to time).
(c) DEMAND FOR ARBITRATION. If a dispute should arise under this
Agreement, either party may within thirty (30) days make a demand for
arbitration by filing a demand in writing with the other.
(d) APPOINTMENT OF ARBITRATORS. The parties to this Agreement may
agree on one arbitrator, but in the event that they cannot so agree,
there shall be three arbitrators, one named in writing by each of the
parties within thirty (30) days after demand for arbitration is made,
and a third to be chosen by the two so named. The arbitrators among
themselves shall appoint a presiding arbitrator. Should either party
fail to timely join in the appointment of the arbitrators, the
arbitrators shall be appointed in accordance with the provisions of
Texas Civil Practice and Remedies Code Section 171.041.
(e) HEARING. All arbitration hearings conducted under the terms of
this Agreement, and all judicial proceedings to enforce any of the
provisions of this Agreement, shall take place in Lubbock County,
Texas. The hearing before the arbitrators of the matter to be
arbitrated shall be at the time and place within that County selected
by the arbitrators or if deemed by the arbitrators to be more
convenient for the parties or more economically feasible, may be
conducted in any city within the Service Area as referred to in
Section 7 hereof or within the State of Texas.
EMPLOYMENT AGREEMENT PAGE 15 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 16
(f) ARBITRATION AWARD. If there is only one arbitrator, his or her
decision shall be binding and conclusive. The submission of a dispute
to the arbitrators and the rendering of their decision shall be a
condition precedent to any right of legal action on the dispute. A
judgment confirming the award of the arbitrators may be rendered by
any court having jurisdiction; or the court may vacate, modify, or
correct the award in accordance with the provisions of the Texas
General Arbitration Act (Texas Civil Practice and Remedies Code ss.
171.087 et seq as it may be amended from time to time).
(g) COSTS OF ARBITRATION. The costs and expenses of arbitration,
including the fees of the arbitrators but excluding any attorneys'
fees, shall be advanced by the Company, but will ultimately be borne
by the losing party or in such proportions as the arbitrators shall
determine.
(h) CONDUCT OF ARBITRATION. Any arbitration brought under the terms of
this Agreement shall be conducted in the following manner:
(1) Time Limitations. The parties agree that the following time
limitations shall govern the arbitration proceedings conducted
under the terms of this Agreement:
(a) Any demand for arbitration must be filed within thirty
(30) days of the date the mediation is deemed unsuccessful,
or thirty (30) days after the date of the written request
for mediation, whichever is later.
(b) Each party must select an arbitrator within thirty (30)
days of receipt of notice that an arbitration proceeding has
commenced. In the event that no such selection is made, the
arbitrator selected by the other party may conduct the
arbitration proceeding without selecting any other
arbitrator.
(c) The hearing must be held within sixty (60) days of the
date on which the third arbitrator is selected.
(d) Hearing briefs must be submitted no later than ten (10)
days after the hearing.
(e) The arbitration award must be made within thirty (30)
days of the receipt of hearing briefs.
EMPLOYMENT AGREEMENT PAGE 16 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 17
(2) Discovery in Arbitration Proceedings. The parties agree that
discovery may be conducted in the course of the arbitration
proceeding in accordance with the following provisions:
(a) Each party may notice no more than three (3) depositions
in total, including both witnesses adherent to the adverse
party and third-party witnesses.
(b) Each party may serve no more than twenty-five (25)
requests for admission on the other party. No requests may
be served within ten (10) days of the date of hearing,
unless the parties otherwise stipulate. All requests for
admission shall be responded to within ten (10) days of
service of the requests, unless the parties otherwise
stipulate.
(c) Each party may serve no more than fifty (50)
interrogatories on the other party. No interrogatory shall
contain subparts, or concern more than one topic or subject
of inquiry. Interrogatories may not be phrased so as to
circumvent the effect of this clause. No interrogatories may
be served within ten (10) days of the date of hearing,
unless the parties otherwise stipulate. All interrogatories
shall be responded to within ten (10) days of service of the
interrogatories, unless the parties otherwise stipulate.
(d) Each party may serve no more than ten (10) requests for
production of documents on the other party. No request for
production of documents shall contain subparts, or seek more
than one type of document. Requests for production of
documents may not be phrased so as to circumvent the effect
of this clause. Unless the parties otherwise stipulate,
requests for production of documents may not be served
within ten (10) day of the date of hearing, and all requests
for production of documents shall be responded to within ten
(10) days of service of the requests.
(e) If any party contends that the other party has served
discovery requests in a manner not permitted by this
Section, or that the other party's response to a discovery
request is unsatisfactory, the party may request the
presiding arbitrator to resolve such discovery disputes. The
presiding arbitrator shall prescribe the procedure by which
such disputes are resolved. Any discovery dispute may be
handled by telephone conference among the parties and the
presiding arbitrator.
EMPLOYMENT AGREEMENT PAGE 17 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 18
12. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT. The Company shall require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company
to expressly assume and agree in writing to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place, provided that the Employee must be given
the position as the Chief Executive Officer ("CEO") with the same authority,
powers and responsibilities set forth in Section 1 hereof with respect to the
subsidiary or subdivision which operates the business of the Company as it
exists on the date of such business combination. Failure of the Company to
obtain such express assumption and agreement at or prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Employee to compensation and benefits from the Company in the same amount and on
the same terms to which the Employee would be entitled hereunder if the Company
terminated the Employee's employment without Cause, except that all options will
be immediately vested. For purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date of
termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise. The Company may not assign this Agreement, (i) except in connection
with, and to the acquiror of, all or substantially all of the business or assets
of the Company, provided such acquiror expressly assumes and agrees in writing
to perform this Agreement as provided in this Section, and (ii) except in
connection with the Company becoming a wholly-owned subsidiary of Holdings, in
which event the Company may assign this Agreement and all of the Company's
rights and obligations hereunder to Holdings. The Employee may not assign his
rights or delegate his duties or obligations under this Agreement.
13. NOTICE. Any notices or other communications required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly made
or given when hand delivered, one (1) business day after being transmitted by
telecopier (confirmed by mail) or sent by overnight courier against receipt, or
five (5) days after being mailed by registered or certified mail, postage
prepaid, return receipt requested, to the party to whom such communication is
given at the address set forth below, which address may be changed by notice
given in accordance with this Section:
If to the Company: Alamosa PCS LLC
4403 Brownfield Highway
Lubbock, Texas 79407
Attn: David E. Sharbutt, Chairman
EMPLOYMENT AGREEMENT PAGE 18 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 19
With Copy to: Jack McCutchin, Jr.
Crenshaw, Dupree & Milam, L.L.P.
P. O. Box 1499
Lubbock, Texas 79408-1499
If to the Employee: David E. Sharbutt
4606 91st Street
Lubbock, Texas 79424
With Copy to: Bill Harriger
Murchison Hund & Harriger, L.L.P.
Post Office Box 54390
Lubbock, Texas 79453-4390
14. MISCELLANEOUS.
(a) SEVERABILITY. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity
or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect.
(b) NO ORAL MODIFICATION, WAIVER OR DISCHARGE. No provisions of this
Agreement may be modified, waived or discharged orally, but only by a
waiver, modification or discharge in writing signed by the Employee
and such officer as may be designated by the Board of Managers of the
Company to execute such a waiver, modification or discharge. No waiver
by either party hereto at any time of any breach by the other party
hereto of, or failure to be in compliance with, any condition or
provision of this Agreement to be performed by such other party shall
be deemed a waiver of similar or dissimilar provisions or conditions
at the time or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect
to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement or in the documents attached
as Exhibits to this Agreement.
(c) INVALID PROVISIONS. Should any portion of this Agreement be
adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of
this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended
or reduced in scope, or otherwise be stricken from this Agreement to
the extent required for the purposes of validity and enforcement
thereof.
EMPLOYMENT AGREEMENT PAGE 19 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 20
(d) ENTIRE AGREEMENT. This Agreement and the Exhibits attached hereto
represent the entire agreement of the parties and shall supersede any
and all previous contracts, arrangements or understandings, express or
implied, between the Employee and the Company with respect to the
subject matter hereof.
(e) SECTION HEADINGS FOR CONVENIENCE ONLY. The section headings herein
are for the purpose of convenience only and are not intended to define
or limit the contents of any section.
(f) EXECUTION IN COUNTERPARTS. The parties may sign this Agreement in
counterparts, all of which shall be considered one and the same
instrument.
(g) GOVERNING LAW AND PERFORMANCE. This Agreement shall be governed by
the laws of the State of Texas and shall be deemed to be executed in
and performance called for in Lubbock, Lubbock County, Texas, or at
the Company's sole option, by the laws of the state or states where
this Agreement may be at issue in any litigation involving the
Company.
DATED this 18th day of January, 2000, to be effective October 1, 1999.
COMPANY
ALAMOSA PCS LLC
By: /s/ SCOTTY HART
-------------------------------------
Name: Scotty Hart
-------------------------------------
Title: Director, by authority of the
Board of Directors
-------------------------------------
EMPLOYEE
/s/ DAVID E. SHARBUTT
---------------------------------------
DAVID E. SHARBUTT
EMPLOYMENT AGREEMENT PAGE 20 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 21
Approved as to the mediation and arbitration provisions in Paragraph 12 above.
CRENSHAW, DUPREE & MILAM, L.L.P.
By: /s/ JACK McCUTCHIN, JR.
------------------------------------
JACK McCUTCHIN, JR.
Attorneys for Alamosa PCS LLC
/s/ BILL HARRIGER
---------------------------------------
BILL HARRIGER
Attorney for Employee
Attachment: Exhibit "A" - The Minimum, Expected and Exceptional Milestones
for the Third Quarter and Fourth Quarter of 1999 as adopted by
the Board of Managers of the Company
Exhibit "B" - List of Companies or Entities Excepted from
Covenants
EMPLOYMENT AGREEMENT PAGE 21 OF 22
ALAMOSA PCS LLC and David E. Sharbutt
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into this date
by and between ALAMOSA PCS, LLC, a Texas Limited Liability Company, having its
principal executive office located at 4403 Brownfield Highway, Lubbock, Texas
79407 (the "Company"), and KENDALL COWAN, an individual residing at 8402
Vicksburg, Lubbock, Texas (the "Employee").
WITNESSETH:
WHEREAS, the parties are entering into this Agreement to set forth and
confirm their respective rights and obligations with respect to the Employee's
employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto mutually agree as follows:
1. EMPLOYMENT; TERM; DUTIES. The Company hereby employs the Employee as
Chief Financial Officer ("CFO"). The term of the Employee's employment, pursuant
to this Agreement, will commence on December 1, 1999, (the "Commencement Date")
and will continue until November 30, 2004, or the termination of this Agreement
as described in Section 6 hereof, whichever shall occur first. The Employee
hereby accepts such employment, and agrees to devote his full time and effort to
the business and affairs of the Company with such duties consistent with the
Employee's position as may be assigned to him from time to time by the Board of
Managers of the Company and/or the Chief Executive Officer ("CEO") of the
Company. The CFO shall report to the CEO of the Company. Notwithstanding the
foregoing, the Company acknowledges that the Employee has other business
interests and ownerships as well as serving on the Boards of Directors of other
companies in which the Employee is a stockholder or owner. Subject to the
provisions of Sections 8 through 11 hereof, the Company acknowledges and
consents to the continuation of these ownerships and relationships, provided
they do not interfere with the Employee's duties under this Agreement.
Notwithstanding anything to the contrary in this Agreement, nothing in this
Agreement shall be deemed to impose any obligation on the Company or any of its
subsidiaries to continue to employ the Employee, or on the Employee to remain in
the employ of the Company or any of its subsidiaries.
2. COMPENSATION. In consideration of all services rendered by the
Employee as CFO during the term of his employment, pursuant to this Agreement,
the Company will provide the Employee with the following compensation:
(a) BASE SALARY. The Company will pay the Employee a base
salary at the annual rate of $150,000.00, payable periodically
but no less often than semi-monthly, in substantially equal
amounts, in accordance with the
Employment Agreement PAGE 1 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 2
Company's payroll practices from time to time in effect. The
Company will review the Employee's base salary at least once
each year and may, in its discretion, increase the Employee's
base salary.
(b) BONUS. In addition to the Employee's base salary, the
Employee shall be eligible to receive a bonus (a "Quarterly
Bonus") for each calendar quarter in an amount, if any,
determined as follows: In each calendar quarter, beginning
with the quarter ending December 31, 1999, Employee's
Quarterly Bonus shall be equal to the sum of (1) plus (2) as
follows:
(1) $18,750.00 multiplied by the
percentage set forth opposite each Expected Milestone
set forth in the attached EXHIBIT "A", incorporated
herein by reference, which is achieved for that
calender quarter.
(2) $18,750.00 multiplied by the percentage set forth
opposite each Exceptional Milestone set forth in
EXHIBIT "A" which is achieved for that calendar
quarter.
If any particular Expected Milestone or Exceptional Milestone
is not achieved for any calendar quarter, that percentage
share of the dollar amount specified in (1) or (2) above, as
the case may be, shall not be payable as part of the Quarterly
Bonus. The Expected Milestones, Exceptional Milestones and
percentages set forth on EXHIBIT "A" may be changed by the
Company at any time and from time to time, but any such change
shall not apply earlier than the calendar quarter following
the calendar quarter in which such change is made by the
Company and communicated to the Employee.
Any Quarterly Bonus owing to the Employee shall be paid within
forty-five (45) days following the end of the applicable
calendar quarter.
(c) UNIT OPTIONS. If, on June 30, 2000, the Company has not
become a wholly-owned subsidiary of Alamosa PCS Holdings,
Inc., a Delaware corporation ("Holdings"), then on said date
the Company will convert the membership interests in the
Company to forty-eight million five hundred thousand
(48,500,000) membership units, and shall grant to the Employee
options to purchase membership units in the Company as
follows:
(1) Option. An option (the "Option") to purchase one
million four hundred fifty-five thousand (1,455,000)
membership units in the Company at a per unit
purchase price equal to Fifteen Dollars ($15.00),
said Option, subject to Section 7 hereof, to vest and
be
Employment Agreement PAGE 2 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 3
exercisable by the Employee in five (5) equal
installments of two hundred ninety-one thousand
(291,000) membership units each on November 30, 2000,
November 30, 2001, November 30, 2002, November 30,
2003, and November 30, 2004, respectively, and
thereafter be exercisable at any time until January
5, 2009, in accordance with the option agreement to
be entered into between the Company and the Employee
as of July 31, 2000, upon terms and conditions
substantially similar to the terms and conditions of
the Nonqualified Stock Option Agreement entered into
by the Employee pursuant to the Alamosa PCS Holdings,
Inc. 1999 Long-Term Incentive Plan.
The Employee will receive no additional compensation for serving the Company in
any other capacity.
3. EMPLOYEE BENEFITS. The Employee will be entitled to participate in
all incentive, retirement, profit-sharing, life, medical, disability and other
benefit plans and programs (collectively "Benefit Plans") as are from time to
time generally available to other executives of the Company with comparable
responsibilities, subject to the provisions of those programs. Without limiting
the generality of the foregoing, the Company will provide the Employee with
basic health and medical benefits on the terms that such benefits are provided
to other executives of the Company with comparable responsibilities. The
Employee will also be entitled to holidays, sick leave and vacation in
accordance with the Company's policies as they may change from time to time, but
in no event shall the Employee be entitled to less than four (4) weeks paid
vacation per year.
4. ADDITIONAL BENEFITS FOR EMPLOYEE. The Employee is a licensed
Certified Public Accountant. The Company acknowledges that it would be in the
best interest of the Company for the Employee to maintain such license. As
additional benefits to the Employee under this Agreement related to such
license, the Company agrees to either pay directly or reimburse the Employee
during the term of this Agreement for each of the following:
(a) Continuing Professional Education (CPE). The Employee is
required to maintain CPE classes. The Company will pay or
reimburse the costs of such classes sufficient for Employee to
maintain his license, but such payment shall be limited to the
cost of such classes (i.e. tuition and books) and the direct
costs associated with such classes, such as travel to and from
and housing, including hotel and meals for the Employee only.
Employment Agreement PAGE 3 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 4
(b) Dues and Licenses. The Company will pay or reimburse the
Employee for all professional dues and licenses attributable
to the Employee's license, including but not limited to the
following:
(1) Texas Society of CPAs;
(2) American Institute of CPAs; and
(3) Annual License Fees, Texas State Board of
Accountancy.
5. EXPENSES.
(a) Reimbursement for Expenses. The Company will promptly
reimburse the Employee, in accordance with the Company's
policies and practices in effect from time to time, for all
expenses reasonably incurred by the Employee in performance of
the Employee's duties under this Agreement, including
reimbursement for miles driven by the Employee in furtherance
of the Company's business ("Business Mileage").
(1) Reimbursement for Business Mileage shall be at
the standard mileage rate allowed by the Internal
Revenue Service ("IRS") for the taxable year and set
forth in the appropriate IRS publication.
(2) Business mileage does not include commuting from
Employee's residence to the Company's headquarters.
(3) Employee is responsible for proper substantiation
and reporting of Business Mileage and/or actual
expenses.
(4) Employee acknowledges that the payment to him of
a monthly vehicle allowance plus the standard mileage
rate may result in taxable income if the business
portion of actual automobile expenses is less than
the total amount paid to employee under this
subsection, or if employee does not maintain the
records required by the Internal Revenue Code and the
Regulations thereunder. Employee has been advised to
consult a tax advisor to determine the taxability of
payments under this subsection, and the record
keeping requirements associated with the travel and
expenses associated with such payments.
(b) Expense Allowance. In addition to reimbursed expenses,
Employee is entitled to $600.00 per month as a vehicle
allowance.
6. TERMINATION. The Employee's employment by the Company: (a) shall
terminate upon the Employee's death or disability (as defined below); (b) may be
terminated by the Company for any reason other than cause or nonperformance at
any
Employment Agreement PAGE 4 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 5
time; (c) may be terminated by the Company for cause (as defined below) at any
time; (d) may be terminated by the Employee, without cause at any time upon
forty-five (45) days' prior written notice delivered by the Employee to the
Company; (e) may be terminated by the Employee for cause (as defined below) at
any time upon forty-five (45) days' prior written notice delivered by the
Employee to the Company; and (f) may be terminated by the Company for
non-performance by the Employee at any time.
(a) The term "disability" means the determination under the
Company's Long-Term Disability Plan that the Employee is
eligible to receive a disability benefit.
(b) The term "cause" in the event of termination of the
Employee's employment by the Company means (i) any breach of
Sections 8 or 10 of this Agreement by Employee which has a
materially adverse effect on the Company and which is not or
cannot be cured within thirty (30) days after notice from the
CEO or the Board of Managers of the Company thereof; (ii)
commission of any act of fraud, embezzlement or dishonesty by
the Employee that is materially and demonstrably injurious to
the Company; (iii) any act or omission by Employee which
constitutes a uncured default or breach of that certain Sprint
PCS Management Agreement dated July 17, 1998 and as it may be
amended from time to time or any other similar Sprint
Management Agreement to which the Company or any of its
affiliates or subsidiaries may be a party ("the Sprint
Agreement"); or (iv) any other intentional misconduct by the
Employee adversely affecting the business or affairs of the
Company in a material manner. The term "intentional misconduct
by the Employee adversely affecting the business or affairs of
the Company" shall mean such misconduct that is detrimental to
the business or the reputation of the Company as it is
perceived both by the general public and the
telecommunications industry.
(c) The term "cause" in the event of termination of the
Employee's employment by the Employee means (i) a dispute
between the Company and the Employee over accounting issues
provided, however, any such dispute shall not constitute
"cause" if the Company, at its own expense, elects to have a
nationally recognized public accounting firm resolve the
accounting issue dispute and such accounting firm agrees with
the Company's position regarding such accounting issue; (ii)
termination of employment by the Employee at any time more
than six (6) months after the date of termination by the
Company for any reason of the employment of David Sharbutt as
Chief Executive Officer of the Company ("Sharbutt's
Termination"), provided the Employee, within sixty (60) days
of the date of Sharbutt's Termination, notifies the Company in
writing of his intention to terminate employment under this
provision and specifies in such notice his date of employment
termination; (iii) the requirement by the Company of
Employment Agreement PAGE 5 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 6
the relocation of the Employee from Lubbock, Texas; (iv) the
change in job responsibilities of the Employee resulting in
the demotion of the Employee from the position of CFO, which
demotion is caused by something other than would be cause for
termination of the Employee's employment by the Company for
cause and other than the non-performance of the Employee as
defined later herein; or (v) the failure of the Company to
complete its initial public offering (IPO) on or before
December 31, 2000.
(d) The term "non-performance by the Employee" in the event of
termination of the Employee's employment by the Company means
the determination by a super-majority (greater than 75%) of
the members of the Board of Managers of the Company, in their
sole and absolute discretion, that the Employee is not
performing his duties under this Agreement after the CEO or
the Board of Managers of the Company has delivered to the
Employee written notice which specifically identifies the
manner in which the CEO or the Board believes he is not
performing his duties and which is not or cannot be cured
within 15 days after such written notice is delivered to the
Employee.
7. CONSEQUENCES OF TERMINATION.
(a) CONSEQUENCES OF TERMINATION ON EMPLOYEE'S DEATH OR
DISABILITY. If the Employee's employment is terminated prior
to November 30,2004, because of the Employee's death or
disability, (i) subject to Section 7(g) hereof, this Agreement
terminates immediately; (ii) Employee or his legal
representative or estate, as the case may be, shall be
eligible to exercise any options granted and vested pursuant
to Section 2(c) hereof at the time of such death or
disability, plus, if such death or disability does not occur
on November 30 of a given year, a fractional portion of those
options which would have vested and become exercisable
pursuant to Section 2(c) hereof on the November 30 immediately
following such death or disability based on a fraction whose
numerator is the number of months (including the month in
which the date of death or disability occurs) since the
previous November 30 and whose denominator is twelve (12), in
accordance with the provisions of Section 2(c) hereof and the
option agreement referred to therein, and any other options
granted to the Employee shall be forfeited; (iii) the Company
will pay the Employee, or his legal representative or estate,
as the case may be, in full satisfaction of all of its
compensation (base salary and bonus) obligations under this
Agreement, an amount equal to the sum of any base salary due
to the Employee through the last day of employment, plus any
accrued bonus to which the Employee may have been entitled on
the last day of employment, but had not yet been received; and
(iv) the Employee's benefits and rights under any Benefit Plan
shall be paid, retained or
Employment Agreement PAGE 6 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 7
forfeited in accordance with the terms of such plan; provided,
however, that Employer shall have no obligation to make any
payments toward these benefits for Employee from and after
termination.
(b) CONSEQUENCES OF TERMINATION BY THE COMPANY FOR ANY REASON
OTHER THAN FOR CAUSE OR FOR NON-PERFORMANCE OF EMPLOYEE.
(1) If the Employee's employment is terminated by the
Company prior to November 30, 2004, for any reason
other than for cause or non-performance of Employee,
(i) subject to Section 7(g) hereof, this Agreement
terminates immediately; (ii) Employee or his legal
representative or estate, as the case may be, shall
be eligible to exercise any options granted but not
exercised pursuant to Section 2(c) hereof, which
options shall be deemed vested as of the date of the
Employee's termination of employment regardless of
whether or not they are in fact otherwise vested
pursuant to Section 2(c) hereof on said date, in
accordance with the provisions of Section 2(c) hereof
and the option agreement referred to therein; (iii)
the Company will pay the Employee, in full
satisfaction of all of its compensation (base salary
and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the
Employee through the last day of employment, plus any
accrued bonus to which the Employee may have been
entitled on the last day of employment, but had not
yet been received; (iv) the Company will pay the
Employee, within sixty (60) days of such termination,
a lump sum severance payment equal to one (1) year's
base salary as in effect at the date of employment
termination; and (v) the Employee's benefits and
rights under any Benefit Plan, other than any basic
health and medical benefit plan, shall be paid,
retained or forfeited in accordance with the terms of
such plan; provided, however, that Employer shall
have no obligation to make any payments toward these
benefits for Employee from and after termination.
(2) Any payment pursuant to clause (b)(1)(iv) above
(the "Termination Payment"):
a. will be subject to offset for any
advances, amounts receivable, and loans,
including accrued interest, outstanding on
the date of the employment termination; and
b. will not be subject to offset on account
of any remuneration paid or payable to the
Employee for any subsequent employment the
Employee may obtain, whether
Employment Agreement PAGE 7 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 8
during or after the period during which the
Termination Payment is made, and the
Employee shall have no obligation whatever
to seek any subsequent employment.
(c) CONSEQUENCES OF TERMINATION FOR CAUSE BY THE COMPANY. If
the Employee's employment is terminated by the Company prior
to November 30, 2004, for cause, (i) subject to Section 7(g)
hereof, this Agreement terminates immediately; (ii) Employee
shall not be eligible to exercise and shall forfeit any
options granted (whether or not vested) pursuant to Section
2(c) hereof at the time of such employment termination that
have not already been exercised by the Employee at the time of
such employment termination; (iii) the Company will pay the
Employee, in full satisfaction of all of its compensation
(base salary and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the Employee
through the last day of employment, plus any accrued bonus to
which the Employee may have been entitled on the last day of
employment, but had not yet been received; and(iv) the
Employee's benefits and rights under any Benefit Plan shall be
paid, retained or forfeited in accordance with the terms of
such plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for
Employee from and after termination.
(d) CONSEQUENCES OF TERMINATION BY THE EMPLOYEE FOR ANY REASON
OTHER THAN FOR CAUSE OR EMPLOYEE'S DEATH OR DISABILITY. If,
upon forty-five (45) days' prior written notice to the Company
by the Employee, the Employee's employment is terminated by
the Employee prior to November 30, 2004, for any reason other
than for cause or Employee's death or disability, (i) subject
to Section 7(g) hereof, this Agreement terminates immediately;
(ii) Employee or his legal representative or estate, as the
case may be, shall be eligible to exercise any options granted
and vested, but not exercised pursuant to Section 2(c) hereof
at the time of such employment termination, in accordance with
the provisions of Section 2(c) hereof and the option agreement
referred to therein, and any other options granted to the
Employee shall be forfeited; (iii) the Company will pay the
Employee, in full satisfaction of all of its compensation
(base salary and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the Employee
through the last day of employment, plus any accrued bonus to
which the Employee may have been entitled on the last day of
employment, but had not yet been received; and (iv) the
Employee's benefits and rights under any Benefit Plan, other
than any basic health and medical benefit plan, shall be
retained or forfeited in accordance with the terms of such
plan; provided, however, that Employer shall have no
Employment Agreement PAGE 8 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 9
obligation to make any payments toward these benefits for
Employee from and after termination.
(e) CONSEQUENCES OF TERMINATION BY THE EMPLOYEE FOR CAUSE.
(1) If, upon forty-five (45) days' prior written
notice to the Company by the Employee, the Employee's
employment is terminated by the Employee prior to
November 30, 2004, for cause (i) subject to Section
7(g) hereof, this Agreement terminates immediately;
(ii) Employee or his legal representative or estate,
as the case may be, shall be eligible to exercise any
options granted and vested pursuant to Section 2(c)
hereof at the time of such employment termination,
plus, if such employment termination does not occur
on November 30 of a given year, those options which
would have vested and become exercisable pursuant to
Section 2(c) hereof on the November 30 immediately
following such employment termination, in accordance
with the provisions of Section 2(c) hereof and the
option agreement referred to therein, and any other
options granted to the Employee shall be forfeited;
(iii) the Company will pay the Employee, in full
satisfaction of all of its compensation (base salary
and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the
Employee through the last day of employment, plus any
accrued bonus to which the Employee may have been
entitled on the last day of employment, but had not
yet been received; (iv) the Company will pay the
Employee, within sixty (60) days of such termination,
a lump sum severance payment equal to one (1) year's
base salary as in effect at the date of employment
termination or the unpaid balance of the annual base
salary which would have been payable to Employee
through November 30, 2004, whichever amount shall be
less; and (v) the Employee's benefits and rights
under any Benefit Plan, other than any basic health
and medical benefit plan, shall be paid, retained or
forfeited in accordance with the terms of such plan;
provided, however, that Employer shall have no
obligation to make any payments toward these benefits
for Employee from and after termination.
(2) Any payment pursuant to clause (e)(1)(iv) above
(the "Termination Payment"):
a. will be subject to offset for any
advances, amounts receivable, and loans,
including accrued interest, outstanding on
the date of the employment termination; and
Employment Agreement PAGE 9 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 10
b. will not be subject to offset on account
of any remuneration paid or payable to the
Employee for any subsequent employment the
Employee may obtain, whether during or after
the period during which the Termination
Payment is made, and the Employee shall have
no obligation whatever to seek any
subsequent employment.
(f) CONSEQUENCES OF TERMINATION BY THE COMPANY FOR
NON-PERFORMANCE BY THE EMPLOYEE. If the Employee's employment
is terminated by the Company prior to November 30, 2004, for
non-performance by the Employee (i) subject to Section 7(g)
hereof, this Agreement terminates immediately; (ii) Employee
or his legal representative or estate, as the case may be,
shall be eligible to exercise any options granted and vested
but not exercised pursuant to Section 2(c) hereof at the time
of such employment termination, in accordance with the
provisions of Section 2(c) hereof and the option agreement
referred to therein, and any other options granted to the
Employee shall be forfeited; (iii) the Company will pay the
Employee, in full satisfaction of all of its compensation
(base salary and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the Employee
through the last day of employment, plus any accrued bonus to
which the Employee may have been entitled on the last day of
employment, but had not yet been received; and (iv) the
Employee's benefits and rights under any Benefit Plan, other
than any basic health and medical benefit plan, shall be paid,
retained or forfeited in accordance with the terms of such
plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for
Employee from and after termination.
(g) PRESERVATION OF CERTAIN PROVISIONS. Notwithstanding any
provisions of this Agreement to the contrary, the provisions
of Sections 8 through 13 hereof shall survive the expiration
or termination of this Agreement as necessary to give full
effect to all of the provisions of this Agreement.
8. NON-COMPETITION BY EMPLOYEE. During the term of this Agreement, the
Employee shall not, directly or indirectly, either as an Employee, Employer,
Consultant, Agent, Principal, Partner, Corporate Officer, Director, Shareholder,
Member, Investor or in any other individual or representative capacity, engage
or participate in any business that is in competition in any manner whatever
with the business of the Company. For these purposes, the business of the
Company is establishing and providing mobile wireless communications services
(the "Business"), including all aspects of the Business within the Service Area
as that term is defined in the Schedule of Definitions referred to in and
incorporated by reference into the Sprint Agreement. Furthermore,
Employment Agreement PAGE 10 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 11
upon the expiration of this Agreement or the termination of this Agreement prior
to November 30, 2004, for any reason, the Employee expressly agrees not to
engage or participate, directly or indirectly, either as an Employee, Employer,
Consultant, Agent, Principal, Partner, Stockholder, Corporate Officer, Director,
Shareholder, Member, Investor or in any other individual or representative
capacity, for a period of two (2) years in any business that is in competition
with the Business and that is located within and/or doing business within the
Service Area as defined above as in existence during the term of the Employee's
employment with the Company. The parties agree that the Company has a legitimate
interest in protecting the Business and goodwill of the Company that has
developed in the areas of the Company's Business and in the geographical areas
of this Covenant Not To Compete as a result of the operations of the Company.
The parties agree that the Company is entitled to protection of its interests in
these areas. The parties further agree that the limitations as to time,
geographical area, and scope of activity to be restrained do not impose a
greater restraint upon Employee than is necessary to protect the goodwill or
other business interest of the Company. The parties further agree that in the
event of a violation of this Covenant Not To Compete, that the Company shall be
entitled to the recovery of damages from Employee and/or an injunction against
Employee for the breach or violation or continued breach or violation of this
Covenant. The Employee agrees that if a court of competent jurisdiction
determines that the length of time or any other restriction, or portion thereof,
set forth in this Section 8 is overly restrictive and unenforceable, the court
may reduce or modify such restrictions to those which it deems reasonable and
enforceable under the circumstances, and as so reduced or modified, the parties
hereto agree that the restrictions of this Section 8 shall remain in full force
and effect. The Employee further agrees that if a court of competent
jurisdiction determines that any provision of this Section 8 is invalid or
against public policy, the remaining provisions of this Section 8 and the
remainder of this Agreement shall not be affected thereby, and shall remain in
full force and effect.
9. EXCEPTIONS TO NON-COMPETITION COVENANTS. Notwithstanding anything
herein to the contrary or apparently to the contrary, the following shall not be
a violation or breach of the non-competition covenants contained in this
Agreement. Employee may invest in the securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if (a) such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934 and
(b) the Employee does not beneficially own (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) in excess of 5% of the outstanding
capital stock of such enterprise. Employee's investment in any company or entity
in which Employer is an owner or stockholder at the time of entering into this
Agreement shall also be an exception to the non-competition covenants. The names
of these companies or entities are shown on the attached Exhibit B, which is
incorporated herein by this reference as if copied at length. Notwithstanding
the foregoing, the Employee's relationship with other entities or business
interests of
Employment Agreement PAGE 11 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 12
Employee shall in no way interfere with or detract from the duties of the
Employee to the Company as called for in this Agreement.
10. CONFIDENTIAL INFORMATION. The Employee recognizes and acknowledges
that he will have access to certain information of members of the Company Group
(as defined below) and that such information is confidential and constitutes
valuable, special and unique property of such members of the Company Group. The
parties agree that the Company has a legitimate interest in protecting the
Confidential Information, as defined below. The parties agree that the Company
is entitled to protection of its interests in the Confidential Information. The
Employee shall not at any time, either during or subsequent to the term of this
Agreement, disclose to others, use, copy or permit to be copied, except in
pursuance of his duties on behalf of the Company, it successors, assigns or
nominees, any Confidential Information of any member of the Company Group
(regardless of whether developed by the Employee) without the prior written
consent of the Company. Employee acknowledges that the use or disclosure of the
Confidential Information to anyone or any third party could cause monetary loss
and damages to the Company. The parties further agree that in the event of a
violation of this covenant against non-use and non-disclosure of Confidential
Information, that the Company shall be entitled to a recovery of damages from
Employee and/or an injunction against Employee for the breach or violation or
continued breach or violation of this covenant.
As used herein, "Company Group" means the Company, and any entity that
directly or indirectly controls, is controlled by, or is under common control
with, the Company, and for purposes of this definition "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities, by contract or otherwise.
The term "Confidential Information" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, financial and operating information, customers,
supplier arrangements, contracts, costs, prices, uses, and applications of
products and services, results of investigations, studies or experiments owned
or used by such person, and all apparatus, products, processes, compositions,
samples, formulas, computer programs, computer hardware designs, computer
firmware designs, and servicing, marketing or manufacturing methods and
techniques at any time used, developed, investigated, made or sold by such
person, before or during the term of this Agreement, that are not readily
available to the public or that are maintained as confidential by such person.
The Employee shall maintain in confidence any Confidential Information of third
parties received as a result of his employment with the Company in accordance
with the Company's obligations to such third parties and the policies
established by the Company.
Employment Agreement PAGE 12 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 13
11. DELIVERY OF DOCUMENTS UPON TERMINATION. The Employee shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Employee, solely or jointly with others, that are in
the Employee's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company Group. In this regard, the Employee hereby grants and
conveys to the Company all right, title and interest in and to, including
without limitation, the right to possess, print, copy, and sell or otherwise
dispose of, any reports, records, papers, summaries, photographs, drawings or
other documents, and writings, and copies, abstracts or summaries thereof, that
may be prepared by the Employee or under his direction or that may come into his
possession in any way during the term of his employment with the Company that
relate in any manner to the past, present or anticipated business of any member
of the Company Group.
12. DISPUTES. The Company and Employee agree to the following in regard
to any disputes between them arising under any of the provisions of this
Agreement other than the provisions of Sections 8 through 11 hereof. Nothing in
this Section 12 applies to or governs disputes arising under Sections 8 through
11 of this Agreement.
(a) MEDIATION. The Company and Employee agree to mediate any
dispute arising under the applicable provisions of this
Agreement. In the event of any such dispute, the parties,
within thirty (30) days of a written request for mediation,
shall attend, in good faith, a mediation in order to make a
good faith reasonable effort to resolve such dispute arising
under this Agreement. The parties shall attempt, in good
faith, to agree to a mediator. If unable to so agree, the
parties, in that event, will move to arbitration as provided
in this Agreement and there will be no mediation. If this good
faith mediation effort fails to resolve any dispute arising
under this Agreement, the Company and Employee agree to
arbitrate any dispute arising under this Agreement. This
arbitration shall occur only after the mediation process
described herein.
(b) ARBITRATION. The Company and Employee agree, as concluded
by the parties to this Agreement on the advice of their
counsel, and as evidenced by the signatures of the parties and
of their respective attorneys, that all questions as to rights
and obligations arising under the terms of this Agreement are
subject to arbitration and such arbitration shall be governed
by the provisions of the Texas General Arbitration Act (Texas
Civil Practice and Remedies Code Section 171.001 et seq as it
may be amended from time to time).
Employment Agreement PAGE 13 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 14
(c) DEMAND FOR ARBITRATION. If a dispute should arise under
this Agreement, either party may within thirty (30) days make
a demand for arbitration by filing a demand in writing with
the other.
(d) APPOINTMENT OF ARBITRATORS. The parties to this Agreement
may agree on one arbitrator, but in the event that they cannot
so agree, there shall be three arbitrators, one named in
writing by each of the parties within thirty (30) days after
demand for arbitration is made, and a third to be chosen by
the two so named. The arbitrators among themselves shall
appoint a presiding arbitrator. Should either party fail to
timely join in the appointment of the arbitrators, the
arbitrators shall be appointed in accordance with the
provisions of Texas Civil Practice and Remedies Code Section
171.041.
(e) HEARING. All arbitration hearings conducted under the
terms of this Agreement, and all judicial proceedings to
enforce any of the provisions of this Agreement, shall take
place in Lubbock County, Texas. The hearing before the
arbitrators of the matter to be arbitrated shall be at the
time and place within that County selected by the arbitrators
or if deemed by the arbitrators to be more convenient for the
parties or more economically feasible, may be conducted in any
city within the Service Area as referred to in Section 7
hereof or within the State of Texas.
(f) ARBITRATION AWARD. If there is only one arbitrator, his or
her decision shall be binding and conclusive. The submission
of a dispute to the arbitrators and the rendering of their
decision shall be a condition precedent to any right of legal
action on the dispute. A judgment confirming the award of the
arbitrators may be rendered by any court having jurisdiction;
or the court may vacate, modify, or correct the award in
accordance with the provisions of the Texas General
Arbitration Act (Texas Civil Practice and Remedies Code
Section 171.087 et seq as it may be amended from time to
time).
(g) COSTS OF ARBITRATION. The costs and expenses of
arbitration, including the fees of the arbitrators but
excluding any attorneys' fees, shall be advanced by the
Company, but will ultimately be borne by the losing party or
in such proportions as the arbitrators shall determine.
(h) CONDUCT OF ARBITRATION. Any arbitration brought under the
terms of this Agreement shall be conducted in the following
manner:
(1) Time Limitations. The parties agree that the
following time limitations shall govern the
arbitration proceedings conducted under the terms of
this Agreement:
Employment Agreement PAGE 14 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 15
(a) Any demand for arbitration must be filed
within thirty (30) days of the date the
mediation is deemed unsuccessful, or thirty
(30) days after the date of the written
request for mediation, whichever is later.
(b) Each party must select an arbitrator
within thirty (30) days of receipt of notice
that an arbitration proceeding has
commenced. In the event that no such
selection is made, the arbitrator selected
by the other party may conduct the
arbitration proceeding without selecting any
other arbitrator.
(c) The hearing must be held within sixty
(60) days of the date on which the third
arbitrator is selected.
(d) Hearing briefs must be submitted no
later than ten (10) days after the hearing.
(e) The arbitration award must be made
within thirty (30) days of the receipt of
hearing briefs.
(2) Discovery in Arbitration Proceedings. The parties
agree that discovery may be conducted in the course
of the arbitration proceeding in accordance with the
following provisions:
(a) Each party may notice no more than three
(3) depositions in total, including both
witnesses adherent to the adverse party and
third-party witnesses.
(b) Each party may serve no more than
twenty-five (25) requests for admission on
the other party. No requests may be served
within ten (10) days of the date of hearing,
unless the parties otherwise stipulate. All
requests for admission shall be responded to
within ten (10) days of service of the
requests, unless the parties otherwise
stipulate.
(c) Each party may serve no more than fifty
(50) interrogatories on the other party. No
interrogatory shall contain subparts, or
concern more than one topic or subject of
inquiry. Interrogatories may not be phrased
so as to circumvent the effect of this
clause. No interrogatories may be served
within ten (10) days of the date of hearing,
unless the parties otherwise stipulate. All
interrogatories shall be
Employment Agreement PAGE 15 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 16
responded to within ten (10) days of service
of the interrogatories, unless the parties
otherwise stipulate.
(d) Each party may serve no more than ten
(10) requests for production of documents on
the other party. No request for production
of documents shall contain subparts, or seek
more than one type of document. Requests for
production of documents may not be phrased
so as to circumvent the effect of this
clause. Unless the parties otherwise
stipulate, requests for production of
documents may not be served within ten (10)
day of the date of hearing, and all requests
for production of documents shall be
responded to within ten (10) days of service
of the requests.
(e) If any party contends that the other
party has served discovery requests in a
manner not permitted by this Section, or
that the other party's response to a
discovery request is unsatisfactory, the
party may request the presiding arbitrator
to resolve such discovery disputes. The
presiding arbitrator shall prescribe the
procedure by which such disputes are
resolved. Any discovery dispute may be
handled by telephone conference among the
parties and the presiding arbitrator.
13. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT. The Company shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree in writing to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place, provided that the
Employee must be given the position as the Chief Financial Officer ("CFO") with
the same authority, powers and responsibilities set forth in Section 1 hereof
with respect to the subsidiary or subdivision which operates the business of the
Company as it exists on the date of such business combination. Failure of the
Company to obtain such express assumption and agreement at or prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation and benefits from the Company in the
same amount and on the same terms to which the Employee would be entitled
hereunder if the Company terminated the Employee's employment without Cause,
except that all options will be immediately vested. For purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the date of termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Company may not assign this Agreement, (i) except in
connection with, and to the
Employment Agreement PAGE 16 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 17
acquiror of, all or substantially all of the business or assets of the Company,
provided such acquiror expressly assumes and agrees in writing to perform this
Agreement as provided in this Section, and (ii) except in connection with the
Company becoming a wholly-owned subsidiary of Holdings, in which event the
Company may assign this Agreement and all of the Company's rights and
obligations hereunder to Holdings. The Employee may not assign his rights or
delegate his duties or obligations under this Agreement.
14. NOTICE. Any notices or other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
made or given when hand delivered, one (1) business day after being transmitted
by telecopier (confirmed by mail) or sent by overnight courier against receipt,
or five (5) days after being mailed by registered or certified mail, postage
prepaid, return receipt requested, to the party to whom such communication is
given at the address set forth below, which address may be changed by notice
given in accordance with this Section:
If to the Company: Alamosa PCS LLC
4403 Brownfield Highway
Lubbock, Texas 79407
Attn: David E. Sharbutt, Chairman
With Copy to: Jack McCutchin, Jr.
Crenshaw, Dupree & Milam, L.L.P.
P. O. Box 1499
Lubbock, Texas 79408-1499
If to the Employee: Kendall Cowan
8402 Vicksburg
Lubbock, Texas 79424
With Copy to:
--------------------------------------
--------------------------------------
--------------------------------------
15. MISCELLANEOUS.
(a) SEVERABILITY. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining
provisions hereof which shall remain in full force and effect.
(b) NO ORAL MODIFICATION, WAIVER OR DISCHARGE. No provisions of
this Agreement may be modified, waived or discharged orally, but
only by a waiver, modification or discharge in writing signed by
the Employee and
Employment Agreement PAGE 17 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 18
such officer as may be designated by the Board of Managers of the
Company to execute such a waiver, modification or discharge. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or failure to be in compliance with, any
condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the time or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this
Agreement or in the documents attached as Exhibits to this
Agreement.
(c) INVALID PROVISIONS. Should any portion of this Agreement be
adjudged or held to be invalid, unenforceable or void, such
holding shall not have the effect of invalidating or voiding the
remainder of this Agreement and the parties hereby agree that the
portion so held invalid, unenforceable or void shall, if possible,
be deemed amended or reduced in scope, or otherwise be stricken
from this Agreement to the extent required for the purposes of
validity and enforcement thereof.
(d) ENTIRE AGREEMENT. This Agreement and the Exhibits attached
hereto represent the entire agreement of the parties and shall
supersede any and all previous contracts, arrangements or
understandings, express or implied, between the Employee and the
Company with respect to the subject matter hereof.
(e) SECTION HEADINGS FOR CONVENIENCE ONLY. The section headings
herein are for the purpose of convenience only and are not
intended to define or limit the contents of any section.
(f) EXECUTION IN COUNTERPARTS. The parties may sign this Agreement
in counterparts, all of which shall be considered one and the same
instrument.
(g) GOVERNING LAW AND PERFORMANCE. This Agreement shall be
governed by the laws of the State of Texas and shall be deemed to
be executed in and performance called for in Lubbock, Lubbock
County, Texas, or at the Company's sole option, by the laws of the
state or states where this Agreement may be at issue in any
litigation involving the Company.
Employment Agreement PAGE 18 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 19
DATED this 18th day of January, 2000, to be effective December 1, 1999.
COMPANY
ALAMOSA PCS LLC
By /s/ DAVID SHARBUTT
-------------------------
Name: David Sharbutt
-------------------------
Title: Chief Executive Officer
-------------------------
EMPLOYEE
/s/ KENDALL W. COWAN
--------------------------------
KENDALL W. COWAN
Employment Agreement PAGE 19 OF 21
Alamosa PCS LLC and Kendall Cowan
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Approved as to the mediation and arbitration provisions in Paragraph 12 above.
CRENSHAW, DUPREE & MILAM, L.L.P.
By /s/ JACK MCCUTCHIN, JR.
--------------------------------------
JACK McCUTCHIN, JR.
Attorneys for Alamosa PCS LLC
[SIGNATURE TO COME]
--------------------------------------
Attorney for Employee
Attachment: Exhibit "A" - The Minimum, Expected and Exceptional Milestones for
the Third Quarter and Fourth Quarter of 1999 as adopted by the
Board of Managers of the Company
Exhibit "B" - List of Companies or Entities Excepted from Covenants
Employment Agreement PAGE 20 OF 21
Alamosa PCS LLC and Kendall Cowan
<PAGE> 1
EXHIBIT 10.22
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS
ARE INDICATED IN THIS AGREEMENT WITH "[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]"
SPRINT PCS
MANAGEMENT AGREEMENT
Between
SPRINTSPECTRUM L.P.,
WIRELESSCO, L.P.,
COX COMMUNICATIONS PCS, L.P.,
COX PCS LICENSE, LLC,
SPRINTCOM, INC.
and
ALAMOSA PCS, LLC
December 23, 1999
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TABLE OF CONTENTS
<TABLE>
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PAGE
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1. MANAGER....................................................................2
1.1 HIRING OF MANAGER ..............................................2
1.2 PROGRAM REQUIREMENTS............................................3
1.3 VENDOR PURCHASE AGREEMENTS .....................................3
1.4 INTERCONNECTION ................................................3
1.5 SEAMLESSNESS ...................................................3
1.6 FORECASTING ....................................................4
1.7 FINANCING ......................................................4
1.8 ETHICAL CONDUCT AND RELATED COVENANTS ..........................4
2. BUILD-OUT OF NETWORK .............. .......................................4
2.1 BUILD-OUT PLAN .................................................4
2.2 COMPLIANCE WITH REGULATORY RULES ...............................4
2.3 EXCLUSIVITY OF SERVICE AREA ....................................5
2.4 RESTRICTION ....................................................5
2.5 COVERAGE ENHANCEMENT ...........................................6
2.6 PURCHASE OF ASSETS BY MANAGER ..................................7
2.7 MICROWAVE RELOCATION ...........................................7
2.8 DETERMINATION OF POPS ..........................................7
3. PRODUCTS AND SERVICES; IXC SERVICES .......................................8
3.1 SPRINT PCS PRODUCTS AND SERVICES ...............................8
3.2 OTHER PRODUCTS AND SERVICES ....................................8
3.3 CROSS-SELLING WITH SPRINT ......................................8
3.4 IXC SERVICES ...................................................9
3.5 RESALE OF PRODUCTS AND SERVICES ................................9
3.5.1 Mandatory Resale of Products and Services ................9
3.5.2 Voluntary Resale of Products and Services ................9
3.6 NON-COMPETITION ...............................................10
3.7 RIGHT OF LAST OFFER ...........................................11
4. MARKETING AND SALES ACTIVITIES ..................... .....................11
4.1 SPRINT PCS NATIONAL OR REGIONAL DISTRIBUTION PROGRAM
REQUIREMENTS ................................................11
4.1.1 Territorial Limitations on Manager's Distribution
Activities ...... .............................................11
4.1.2 Settlement of Equipment Sales ...........................11
4.1.3 Use of Third-Party Distributors .........................12
4.2 SPRINT PCS NATIONAL ACCOUNTS PROGRAM REQUIREMENTS .............12
4.3 SPRINT PCS ROAMING AND INTER SERVICE AREA PROGRAM .............12
REQUIREMENTS ................................................12
4.4 PRICING .......................................................13
4.5 HOME SERVICE AREA .............................................13
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5. USE OF BRANDS ............................................................14
5.1 USE OF BRANDS .................................................14
5.2 CONFORMANCE TO MARKETING COMMUNICATIONS GUIDELINES.............14
5.3 JOINT MARKETING WITH THIRD PARTIES ............................14
5.4 PRIOR APPROVAL OF USE OF BRANDS ...............................15
5.5 DURATION OF USE OF BRAND ......................................16
6. ADVERTISING AND PROMOTION.................................................16
6.1 NATIONAL ADVERTISING AND PROMOTION.............................16
6.2 IN-TERRITORY ADVERTISING AND PROMOTION.........................16
6.3 REVIEW OF ADVERTISING AND PROMOTION CAMPAIGNS..................16
6.4 PUBLIC RELATIONS...............................................17
7. SPRINT PCS TECHNICAL PROGRAM REQUIREMENTS ................................17
7.1 CONFORMANCE TO SPRINT PCS TECHNICAL PROGRAM REQUIREMENTS ......17
7.2 ESTABLISHMENT OF SPRINT PCS TECHNICAL PROGRAM REQUIREMENTS ...17
7.3 HANDOFF TO ADJACENT NETWORKS ..................................17
8. SPRINT PCS CUSTOMER SERVICE PROGRAM REQUIREMENTS .........................18
8.1 COMPLIANCE WITH SPRINT PCS CUSTOMER SERVICE PROGRAM
REQUIREMENTS .............................................18
9. SPRINT PCS PROGRAM REQUIREMENTS . . ......................................18
9.1 PROGRAM REQUIREMENTS GENERALLY ................................18
9.2 AMENDMENTS TO PROGRAM REQUIREMENTS ............................18
9.3 MANAGER'S RIGHT TO REQUEST REVIEW OF CHANGES ..................19
9.4 SPRINT PCS' RIGHT TO IMPLEMENT CHANGES ........................20
9.5 RIGHTS OF INSPECTION ..........................................20
9.6 MANAGER'S RESPONSIBILITY TO INTERFACE WITH SPRINT PCS .........20
10. FEES ....................................................................21
10.1 FEES AND PAYMENTS ............ ................................21
10.1.1 Fee Based on Collected Revenues ........................21
10.1.2 Payment of Universal Service Funds .....................21
10.1.3 Inter Service Area Fees ....... ........................21
10.1.4 Interconnect Fees ........... ..........................21
10.1.5 Outbound Roaming Fees ...... ...........................21
10.1.6 Reimbursements ............. ...........................21
10.2 MONTHLY TRUE UP ................ ..............................22
10.3 TAXES .........................................................22
10.4 COLLECTED REVENUES DEFINITION .................................22
10.5 LATE PAYMENTS .................................................24
10.6 SETOFF RIGHT IF FAILURE TO PAY AMOUNTS DUE. ...................24
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11. TERM; TERMINATION; EFFECT OF TERMINATION.................................24
11.1 INITIAL TERM ..................................................24
11.2 RENEWAL TERMS .................................................24
11.2.1 Non-renewal Rights of Manager .........................24
11.2.2 Non-renewal Rights of Sprint PCS ......................26
11.2.3 Extended Term Awaiting FCC Approval ...................27
11.3 EVENTS OF TERMINATION .........................................27
11.3.1 Termination of License .................................27
11.3.2 Breach of Agreement. Payment of Money Terms ............28
11.3.3 Breach of Agreement: Other Terms .......................28
11.3.4 Regulatory Considerations ..............................28
11.3.5 Termination of Trademark License Agreements ............28
11.3.6 Financing Considerations ...............................29
11.3.7 Bankruptcy of a Party ..................................29
11.4 EFFECT OF AN EVENT OF TERMINATION .............................30
11.5 MANAGER'S EVENT OF TERMINATION RIGHTS AND REMEDIES ............31
11.5.1 Manager's Put Right ....................................31
11.5.2 Manager's Purchase Right ...............................32
11.5.3 Manager's Action for Damages or Other Relief ...........33
11.6 SPRINT PCS' EVENT OF TERMINATION RIGHTS AND REMEDIES...........33
11.6.1 Sprint PCS' Purchase Right .............................33
11.6.2 Sprint PCS' Put Right ..................................33
11.6.3 Sprint PCS' Right to Cause A Cure ......................34
11.6.4 Sprint PCS' Action for Damages or Other Relief .........36
11.7 DETERMINATION OF ENTIRE BUSINESS VALUE ........................36
11.7.1 Appointment of Appraisers ..............................36
11.7.2 Manager's Operating Assets .............................36
11.7.3 Entire Business Value ..................................37
11.7.4 Calculation of Entire Business Value ...................37
11.8 CLOSING TERMS AND CONDITIONS ..................................38
11.9 CONTEMPORANEOUS AND IDENTICAL APPLICATION .....................38
12. BOOKS AND RECORDS; CONFIDENTIAL INFORMATION; INSURANCE ..................38
12.1 BOOKS AND RECORDS .............................................38
12.1.1 General ................................................38
12.1.2 Audit ..................................................38
12.1.3 Contesting an Audit ....................................39
12.2 CONFIDENTIAL INFORMATION ......................................40
12.3 INSURANCE .....................................................41
12.3.1 General ................................................41
12.3.2 Waiver of Subrogation ..................................41
12.3.3 Certificates of Insurance ..............................41
13. INDEMNIFICATION ............ ............................................42
13.1 INDEMNIFICATION BY SPRINT PCS .................................42
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13.2 INDEMNIFICATION BY MANAGER ....................................42
13.3 PROCEDURE .....................................................42
13.3.1 Notice .................................................42
13.3.2 Defense by Indemnitor ..................................43
13.3.3 Defense by Indemnitee ..................................43
13.3.4 Costs ..................................................43
14. DISPUTE RESOLUTION ......................................................43
14.1 NEGOTIATION ...................................................43
14.2 UNABLE TO RESOLVE .............................................44
14.3 ATTORNEYS AND INTENT ..........................................45
14.4 TOLLING OF CURE PERIODS .......................................45
15. REPRESENTATIONS AND WARRANTIES ..........................................45
15.1 DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENTS ...45
15.2 VALID AND BINDING OBLIGATION ..................................45
15.3 NO CONFLICT; NO DEFAULT .......................................46
15.4 LITIGATION ....................................................46
16. REGULATORY COMPLIANCE ...................................................46
16.1 REGULATORY COMPLIANCE .........................................46
16.2 FCC COMPLIANCE ................................................47
16.3 MARKING AND LIGHTING ..........................................48
16.4 REGULATORY NOTICES ............................................48
16.5 REGULATORY POLICY-SETTING PROCEEDINGS .........................49
17. GENERAL PROVISIONS ......................................................49
17.1 NOTICES .......................................................49
17.2 CONSTRUCTION ..................................................49
17.3 HEADINGS ......................................................49
17.4 FURTHER ACTION ................................................49
17.5 COUNTERPART EXECUTION .........................................49
17.6 SPECIFIC PERFORMANCE ..........................................49
17.7 ENTIRE AGREEMENT; AMENDMENTS ..................................49
17.8 LIMITATION ON RIGHTS OF OTHERS ................................50
17.9 WAIVERS .......................................................50
17.9.1 Waivers-General ........................................50
17.9.2 Waivers-Manager ........................................50
17.9.3 Force Majeure ..........................................50
17.10 WAIVER OF JURY TRIAL ..........................................51
17.11 BINDING EFFECT ................................................51
17.12 GOVERNING LAW .................................................51
17.13 SEVERABILITY ..................................................51
17.14 LIMITATION OF LIABILITY .......................................51
17.15 NO ASSIGNMENT; EXCEPTIONS .....................................51
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17.15.1 General ...............................................51
17.15.2 Assignment Right of Manager to Financial Lender........52
17.15.3 Change of Control Rights ..............................53
17.15.4 Right of First Refusal ................................54
17.15.5 Transfer of Sprint PCS Network ........................55
17.16 PROVISION OF SERVICES BY SPRINT SPECTRUM ......................55
17.17 NUMBER PORTABILITY ............................................55
17.18 DISCLAIMER OF AGENCY ..........................................55
17.19 INDEPENDENT CONTRACTORS .......................................55
17.20 EXPENSE .......................................................56
17.21 GENERAL TERMS ................................................56
17.22 CONFLICTS WITH OTHER AGREEMENTS ...............................56
17.23 SURVIVAL UPON TERMINATION .....................................56
17.24 ANNOUNCED TRANSACTION .........................................56
17.25 ADDITIONAL TERMS AND PROVISIONS ...............................57
17.26 MASTER SIGNATURE PAGE .........................................57
17.27 AGENT AUTHORIZATION ...........................................57
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SPRINT PCS MANAGEMENT AGREEMENT
This SPRINT PCS MANAGEMENT AGREEMENT is made as of December 23, 1999,
between Sprint Spectrum L.P., a Delaware limited partnership, WirelessCo, L.P.,
a Delaware limited partnership, Cox Communications PCS, L.P., a Delaware limited
partnership, Cox CPS License, LLC, a Delaware limited liability company,
SprintCom, Inc., a Kansas corporation, and Alamosa PCS, LLC, a Delaware limited
liability company (but not any Related Party) ("Manager"). The definitions for
this agreement are set forth on the "Schedule of Definitions".
RECITALS
A. Sprint Spectrum L.P., a Delaware limited partnership, WirelessCo,
L.P., a Delaware limited partnership, SprintCom, Inc., a Kansas corporation,
American PCS Communications, LLC, a Delaware limited liability company, APC PCS,
LLC, a Delaware limited liability company, PhillieCo Partners I, L.P., a
Delaware limited partnership, PhillieCo, L.P., a Delaware limited partnership,
Cox Communications PCS, L.P., a Delaware limited partnership, and Cox PCS
License, L.L.C., a Delaware limited liability company, hold and exercise,
directly or indirectly, control over licenses to operate wireless services
networks.
B. The entity or entities named in Recital A that execute this
agreement hold, directly or indirectly, the Licenses for the areas identified on
the Service Area Exhibit and are referred to in this agreement as "Sprint PCS."
Because this agreement addresses the rights and obligations of each license
holder with respect to each of its Licenses, each reference in this agreement to
"Sprint PCS" refers to the entity that owns, directly or indirectly, the License
referred to in that particular instance or application of the provision of this
agreement. If Sprint Spectrum does not own the License, it will provide on
behalf of Sprint PCS most or all of the services required under this agreement
to be provided by Sprint PCS.
C. The Sprint PCS business was established to use the Sprint PCS
Network, a nationwide wireless services network, to offer seamless, integrated
voice and data services using wireless technology. The Sprint PCS Network offers
the services to customers under the Brands.
D. This agreement, therefore, includes provisions defining Manager's
obligations with respect to:
o The design, construction and management of the Service Area
Network;
o Offering and promoting products and services designated by
Sprint PCS as the Sprint PCS Products and Services of the
Sprint PCS Network;
o Adherence to Program Requirements established by Sprint PCS to
ensure seamless interoperability throughout the Sprint PCS
Network and uniform and consistent quality of product and
service offerings;
o Adherence to Customer Service Program Requirements established
by Sprint PCS to ensure consistency in interactions with
customers (including billing, customer care, etc.); and
o Adherence to Program Requirements relating to the marketing,
promotion and distribution of Sprint PCS Products and
Services.
<PAGE> 8
E. The Sprint PCS Network is expanding with the assistance of
"managers" (companies such as Manager that manage Service Area Networks that
offer Sprint PCS Products and Services under a license owned by Sprint PCS or
one of the entities named in Recital A) and "affiliates" (companies that manage
Service Area Networks that offer Sprint PCS Products and Services under a
license owned by the affiliate).
F. Manager wishes to enter into this agreement to help construct,
operate, manage and maintain for Sprint PCS a portion of the Sprint PCS Network
in the Service Area. Sprint PCS has determined that permitting Manager to manage
a portion of the Sprint PCS Network in accordance with the terms of this
agreement will facilitate Sprint PCS' expansion of fully digital, wireless
coverage under the License and will enhance the wireless service for customers
of Sprint PCS.
G. All managers of a portion of the business of Sprint PCS, including
Manager, must construct facilities and operate in accordance with Program
Requirements established by Sprint PCS with respect to certain aspects of the
development and offering of wireless products and services and the presentation
of the products and services to customers, to establish and operate the Sprint
PCS Network successfully by providing seamless, integrated voice and data
services, using wireless technology.
AGREEMENT
In consideration of the recitals and mutual covenants and agreements
contained in this agreement, the sufficiency of which are hereby acknowledged,
the parties, intending to be bound, agree as follows:
1. MANAGER
1.1 HIRING OF MANAGER. Sprint PCS hires Manager:
(a) to construct and manage the Service Area Network in
compliance with the License and in accordance with the terms of this agreement;
(b) to distribute continuously during the Term the Sprint PCS
Products and Services and to establish distribution channels in the Service
Area;
(c) to conduct continually during the Term advertising and
promotion activities in the Service Area (including mutual decisions to "go
dark", with respect to advertising and promotion activities, for reasonable
periods of time); and
(d) to manage that portion of the customer base of Sprint PCS
that has the NPA-NXXs assigned to the Service Area Network.
Sprint PCS has the right to unfettered access to the Service Area
Network to be constructed by Manager under this agreement. The fee to be paid to
Manager by Sprint PCS under Section 10 is for all obligations of Manager under
this agreement.
1.2 PROGRAM REQUIREMENTS. Manager must adhere to the Program
Requirements established by Sprint PCS and as modified from time to time, to
ensure uniform and consistent operation of all wireless systems within the
Sprint PCS Network and to present the Sprint PCS Products and Services to
customers in a uniform and consistent manner under the Brands.
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1.3 VENDOR PURCHASE AGREEMENTS. Manager may participate in discounted
volume-based pricing on wireless-related products and services and in the
warranties Sprint PCS receives from its vendors, as is commercially reasonable
and to the extent permitted by applicable procurement agreements (e.g.,
agreements related to network infrastructure equipment, subscriber equipment,
interconnection, and collocation). Sprint PCS will use commercially reasonable
efforts to obtain for managers the same price Sprint PCS receives from vendors;
this does not prohibit Sprint PCS from entering into procurement agreements that
do not provide managers with the Sprint PCS prices.
Manager must purchase subscriber and infrastructure equipment from a
Sprint PCS approved list of products, which will include a selection from a
variety of manufacturers. Where required, the products must include proprietary
software developed by the manufacturers for Sprint PCS or by Sprint PCS to allow
seamless interoperability in the Sprint PCS Network. Sprint PCS or the vendor
may require Manager to execute a separate license agreement for the software
prior to Manager's use of the software.
Manager may only make purchases under this Section 1.3 for items to be
used exclusively in the Service Area (e.g., Manager may not purchase base
stations under a Sprint PCS contract for use in a system not affiliated with
Sprint PCS).
1.4 INTERCONNECTION. If Manager desires to interconnect a portion of
the Service Area Network with another carrier and Sprint PCS can interconnect
with that carrier at a lower rate, then to the extent permitted by applicable
laws, tariffs and contracts, Sprint PCS may arrange for the interconnection
under its agreements with the carrier and if it does so, Sprint PCS will bill
the interconnection fees to Manager.
1.5 SEAMLESSNESS. Manager will design and operate its systems,
platforms, products and services in the Service Area and the Service Area
Network so as to seamlessly interface them into the Sprint PCS Network.
1.6 FORECASTING. Manager and Sprint PCS will work cooperatively to
generate mutually acceptable forecasts of important business metrics including
traffic volumes, handset sales, subscribers and Collected Revenues for the
Sprint PCS Products and Services. The forecasts are for planning purposes only
and do not constitute Manager's obligation to meet the quantities forecast.
1.7 FINANCING. The construction and operation of the Service Area
Network requires a substantial financial commitment by Manager. The manner in
which Manager will finance the build-out of the Service Area Network and provide
the necessary working capital to operate the business is described in detail on
Exhibit 1.7. Manager will allow Sprint PCS an opportunity to review before
filing any registration statement or prospectus or any amendment or supplement
thereto before distributing any offering memorandum or amendment or supplement
thereto, and agrees not to file or distribute any such document if Sprint PCS
reasonably objects in writing on a timely basis to any portion of the document
that refers to Sprint PCS, its Related Parties, their respective businesses,
this agreement or the Services Agreement.
1.8 ETHICAL CONDUCT AND RELATED COVENANTS. Each party must perform its
obligations under this agreement in a diligent, legal, ethical, and professional
manner.
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2. BUILD-OUT OF NETWORK
2.1 BUILD-OUT PLAN. Manager will build-out the Service Area Network in
the Service Area in accordance with a Build-out Plan. Sprint PCS and Manager
will jointly develop each Build-out Plan, except the initial Build-out Plan and
any modifications, additions or expansions of the Build-out Plan will be subject
to prior written approval by Sprint PCS. Manager will report to Sprint PCS its
performance regarding the critical milestones included in the Build-out Plan on
a periodic basis as mutually agreed to by the parties, but no less frequently
than quarterly. The Build-out Plan and the Service Area Network as built must
comply with Sprint PCS Program Requirements and federal and local regulatory
requirements.
Sprint PCS approves the Build-out Plan in effect as of the date of this
agreement, which Build-out Plan is attached as Exhibit 2.1. Each new or amended
Build-out Plan will also become part of Exhibit 2.1.
2.2 COMPLIANCE WITH REGULATORY RULES. During the build-out of the
Service Area Network, Sprint PCS authorizes Manager to make all filings with
regulatory authorities regarding the build-out, including filings with the
Federal Aviation Administration, environmental authorities, and historical
districts. Manager may further delegate its duty under this Section 2.2 to a
qualified site acquisition company. Manager must ensure that a copy of every
filing is given to Sprint PCS. Manager must ensure that Sprint PCS is notified
in writing of any contact by a regulatory agency including the FCC with Manager
or Manager's site acquisition company regarding any filing. Sprint PCS has the
right to direct any proceeding, inquiry, dispute, appeal or other activity with
a regulatory or judicial authority regarding any filing made on behalf of Sprint
PCS. Manager will amend, modify, withdraw, refile and otherwise change any
filing as Sprint PCS requires. Notwithstanding the preceding sentences in this
Section 2.2, and in conjunction with Section 16, Sprint PCS is solely
responsible for making any and all filings with the FCC regarding the build-out.
Manager will notify Sprint PCS of any activity, event or condition related to
the build-out that might require an FCC filing.
2.3 EXCLUSIVITY OF SERVICE AREA. Manager will be the only person or
entity that is a manager or operator for Sprint PCS with respect to the Service
Area and neither Sprint PCS nor any of its Related Parties will own, operate,
build or manage another wireless mobility communications network in the Service
Area so long as this agreement remains in full force and effect and there is no
Event of Termination that has occurred giving Sprint PCS the right to terminate
this agreement, except that:
(a) Sprint PCS may cause Sprint PCS Products and Services to
be sold in the Service Area through the Sprint PCS National Accounts Program
Requirements and Sprint PCS National or Regional Distribution Program
Requirements;
(b) A reseller of Sprint PCS Products and Services may sell
its products and services in the Service Area so long as such resale is not
contrary to the terms and conditions of this agreement; and
(c) Sprint PCS and its Related Parties may engage in the
activities described in Sections 2.4(a) and 2.4(b) with Manager in the
geographic areas within the Service Area in which Sprint PCS or any of its
Related Parties owns an incumbent local exchange carrier as of the date of this
agreement.
2.4 RESTRICTION. In geographic areas within the Service Area in which
Sprint PCS or any of its Related Parties owns an incumbent local exchange
carrier as of the date of this agreement, Manager must not offer any Sprint PCS
Products or Services specifically designed for the competitive local exchange
market ("fixed wireless local loop"), except that:
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<PAGE> 11
(a) Manager may designate the local exchange carrier that is a
Related Party of Sprint PCS to be the exclusive distributor of the fixed
wireless local loop product in the territory served by the local exchange
carrier, even if a portion of its territory is within the Service Area; or
(b) Manager may sell the fixed wireless local loop product
under the terms and conditions specified by Sprint PCS (e.g., including
designation by Sprint PCS of an exclusive distribution agent for the territory).
This restriction exists with respect to a particular geographic area only so
long as Sprint PCS or its Related Party owns such incumbent local exchange
carrier.
Nothing in this Section 2.4 prohibits Manager from offering Sprint PCS
Products and Services primarily designed for mobile functionality. The
restricted markets as of the date of this agreement are set forth on Exhibit
2.4.
2.5 COVERAGE ENHANCEMENT. Sprint PCS and Manager agree that maintaining
a high standard of customer satisfaction regarding network capacity and
footprint is a required element of the manager and affiliate programs. Sprint
PCS intends to expand network coverage to build all cells that cover at least
5,000 pops and all interstate and major highways in the areas not operated by
Manager or Other Managers. Accordingly, Manager agrees to build-out New Coverage
when directed by Sprint PCS as set forth in this Section 2.5. Sprint PCS agrees
not to require any New Coverage build-out during the first two years of this
Agreement, nor any New Coverage that exceeds the capacity and footprint
parameters that Sprint PCS has adopted for all of its comparable markets.
Sprint PCS will give to Manager a written notice of any New Coverage
within the Service Area that Sprint PCS decides should be built-out. Such notice
will include an analysis completed by Sprint PCS demonstrating that such
required build-out should be economically advantageous to Manager. Such analysis
will be generated in good faith and will be based on then-currently available
information, however Sprint PCS makes no warranties or representations regarding
the accuracy of, nor will Sprint PCS be bound by, or guarantee the accuracy of,
such analysis. Manager must confirm to Sprint PCS within 90 days after receipt
of the notice that Manager will build-out the New Coverage and deliver to Sprint
PCS with such confirmation Manager's proposed amendment to the Build-out Plan
and a description of the manner and timing in which it will finance such
build-out.
If Manager confirms, within such 90-day period, its intention to
build-out the New Coverage, then Manager and Sprint PCS will diligently finalize
an amendment to the Build-out Plan and proceed as set forth in Sections 2.1 and
2.2. The amended Build-out Plan will contain critical milestones that provide
Manager a commercially reasonable period in which to construct and implement the
New Coverage. In determining what constitutes a "commercially reasonable period"
as used in this paragraph, the parties will consider several factors, including
local zoning processes and other legal requirements, weather conditions,
equipment delivery schedules, the need to arrange additional financing, and
other construction already in progress by Manager. Manager will construct and
operate the New Coverage in accordance with the terms of this Agreement, and the
New Coverage will be included in the Service Area Network for purposes of this
agreement.
If Manager fails to confirm, within such 90-day period, its intention
to build-out the New Coverage, declines to complete such build-out, or fails to
complete such build-out in accordance with the amended Build- out Plan, then an
Event of Termination will be deemed to have occurred under Section 11.3.3,
Manager will
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not have a right to cure such breach, and Sprint PCS may exercise its rights and
remedies under Section 11.2.2.1.
Notwithstanding the preceding paragraphs in this Section 2.5, the
capacity and footprint parameters contained in the amended Build-out Plan will
not be required to exceed the parameters adopted by Sprint PCS in building out
all of its comparable service areas, unless such build-out relates to an
obligation regarding the Service Area Network mandated by law. When necessary
for reasons related to new technical standards, new equipment or strategic
reasons, Sprint PCS can require Manager to build-out the New Coverage
concurrently with Sprint PCS' build-out, in which case Sprint PCS will reimburse
Manager for its costs and expenses if Sprint PCS discontinues its related
build-out.
If Sprint PCS requires build-out of New Coverage that will:
(a) cause the Manager to spend an additional amount greater
than 5% of Manager's shareholder's equity or capital account plus Manager's
long-term debt (i.e., notes that mature more than one year from the date
issued), as reflected on Manager's books; or
(b) cause the long-term operating expenses of Manager on a per
unit basis using a 10-year time frame to increase by more than 10% on a net
present value basis,
then Manager may give Sprint PCS a written notice requesting Sprint PCS to
reconsider the required New Coverage.
The Sprint PCS Vice President or the designee of the Sprint PCS Chief
Officer in charge of the group that manages the Sprint PCS relationship with
Manager will review Manager's request and render a decision regarding the New
Coverage. If after the review and decision by the Vice President or designee,
Manager is still dissatisfied, then Manager may ask that the Chief Officer to
whom the Vice President or designee reports review the matter. If Sprint PCS
still requires Manager to complete the New Coverage following, the Chief
Officer's review, then if Manager and Sprint PCS fail to agree to an amended
Build-out Plan within 15 days after completion of the reconsideration process
described above in this paragraph or the end of the 90-day period described in
the second paragraph of this Section 2.5, whichever occurs first, then an Event
of Termination will be deemed to have occurred under Section 11.3.3, Manager
will not have a right to cure such breach, and Sprint PCS may exercise its
rights and remedies under Section 11.2.2.1.
2.6 PURCHASE OF ASSETS BY MANAGER. If Sprint PCS has assets located in
the Service Area that Manager could reasonably use in its construction of the
Service Area Network and if Sprint PCS is willing to sell such assets, then
Manager agrees to purchase from Sprint PCS and Sprint PCS agrees to sell to
Manager the assets in accordance with the terms and conditions of the asset
purchase agreement attached as Exhibit 2.6.
2.7 MICROWAVE RELOCATION. Sprint PCS will relocate interfering
microwave sources in the spectrum in the Service Area to the extent necessary to
permit the Service Area Network to carry the anticipated call volume as set out
in the Build-out Plan. If the spectrum cleared is not sufficient to carry the
actual call volume then Sprint PCS will clear additional spectrum of its
choosing to accommodate the call volume. Sprint PCS may choose to clear spectrum
one carrier at a time. The parties will share equally all costs associated with
clearing spectrum under this Section 2.7.
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2.8 DETERMINATION OF POPS. If any provision in this agreement requires
the determination of pops in a given area, then the pops will be determined
using the census block group pop forecast then used by Sprint PCS, except that a
different forecast will be used for any FCC filing and in preparing the
Build-out Plan if required by the FCC. Sprint PCS presently uses the forecast of
Equifax/NDS, but it may choose in its sole discretion to use another service
that provides comparable data.
3. PRODUCTS AND SERVICES; IXC SERVICES
3.1 SPRINT PCS PRODUCTS AND SERVICES. Manager must offer for sale,
promote and support all Sprint PCS Products and Services within the Service
Area, unless the parties otherwise agree in advance in writing. Within the
Service Area, Manager may only sell, promote and support wireless products and
services that are Sprint PCS Products and Services or are other products and
services authorized under Section 3.2. The Sprint PCS Products and Services as
of the date of this agreement are attached as Exhibit 3.1. Sprint PCS may modify
the Sprint PCS Products and Services from time to time in its sole discretion by
delivering, to Manager a new Exhibit 3.1. If Sprint PCS begins offering
nationally a Sprint PCS Product or Service that is a Manager's Product or
Service, such Manager's Product or Service will become a Sprint PCS Product or
Service under this agreement.
3.2 OTHER PRODUCTS AND SERVICES. Manager may offer wireless products
and services that are not Sprint PCS Products and Services, on the terms Manager
determines, if the offer of the additional products and services:
(a) does not violate the obligations of Manager under this
agreement;
(b) does not cause distribution channel conflict with or
consumer confusion regarding Sprint PCS' regional and national
offerings of Sprint PCS Products and Services;
(c) complies with the Trademark License Agreements; and
(d) does not materially impede the development of the Sprint
PCS Network.
Manager will not offer any products or services under this Section 3.2
that are confusingly similar to Sprint PCS Products and Services. Manager must
request that Sprint PCS determine whether Sprint PCS considers a product or
service to be confusingly similar to any Sprint PCS Products and Services by
providing advance written notice to Sprint PCS that describes those products and
services that could be interpreted to be confusingly similar to Sprint PCS
Products and Services. If Sprint PCS fails to provide a response to Manager
within 30 days after receiving the notice, then the products and services are
deemed to create confusion with the Sprint PCS Products and Services and the
request therefore rejected. In rejecting any request Sprint PCS must provide the
reasons for the rejection. If the rejection is based on Sprint PCS' failure to
respond within 30 days and Manager requests an explanation for the deemed
rejection, then Sprint PCS must provide within 30 days the reasons for the
rejection.
3.3 CROSS-SELLING WITH SPRINT. Manager and Sprint and Sprint's Related
Parties may enter into arrangements to sell Sprint's services, including long
distance service (except those long distance services governed by Section 3.4),
Internet access, customer premise equipment, prepaid phone cards, and any other
services that Sprint or its Related Parties make available from time to time.
Sprint's services may be packaged with the Sprint PCS Products and Services.
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If Manager chooses to resell the long distance services, Internet
access or competitive local telephone services including prepaid phone cards, of
third parties (other than Manager's Related Parties), Manager will give Sprint
the right of last offer to provide those services on the same terms and
conditions as the offer to which Manager is prepared to agree, subject to the
terms of any existing agreements Manager was subject to prior to execution of
this agreement.
If Sprint sells Sprint PCS Products and Services in the Service Area,
Manager will provide such Sprint PCS Products and Services to such customers in
accordance with the terms and conditions of the Sprint PCS National or Regional
Distribution Program Requirements.
3.4 IXC SERVICES. Manager must purchase from Sprint long distance
telephony services for the Sprint PCS Products and Services at wholesale rates.
Long distance telephone calls are those calls between the local calling area for
the Service Area Network and areas outside the local calling area. The local
calling area will be defined by mutual agreement of Sprint PCS and Manager. If
the parties cannot agree on the extent of the local calling area they will
resolve the matter through the dispute resolution process in Section 14. Any
arrangement must have terms at least as favorable to Manager (in all material
respects) as those offered by Sprint to any wholesale customer of Sprint in
comparable circumstances (taking into consideration volume, traffic patterns,
etc.). If Manager is bound by an agreement for these services and the agreement
was not made in anticipation of this agreement, then the requirements of this
Section 3.4 do not apply during the term of the other agreement. If the other
agreement terminates for any reason then the requirements of this Section 3.4 do
apply.
3.5 RESALE OF PRODUCTS AND SERVICES.
3.5.1 MANDATORY RESALE OF PRODUCTS AND SERVICES. Sprint PCS is
subject to FCC rules that require it to allow its service plans to be resold by
a purchaser of the service plan. Sprint PCS will not grant the purchaser of a
service plan the right to use any of the support services offered by Sprint PCS,
including customer care, billing, collection, and advertising, nor the right to
use the Brands. The reseller only has the right to use the service purchased.
Consequently, Manager agrees not to interfere with any purchaser of the Sprint
PCS Products or Services who resells the service plans in accordance with this
agreement and applicable law. Manager will notify purchaser that the purchaser
does not have a right to use the Brands or Sprint PCS' support services. In
addition, Manager will notify Sprint PCS if it reasonably believes a reseller of
retail service plans is using the support services or Brands.
3.5.2 VOLUNTARY RESALE OF PRODUCTS AND SERVICES. Sprint PCS
may choose to offer a resale product under which resellers will resell Sprint
PCS Products and Services under brand names other than the Brands, except Sprint
PCS may permit the resellers to use the Brands for limited purposes related to
the resale of Sprint PCS Products and Services (e.g., to notify people that the
handsets of the resellers will operate on the Sprint PCS Network). The resellers
may also provide their own support services (e.g., customer care and billing) or
may purchase the support services from Sprint PCS.
If Sprint PCS chooses to offer a voluntary resale product, it will
adopt a program that will be a Program Requirement under this agreement and that
addresses the manner in which Manager and Other Managers interact with the
resellers. Manager must agree to comply with the terms of the program, including
its pricing provisions, if Manager wants handsets of subscribers of resellers
with NPA-NXXs of Manager to be activated. Usage of telecommunications services
while in the Service Area by subscribers of resellers with
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NPA-NXXs from outside the Service Area will be subject to the pricing provisions
of the Sprint PCS Roaming and Inter Service Area Program for roaming and inter
service area pricing between Manager and Sprint PCS unless Manager agrees in
writing to different pricing.
Except as required under the regulations and rules concerning mandatory
resale, Manager may not sell Sprint PCS Products and Services for resale unless
Sprint PCS consents to such sales in advance in writing.
3.6 NON-COMPETITION. Neither Manager nor any of its Related Parties may
offer Sprint PCS Products and Services outside of the Service Area without the
prior written approval of Sprint PCS.
Within the Service Area, Manager and Manager's Related Parties may
offer, market or promote telecommunications products or services only under the
following brands:
(a) products or services with the Brands;
(b) other products and services approved under Section 3.2;
(c) products or services with Manager's brand; or
(d) products or services with the brands of Manager's Related
Parties,
except no brand of a significant competitor of Sprint PCS or its Related Parties
in the telecommunications business may be used by Manager or Manager's Related
Parties on these products and services.
If Manager or any of its Related Parties has licenses to provide
broadband personal communication services outside the Service Area, neither
Manager nor such Related Party may utilize the spectrum to offer Sprint PCS
Products and Services without prior written consent from Sprint PCS.
Additionally, when Manager's customers from inside the Service Area travel or
roam to other geographic areas, Manager will route the customers' calls, both
incoming and outgoing, according to the Sprint PCS Network Roaming and Inter
Service Area Program Requirements, without regard to any wireless networks
operated by Manager or its Related Parties. For example, Manager will program
the preferred roaming list for handsets sold in the Service Area to match the
Sprint PCS preferred roaming list.
3.7 RIGHT OF LAST OFFER. Manager will offer to Sprint the right to make
to Manager the last offer to provide backhaul and transport services for call
transport for the Service Area Network, if Manager decides to use third parties
for backhaul and transport services rather than self-provisioning the services
or purchasing the services from Related Parties of Manager. Sprint will have a
reasonable time to respond to Manager's request for last offer to provide
backhaul and transport pricing and services, which will be no greater than 5
Business Days after receipt of the request for the services and pricing from
Manager.
If Manager has an agreement in effect as of the date of this agreement
for these services and the agreement was not made in anticipation of this
agreement, then the requirements of this Section 3.7 do not apply during the
term of the other agreement. If the other agreement terminates for any reason
then the requirements of this Section 3.7 do apply.
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4. MARKETING AND SALES ACTIVITIES
4.1 SPRINT PCS NATIONAL OR REGIONAL DISTRIBUTION PROGRAM REQUIREMENTS.
During the term of this agreement, Manager must participate in any Sprint PCS
National or Regional Distribution Program (as in effect from time to time), and
will pay or receive compensation for its participation in accordance with the
terms and conditions of that program. The Sprint PCS National or Regional
Distribution Program Requirements in effect as of the date of this agreement are
attached as Exhibit 4.1.
4.1.1 TERRITORIAL LIMITATIONS ON MANAGER'S DISTRIBUTION
ACTIVITIES. Neither Manager nor any of its Related Parties will market, sell or
distribute Sprint PCS Products and Services outside of the Service Area, except:
(a) as otherwise agreed upon by the parties in advance in
writing; or
(b) Manager may place advertising in media that has
distribution outside of the Service Area, so long as that advertising is
intended by Manager to reach primarily potential customers within the Service
Area.
4.1.2 SETTLEMENT OF EQUIPMENT SALES. Sprint PCS will establish
a settlement policy and process that will be included in the Sprint PCS National
or Regional Distribution Program Requirements to:
(a) reconcile sales of subscriber equipment made in the
service areas of Sprint PCS or Other Managers of Sprint PCS, that result in
activations in the Service Area; and
(b) reconcile sales of subscriber equipment made in the
Service Area that result in activations in service areas of Sprint PCS or Other
Managers.
In general, the policy will provide that the party in whose service
area the subscriber equipment is activated will be responsible for the payment
of any subsidy (i.e., the difference between the price paid to the manufacturer
and the suggested retail price for direct channels or the difference between the
price paid to the manufacturer and the wholesale price for third party
retailers) and for other costs associated with the sale, including logistics,
inventory carrying costs, direct channel commissions and other retailer
compensation.
4.1.3 USE OF THIRD-PARTY DISTRIBUTORS.
(a) Manager may request that Sprint PCS and a local
distributor enter into Sprint PCS' standard distribution agreement regarding the
purchase from Sprint PCS of handsets and accessories. Sprint PCS will use
commercially reasonable efforts to reach agreement with the local distributor.
Sprint PCS may refuse to enter into a distribution agreement with a distributor
for any reasonable reason, including that the distributor fails to pass Sprint
PCS' then current credit and background checks or the distributor fails to agree
to the standard terms of the Sprint PCS distribution agreement. Any local
distributor will be subject to the terms of the Trademark License Agreements or
their equivalent. Manager will report to Sprint PCS the activities of any local
distributor that Manager believes to be in violation of the distribution
agreement.
(b) Manager may establish direct local distribution programs
in accordance with the Sprint PCS National or Regional Distribution Program
Requirements, subject to the terms and conditions of the Trademark License
Agreements and the non-competition and other provisions contained in this
agreement. If Manager sells Sprint PCS handsets and accessories directly to a
local distributor:
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(i) Sprint PCS has the right to approve or disapprove
a particular distributor,
(ii) Manager is responsible for such distributor's
compliance with the terms of the Trademark License Agreements and the
other provisions contained in this agreement, and
(iii) Manager must retain the right to terminate the
distribution rights of the local distributor when so instructed by
Sprint PCS (even if Sprint PCS initially approved or did not exercise
its right to review the distributor).
4.2 SPRINT PCS NATIONAL ACCOUNTS PROGRAM REQUIREMENTS. During the term
of this agreement, Manager must participate in the Sprint PCS National Accounts
Program (as in effect from time to time), and will be entitled to compensation
for its participation and will be required to pay the expenses of the program in
accordance with the terms and conditions of that program. The Sprint PCS
National Accounts Program Requirements in effect as of the date of this
agreement are attached as Exhibit 4.2.
4.3 SPRINT PCS ROAMING AND INTER SERVICE AREA PROGRAM REQUIREMENTS.
Manager will participate in the Sprint PCS Roaming and Inter Service Area
Program established and implemented by Sprint PCS, including roaming price plans
and inter-carrier settlements. The Sprint PCS Roaming and Inter Service Area
Program Requirements in effect as of the date of this agreement are attached as
Exhibit 4.3.
As part of the Sprint PCS Roaming and Inter Service Area Program
Requirements, Sprint PCS will establish a settlement policy and process to
equitably distribute between the members making up the Sprint PCS Network (i.e.,
Sprint PCS, Manager and all Other Managers) the revenues received by one member
for services used by its customers when they travel into other members' service
areas.
4.4 PRICING. Manager will offer and support all Sprint PCS pricing
plans designated for regional or national offerings of Sprint PCS Products and
Services (e.g., national inter service area rates, regional home rates, and
local price points). The Sprint PCS pricing plans as of the date of this
agreement are attached as Exhibit 4.4. Sprint PCS may modify the Sprint PCS
pricing plans from time to time in its sole discretion by delivering to Manager
a new Exhibit 4.4.
Additionally, with prior approval from Sprint PCS, which approval will
not be unreasonably withheld, Manager may establish price plans for Sprint PCS
Products and Services that are only offered in its local market, subject to:
(a) the non-competition and other provisions
contained in this agreement;
(b) consistency with regional and national pricing
plans;
(c) regulatory requirements; and
(d) capability and cost of implementing rate plans in
Sprint PCS systems (if used).
Manager must provide advance written notice to Sprint PCS with details
of any pricing proposal for Sprint PCS Products or Services in the Service Area.
If Sprint PCS fails to. respond to Manager within 10 Business Days after
receiving such notice, then the price proposed for those Sprint PCS Products or
Services is deemed approved.
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At the time Sprint PCS approves a pricing proposal submitted by
Manager, Sprint PCS will provide Manager an estimate of the costs and expenses
and applicable time frames required for Sprint PCS to implement the proposed
pricing plan. Manager agrees to promptly reimburse Sprint PCS for any cost or
expense incurred by Sprint PCS to implement such a pricing plan, which will not
exceed the amount estimated by Sprint PCS if Manager waited for Sprint PCS'
response to Manager's proposal.
4.5 HOME SERVICE AREA. Sprint PCS and Manager will agree to the initial
home service area for each base station in the Service Area Network prior to the
date the Service Area Network goes into commercial operation. If the parties
cannot agree to the home service area for each base station in the Service Area
Network, then the parties will use the dispute resolution process in Section 14
of this agreement to assign each base station to a home service area.
5. USE OF BRANDS
5.1 USE OF BRANDS.
(a) Manager must enter into the Trademark License Agreements
on or before the date of this agreement.
(b) Manager must use the Brands exclusively in the marketing,
promotion, advertisement, distribution, lease or sale of any Sprint PCS Products
and Services within the Service Area, except Manager may use other brands to the
extent permitted by the Trademark License Agreements and not inconsistent with
the terms of this agreement.
(c) Neither Manager nor any of its Related Parties may market,
promote, advertise, distribute, lease or sell any of the Sprint PCS Products and
Services or Manager's Products and Services on a non-branded, "private label"
basis or under any brand, trademark, trade name or trade dress other than the
Brands, except (i) for sales to resellers required under this agreement, or (ii)
as permitted under the Trademark License Agreements.
(d) The provisions of this Section 5.1 do not prohibit Manager
from including Sprint PCS Products and Services under the Brands within the
Service Area as part of a package with its other products and services that bear
a different brand or trademark. The provisions of this Section 5.1 do not apply
to the extent that they are inconsistent with applicable law or in conflict with
the Trademark License Agreements.
5.2 CONFORMANCE TO MARKETING COMMUNICATIONS GUIDELINES. Manager must
conform to the Marketing Communications Guidelines in connection with the
marketing, promotion, advertisement, distribution, lease and sale of any of the
Sprint PCS Products and Services. The Marketing Communications Guidelines in
effect as of the date of this agreement are attached as Exhibit 5.2. Sprint and
Sprint Spectrum may amend the Marketing Communications Guidelines from time to
time in accordance with the terms of the Trademark License Agreements.
5.3 JOINT MARKETING WITH THIRD PARTIES.
(a) Manager may engage in various joint marketing activities
(e.g., promotions with sports teams and entertainment providers or tournament
sponsorships) with third parties in the Service Area from time
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to time during the term of this agreement with respect to the Sprint PCS
Products and Services, except that Manager may engage in the joint marketing
activities only if the joint marketing activities:
(i) are conducted in accordance with the terms and
conditions of the Trademark License Agreements and the Marketing
Communications Guidelines;
(ii) do not violate the terms of this agreement;
(iii) are not likely (as determined by Sprint PCS, in
its sole discretion) to cause confusion between the Brands and any
other trademark or service mark used in connection with the activities;
(iv) are not likely (as determined by Sprint, in its
sole discretion) to cause confusion between the Sprint Brands and any
other trademark or service mark used in connection with the activities;
and
(v) are not likely (as determined by Sprint PCS, in
its sole discretion) to give rise to the perception that the Sprint PCS
Products and Services are being advertised, marketed or promoted under
any trademark or service mark other than the Brands, except as provided
in the Trademark License Agreements. Manager will not engage in any
activity that includes co-branding involving use of the Brands (that
is, the marketing, promotion, advertisement, distribution, lease or
sale of any of the Sprint PCS Products and Services under the Brands
and any other trademark or service mark), except as provided in the
Trademark License Agreements.
(b) Manager must provide advance written notice to Sprint PCS
describing any joint marketing activities that may:
(i) cause confusion between the Brands and any other
trademark or service mark used in connection with the proposed
activities; or
(ii) give rise to the perception that the Sprint PCS
Products and Services are being advertised, marketed or promoted under
any trademark or service mark other than the Brands, except as provided
in the Trademark License Agreements.
(c) If Sprint PCS fails to provide a response to Manager
within 20 days after receiving such notice, then the proposed activities are
deemed, as the case may be:
(i) not to create confusion between the Brands and
any other trademark or service mark; or
(ii) not to give rise to the perception that
Manager's products and services are being advertised, marketed or
promoted under any trademark or service mark other than the Brands,
except as provided in the Trademark License Agreements.
5.4 PRIOR APPROVAL OF USE OF BRANDS. Manager must obtain advance
written approval from Sprint for use of the Sprint Brands to the extent required
by the Sprint Trademark and Service Mark License Agreement and from Sprint PCS
for use of the Sprint PCS Brands to the extent required by the Sprint
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Spectrum Trademark and Service Mark License Agreement. Sprint PCS will use
commercially reasonable efforts to facilitate any review of Manager's use of the
Brands, if Sprint PCS is included in the review process.
5.5 DURATION OF USE OF BRAND. Manager is entitled to use the Brands
only during the term of the Trademark License Agreements and any transition
period during which Manager is authorized to use the Brands following the
termination of the Trademark License Agreements.
6. ADVERTISING AND PROMOTION
6.1 NATIONAL ADVERTISING AND PROMOTION. Sprint PCS is responsible for
(a) all national advertising and promotion of the Sprint PCS Products and
Services, including the costs and expenses related to national advertising and
promotions, and (b) all advertising and promotion of the Sprint PCS Products and
Services in the markets where Sprint PCS operates without the use of an Other
Manager.
6.2 IN-TERRITORY ADVERTISING AND PROMOTION. Manager must advertise and
promote the Sprint PCS Products and Services in the Service Area (and may do so
in the areas adjacent to the Service Area so long as Manager intends that such
advertising, or promotion primarily reach potential customers within the Service
Area). Manager must advertise and promote the Sprint PCS Products and Services
in accordance with the terms and conditions of this agreement, the Trademark
License Agreements and the Marketing Communication Guidelines. Manager is
responsible for the costs and expenses incurred by Manager with respect to
Manager's advertising and promotion activities in the Service Area.
Manager will be responsible for a portion of the cost of any promotion
or advertising done by third party retailers in the Service Area (e.g., Best
Buy) in accordance with any cooperative advertising arrangements based on per
unit handset sales.
Sprint PCS has the right to use in any promotion or advertising done by
Sprint PCS any promotion or advertising materials developed by Manager from time
to time with respect to the Sprint PCS Products and Services. Sprint PCS will
reimburse Manager for the reproduction costs related to such use.
Sprint PCS will make available to Manager the promotion or advertising
materials developed by Sprint PCS from time to time with respect to Sprint PCS
Products and Services in current use by Sprint PCS (e.g., radio ads, television
ads, design of print ads, design of point of sale materials, retail store
concepts and designs, design of collateral). Manager will bear the cost of using
such materials (e.g., cost of local radio and television ad placements, cost of
printing collateral in quantity, and building out and finishing retail stores).
6.3 REVIEW OF ADVERTISING AND PROMOTION CAMPAIGNS. Sprint PCS and
Manager will jointly review the upcoming marketing and promotion campaigns of
Manager with respect to Sprint PCS Products and Services (including advertising
and promotion expense budgets) and will use good faith efforts to coordinate
Manager's campaign with Sprint PCS' campaign to maximize the market results of
both parties. Sprint PCS and Manager may engage in cooperative advertising or
promotional activities during the term of this agreement as the parties may
agree in writing.
6.4 PUBLIC RELATIONS. If Manager conducts local public relations
efforts, then Manager must conduct the local public relations efforts consistent
with the Sprint PCS Communications Policies. The Sprint PCS Communications
Policies as of the date of this agreement are attached as Exhibit 6.4. Sprint
PCS may modify the Sprint PCS Communications Policies from time to time by
delivering to Manager a new Exhibit 6.4.
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7. SPRINT PCS TECHNICAL PROGRAM REQUIREMENTS
7.1 CONFORMANCE TO SPRINT PCS TECHNICAL PROGRAM REQUIREMENTS.
(a) Manager must meet or exceed the Sprint PCS Technical
Program Requirements established by Sprint PCS from time to time for the Sprint
PCS Network Manager will be deemed to meet the Sprint PCS Technical Program
Requirements if:
(i) Manager operates the Service Area Network at a
level equal to or better than the lower of the Operational Level of
Sprint PCS or the operational level contemplated by the Sprint PCS
Technical Program Requirements; or
(ii) Sprint PCS is responsible under the Services
Agreement to ensure the Service Area Network complies with the Sprint
PCS Technical Program Requirements.
(b) Manager must demonstrate to Sprint PCS that Manager has
complied with the Sprint PCS Technical Program Requirements prior to connecting
the Service Area Network to the rest of the Sprint PCS Network. Once the Service
Area Network is connected to the Sprint PCS Network, Manager must continue to
comply with the Sprint PCS Technical Program Requirements. Sprint PCS agrees
that the Sprint PCS Technical Program Requirements adopted for Manager will be
the same Sprint PCS Technical Program Requirements applied by Sprint PCS to the
Sprint PCS Network.
7.2 ESTABLISHMENT OF SPRINT PCS TECHNICAL PROGRAM REQUIREMENTS. Sprint
PCS has delivered to Manager a copy of the current Sprint PCS Technical Program
Requirements, attached as Exhibit 7.2. Sprint PCS drafted the Sprint PCS
Technical Program Requirements to ensure a minimum, base-line level of quality
for the Sprint PCS Network. The Sprint PCS Technical Program Requirements
include standards relating to voice quality, interoperability, consistency
(seamlessness) of coverage, RF design parameters, system design, capacity, and
call blocking ratio. Sprint PCS has selected code division multiple access as
the initial air interface technology for the Sprint PCS Network (subject to
change in accordance with Section 9.1).
7.3 HANDOFF TO ADJACENT NETWORKS. If technically feasible and
commercially reasonable, Manager will operate the Service Area Network in a
manner that permits a seamless handoff of a call initiated on the Service Area
Network to any adjacent PCS network that is part of the Sprint PCS Network, as
specified in the Sprint PCS Technical Program Requirements. Sprint PCS agrees
that the terms and conditions for seamless handoffs adopted for the Service Area
Network will be the same as the terms Sprint PCS applies to the other parts of
the Sprint PCS Network for similar configurations of equipment.
8. SPRINT PCS CUSTOMER SERVICE PROGRAM REQUIREMENTS
8.1 COMPLIANCE WITH SPRINT PCS CUSTOMER SERVICE PROGRAM REQUIREMENTS.
Manager must comply with the Sprint PCS Customer Service Program Requirements in
providing the Sprint PCS Products and Services to any customer of Manager,
Sprint PCS or any Sprint PCS Related Party. Manager will be deemed to meet the
standards if:
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(a) Manager operates the Service Area Network at a level equal
to or better than the lower of the Operational Level of Sprint PCS or the
operational level contemplated by the Program Requirements; or
(b) Manager has delegated to Sprint PCS under the Services
Agreement responsibility to ensure the Service Area Network complies with the
Sprint PCS Customer Service Standards.
Sprint PCS has delivered to Manager a copy of the Sprint PCS Customer
Service Standards, which are attached as Exhibit 8.1.
9. SPRINT PCS PROGRAM REQUIREMENTS
9.1 PROGRAM REQUIREMENTS GENERALLY. This agreement contains numerous
references to Sprint PCS National and Regional Distribution Program
Requirements, Sprint PCS National Accounts Program Requirements, Sprint PCS
Roaming and Inter Service Area Program Requirements, Sprint PCS Technical
Program Requirements and Sprint PCS Customer Service Program Requirements. This
agreement also provides under Section 3.5.2 for the offering by Sprint PCS of a
voluntary resale product through a program, which program, if adopted, will be a
Program Requirement under this agreement. Sprint PCS may unilaterally amend from
time to time in the manner described in Section 9.2 all Program Requirements
mentioned in this agreement. The most current version of the Program
Requirements mentioned in the first sentence of this Section 9.1 have been
provided to Manager. Manager has reviewed the Program Requirements and adopts
them for application in the Service Area.
9.2 AMENDMENTS TO PROGRAM REQUIREMENTS. Sprint PCS may amend any of the
Program Requirements, subject to the following conditions:
(a) The applicable Program Requirements, as amended, will
apply equally to Manager, Sprint PCS and each Other Manager, except if Manager
and Sprint PCS agree otherwise or if Sprint PCS grants a waiver to Manager.
Sprint PCS may grant waivers to Other Managers without affecting Manager's
obligation to comply with the Program Requirements;
(b) Each amendment will be reasonably required to fulfill the
purposes set forth in Section 1.2 with respect to uniform and consistent
operations of the Sprint PCS Network and the presentation of Sprint PCS Products
and Services to customers in a uniform and consistent manner;
(c) Each amendment will otherwise be on terms and conditions
that are commercially reasonable with respect to the construction, operation and
management of the Sprint PCS Network. With respect to any amendment to the
Program Requirements, Sprint PCS will provide for reasonable transition periods
and, where appropriate, may provide for grandfathering provisions for existing
activities by Manager that were permitted under the applicable Program
Requirements before the amendment;
(d) Sprint PCS must give Manager reasonable, written notice of
the amendment, but in any event the notice will be given at least 30 days prior
to the effective date of the amendment; and
(e) Manager must implement any changes in the Program
Requirements within a commercially reasonable period of time unless otherwise
consented to by Sprint PCS. Sprint PCS will determine what constitutes a
commercially reasonable period of time taking into consideration relevant
business
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factors, including the strategic significance of the changes to the Sprint PCS
Network, the relationship of the changes to the yearly marketing cycle, and the
financial demands on and capacity generally of Other Managers. Notwithstanding
the preceding two sentences, Manager will not be required to implement any
change in the Service Area Network or the business of Manager required by an
amendment to a Program Requirement until Sprint PCS has implemented the required
changes in substantially all of that portion of the Sprint PCS Network that
Sprint PCS operates without the use of a manager or affiliate, unless the
amendment to the Program Requirement relates to an obligation regarding the
Service Area Network mandated by law. When necessary for reasons related to new
technical standards, new equipment or strategic reasons, Sprint PCS can require
Manager to implement the changes in the Service Area Network or Manager's
business concurrently with Sprint PCS, in which case Sprint PCS will reimburse
Manager for its costs and expenses if Sprint PCS discontinues the Program
Requirement changes prior to implementation.
Sprint PCS may grant Manager appropriate waivers and variances from the
requirements of any Program Requirements. Sprint PCS has the right to adopt any
Program Requirements that implement any obligation regarding the Service Area
Network mandated by law.
Any costs and expenses incurred by Manager in connection with
conforming to any change to the Program Requirements during the term of this
agreement are the responsibility of Manager.
9.3 MANAGER'S RIGHT TO REQUEST REVIEW OF CHANGES. If Sprint PCS
announces a change to a Program Requirement that will:
(a) cause the Manager to spend an additional amount greater
than 5% of Manager's shareholder's equity or capital account plus Manager's
long-term debt (i.e., notes that mature more than one year from the date
issued), as reflected on Manager's books; or
(b) cause the long term operating expenses of Manager on a per
unit basis using a 10-year time frame to increase by more than 10% on a net
present value basis,
then Manager may give Sprint PCS a written notice requesting Sprint PCS to
reconsider the change.
The Sprint PCS Vice President or the designee of the Sprint PCS Chief
Officer in charge of the group that manages the Sprint PCS relationship with
Manager will review Manager's request and render a decision regarding the
change. If after the review and decision by the Vice President or designee,
Manager is still dissatisfied, then Manager may ask that the Chief Officer to
whom the Vice President or designee reports review the matter. If Sprint PCS
still requires Manager to implement the change to the Program Requirement
following, the Chief Officer's review, then upon Manager's failure to implement
the change an Event of Termination will be deemed to have occurred under Section
11.3.3, Manager will not have a right to cure such breach, and Sprint PCS may
exercise its rights and remedies under Section 11.6.
9.4 SPRINT PCS' RIGHT TO IMPLEMENT CHANGES. If Manager requests Sprint
PCS to reconsider a change to a Program Requirement as permitted under Section
9.3 and Sprint PCS decides it will not require Manager to make the change,
Sprint PCS may, but is not required to, implement the change at Sprint PCS'
expense, in which event Manager will be required to operate the Service Area
Network, as changed, but Sprint PCS will be entitled to any revenue derived from
the change.
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9.5 RIGHTS OF INSPECTION. Sprint PCS and its authorized agents and
representatives may enter upon the premises of any office or facility operated
by or for Manager at any time, with reasonable advance notice to Manager if
possible, to inspect, monitor and test in a reasonable manner the Service Area
Network, including the facilities, equipment, books and records of Manager, to
ensure that Manager has complied or is in compliance with all covenants and
obligations of Manager under this agreement, including Manager's obligation to
conform to the Program Requirements. The inspection, monitoring and testing may
not disrupt the operations of the office or facility, nor impede Manager's
access to the Service Area Network.
9.6 MANAGER'S RESPONSIBILITY TO INTERFACE WITH SPRINT PCS. Manager will
use platforms fully capable of interfacing with the Sprint PCS platforms in
operating the Service Area Network and in providing Sprint PCS Products and
Services. Manager will pay the expense of making its platforms fully capable of
interfacing with Sprint PCS, including paying for the following:
(i) connectivity;
(ii) any changes that Manager requests Sprint PCS to
make to Sprint PCS systems to interconnect with Manager's systems that
Sprint PCS, in its sole discretion, agrees to make;
(iii) equipment to run Manager's software;
(iv) license fees for Manager's software; and
(v) Manager's upgrades or changes to its platforms.
10. FEES
10.1 FEES AND PAYMENTS.
10.1.1 FEE BASED ON COLLECTED REVENUES. Sprint PCS will pay to
Manager a weekly fee equal to 92% of Collected Revenues for the week for all
obligations of Manager under this Agreement. The fee will be due on Thursday of
the week following the week for which the fee is calculated.
10.1.2 PAYMENT OF UNIVERSAL SERVICE FUNDS. Sprint PCS and
Manager will share any federal and state subsidy funds (e.g., payments by a
state of universal service fund subsidies to Sprint PCS or Manager), if any,
received by Sprint PCS or Manager for customers who reside in the portion of the
Service Area served by the Service Area Network. Manager is entitled to 92% of
any amount received by either party and Sprint PCS is entitled to 8% of such
amounts.
10.1.3 INTER SERVICE AREA FEES. Sprint PCS will pay to Manager
monthly a fee as set out in the Sprint PCS Roaming and Inter Service Area
Program, for each minute of use that a customer of Sprint PCS or one of the
Other Managers whose NPA-NXX is not assigned to the Service Area Network uses
the Service Area Network. Manager will pay to Sprint PCS a fee, as set out in
the Sprint PCS Roaming and Inter Service Area Program, for each minute of use
that a customer whose NPA-NXX is assigned to the Service Area Network uses a
portion of the Sprint PCS Network other than the Service Area Network. Manager
acknowledges that the manner in which the NPA-NXX is utilized could change,
which will require a modification in the manner in which the inter service area
fees, if any, will be calculated.
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10.1.4 INTERCONNECT FEES. Manager will pay to Sprint PCS (or
to other carriers as appropriate) monthly the interconnect fees, if any, as
provided under Section 1.4.
10.1.5 OUTBOUND ROAMING FEES. If not otherwise provided under
any Program Requirement:
(a) Sprint PCS will pay to Manager monthly the amount of
Outbound Roaming fees that Sprint PCS collects for the month from end users
whose NPA-NXX is assigned to the Service Area; and
(b) Manager will pay to Sprint PCS (or to a clearinghouse or
other carrier as appropriate) the direct cost of providing the capability for
the Outbound Roaming, including any amounts payable to the carrier that handled
the roaming call and the clearinghouse operator.
10.1.6 REIMBURSEMENTS. Manager will pay to or reimburse Sprint
PCS for any amounts that Sprint PCS is required to pay to a third party (e.g., a
telecommunications carrier) to the extent Sprint PCS already paid such amount to
Manager under this Section 10.
10.2 MONTHLY TRUE UP. Manager will report to Sprint PCS monthly the
amount of Collected Revenues received directly by the Manager (e.g., customer
mails payment to the business address of Manager rather than to the lockbox or a
customer pays a direct sales force representative in cash). Sprint PCS will on a
monthly basis true up the fees and payments due under Section 10.1 against the
actual payments made by Sprint PCS to Manager. Sprint PCS will provide to
Manager a true up report each month showing the true up and the net amount due
from one party to the other, if any. If the weekly payments made to Manager
exceed the actual fees and payments due to Manager, then Manager will remit the
amount of the overpayment to Sprint PCS within 5 Business Days after receiving
the true up report from Sprint PCS. If the weekly payments made to Manager are
less than the actual fees and payments due to Manager, then Sprint PCS will
remit the shortfall to Manager within 5 Business Days after sending the true up
report to Manager.
If a party disputes any amount on the true up report, the disputing
party must give the other party written notice of the disputed amount and the
reason for the dispute within 90 days after it receives the true up report. The
dispute will be resolved through the dispute resolution process in Section 14.
The parties must continue to pay to the other party any undisputed amounts owed
under this agreement during the dispute resolution process. The dispute of an
item does not stay or diminish a party's other rights and remedies under this
agreement.
10.3 TAXES. Manager will pay or reimburse Sprint PCS for any sales,
use, gross receipts or similar tax, administrative fee, telecommunications fee
or surcharge for taxes or fees levied by a governmental authority on the fees
and charges payable by Sprint PCS to Manager.
Manager will report all taxable property to the appropriate taxing
authority for ad valorem tax purposes. Manager will pay as and when due all
taxes, assessments, liens, encumbrances, levies, and other charges against the
real estate and personal property owned by Manager or used by Manager in
fulfilling its obligations under this agreement.
Manager is responsible for paying all sales, use, or similar taxes on
the purchase and use of its equipment, advertising, and other goods or services
in connection with this agreement.
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10.4 COLLECTED REVENUES DEFINITION. "Collected Revenues" means actual
payments received by or on behalf of Sprint PCS or Manager for Sprint PCS
Products and Services from others, including the customers, whose NPA-NXX is the
same as that for the portion of the Service Area served by the Service Area
Network. In determining Collected Revenues the following principles will apply.
(a) The following items will be treated as follows:
(i) Collected Revenues do not include revenues from
federal and state subsidy funds; they are handled separately as noted
in Section 10.1.2;
(ii) Collected Revenues do include any amounts
received for the payment of Inbound Roaming charges and interconnect
fees when calls are carried on the Service Area Network; and
(iii) Collected Revenues do not include any amounts
received with respect to any changes made by Sprint PCS under Section
9.4.
(b) The following items are not Collected Revenues; Sprint PCS
is obligated to remit the amounts received with respect to such items, if any,
to Manager, as follows:
(i) inter service area payments will be paid as
provided under Section 10.1.3;
(ii) Outbound Roaming and related charges will be
paid as provided under Section 10.1.5;
(iii) proceeds from the sale or lease of subscriber
equipment and accessories will be paid to Manager, subject to the
equipment settlement process in Section 4.1.2;
(iv) proceeds from sales not in the ordinary course
of business (e.g., sales of switches, cell sites, computers, vehicles
or other fixed assets);
(v) any amounts collected with respect to sales and
use taxes, gross receipts taxes, transfer taxes, and similar taxes,
administrative fees, telecommunications fees, and surcharges for taxes
and fees that are collected by a carrier for the benefit of a
governmental authority, subject to Manager's obligation under Section
10.3; and
(vi) Manager will be entitled to 100% of all revenues
received by Sprint PCS with respect to sales of Manager's Products and
Services.
(c) The following items are not Collected Revenues; neither
party is obligated to remit any amounts respecting, such items:
(i) reasonable adjustments of a customer's account
(e.g., if Sprint PCS or Manager reduces a customer's bill, then the
amount of the adjustment is not Collected Revenues); and
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(ii) amount of bad debt and fraud associated with
customers whose NPA-NXX is assigned to the Service Area (e.g., if
Sprint PCS or Manager writes off a customer's bill as a bad debt, there
are no Collected Revenues on which a fee is due to Manager).
10.5 LATE PAYMENTS. Any amount due under this Section 10 that is not
paid by one party to the other party in accordance with the terms of this
agreement will bear interest at the Default Rate beginning (and including) the
3rd day after the due date until (and including) the date paid.
10.6 SETOFF RIGHT IF FAILURE TO PAY AMOUNTS DUE. If Manager fails to
pay any undisputed amount due Sprint PCS or a Related Party of Sprint PCS under
this agreement, the Services Agreement, or any other agreement with Sprint PCS
or a Related Party of Sprint PCS, then Sprint PCS may setoff against its
payments to Manager under this Section 10, the following amounts:
(a) any amount that Manager owes to Sprint PCS or a Related
Party of Sprint PCS, including amounts due under the Services Agreement; and
(b) any amount that Sprint PCS reasonably estimates will be
due to Sprint PCS for the current month under the Services Agreement (e.g., if
under the Services Agreement customer care calls are billed monthly, Sprint PCS
can deduct from the weekly payment to Manager an amount Sprint PCS reasonably
estimates will be due Sprint PCS on account of such customer care calls under
the Services Agreement).
On a monthly basis Sprint PCS will true up the estimated amounts deducted
against the actual amounts due Sprint PCS and Sprint PCS' Related Parties. If
the estimated amounts deducted by Sprint PCS exceed the actual amounts due to
Sprint PCS and Sprint PCS' Related Parties, then Sprint PCS will remit the
excess to Manager with the next weekly payment. If the estimated amounts
deducted are less than the actual amounts due to Sprint PCS and its Related
Parties, then Sprint PCS may continue to setoff the payments to Manager against
the amounts due to Sprint PCS and Sprint PCS' Related Parties. This right of
setoff is in addition to any other right that Sprint PCS may have under this
agreement.
11. TERM; TERMINATION; EFFECT OF TERMINATION
11.1 INITIAL TERM. This agreement commences on the date of execution
and, unless terminated earlier in accordance with the provisions of this Section
11, continues for a period of 20 years (the "Initial Term").
11.2 RENEWAL TERMS. Following expiration of the Initial Term, this
agreement will automatically renew for 3 successive 10-year renewal periods (for
a maximum of 50 years including the Initial Term), unless at least 2 years prior
to the commencement of any renewal period either party notifies the other party
in writing that it does not wish to renew this agreement.
11.2.1 NON-RENEWAL RIGHTS OF MANAGER. If this agreement will
terminate because Sprint PCS gives Manager timely written notice of non-renewal
of this agreement, then Manager may exercise its rights under Section 11.2.1.1
or, if applicable, its rights under Section 11.2.1.2.
11.2.1.1 Manager's Put Right. Manager may within 30 days after
the date Sprint PCS gives notice of non-renewal put to Sprint PCS all
of the Operating Assets. Sprint PCS will pay to Manager for the
Operating Assets an amount equal to 80% of the Entire Business Value.
The closing of the
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purchase of the Operating Assets will occur within 20 days after the
later of (a) the receipt by Sprint PCS of the written notice of
determination of the Entire Business Value provided by the appraisers
under Section 11.7 or (b) the receipt of all materials required to be
delivered to Sprint PCS under Section 11.8. Upon closing the purchase
of the Operating Assets this agreement will be deemed terminated. The
exercise of the put, the determination of the Operating Assets, the
representations and warranties made by Manager with respect to the
Operating Assets and the business, and the process for closing the
purchase will be subject to the terms and conditions set forth in
Section 11.8.
11.2.1.2 Manager's Purchase Right.
(a) If Sprint PCS owns 20 MHz or more of PCS spectrum
in the Service Area under the License on the date this
agreement is executed, then Manager may within 30 days after
the date Sprint PCS gives notice of nonrenewal declare its
intent to purchase the Disaggregated License. Subject to
receipt of FCC approval of the necessary disaggregation and
partition, Manager may purchase from Sprint PCS the
Disaggregated License for an amount equal to the greater of
(1) the original cost of the License to Sprint PCS (pro rated
on a pops and spectrum basis) plus the microwave relocation
costs paid by Sprint PCS or (2) 10% of the Entire Business
Value.
(b) Upon closing the purchase of the spectrum this
agreement will be deemed terminated. The closing of the
purchase of the Disaggregated License will occur within the
later of:
(1) 20 days after the receipt by Manager of
the written notice of determination of the Entire
Business Value by the appraisers under Section 11.7;
or
(2) 10 days after the approval of the sale
of the Disaggregated License by the FCC.
(c) The exercise of the purchase right, the
determination of the geographic extent of the Disaggregated
License coverage, the representations and warranties made by
Sprint PCS with respect to the Disaggregated License, and the
process for closing the purchase will be subject to the terms
and conditions set forth in Section 11.8.
(d) After the closing of the purchase Manager will
allow:
(1) subscribers of Sprint PCS to roam on
Manager's network; and
(2) Sprint PCS to resell Manager's Products
and Services.
Manager will charge Sprint PCS a MFN price in either case.
11.2.2 NON-RENEWAL RIGHTS OF SPRINT PCS. If this agreement
will terminate because of any of the following five (5) events, then Sprint PCS
may exercise its rights under Section 11.2.2.1 or, if applicable, its rights
under Section 11.2.2.2:
(a) Manager gives Sprint PCS timely written notice of
nonrenewal of this agreement;
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(b) both parties give timely written notices of non-renewal;
(c) this agreement expires with neither party giving a written
notice of non-renewal;
(d) either party elects to terminate this agreement under
Section 11.3.4(a); or
(e) Manager elects to terminate this agreement under Section
11.3.4(b).
11.2.2.1 Sprint PCS' Purchase Right. Sprint PCS may purchase
from Manager all of the Operating Assets. Sprint PCS will pay to
Manager an amount equal to 80% of the Entire Business Value. The
closing of the purchase of the Operating Assets will occur within 20
days after the later of (a) the receipt by Sprint PCS of the written
notice of determination of the Entire Business Value provided by the
appraisers under Section 11.7 or (b) the receipt of all materials
required to be delivered to Sprint PCS under Section 11.8. Upon closing
the purchase of the Operating Assets this agreement will be deemed
terminated. The exercise of the purchase right, the determination of
the Operating Assets, the representations and warranties made by
Manager with respect to the Operating Assets and the business, and the
process for closing the purchase will be subject to the terms and
conditions set forth in Section 11.8.
11.2.2.2 Sprint PCS' Put Right.
(a) Sprint PCS may, subject to receipt of FCC
approval, put to Manager the Disaggregated License for a
purchase price equal to the greater of (1) the original cost
of the License to Sprint PCS (pro rated on a pops and spectrum
basis) plus the microwave relocation costs paid by Sprint PCS
or (2) 10% of the Entire Business Value.
(b) Upon closing the purchase of the Disaggregated
License this agreement will be deemed terminated. The closing
of the purchase of the Disaggregated License will occur within
the later of:
(1) 20 days after the receipt by Sprint PCS
of the written notice of determination of the Entire
Business Value by the appraisers under Section 11.7;
or
(2) 10 days after the approval of the sale
of the Disaggregated License by the FCC.
(c) The exercise of the put, the determination of the
geographic extent of the Disaggregated License coverage, the
representations and warranties made by Sprint PCS with respect
to the Disaggregated License, and the process for closing the
purchase will be subject to the terms and conditions set forth
in Section 11.8.
(d) Manager may, within 10 days after it receives
notice of Sprint PCS' exercise of its put, advise Sprint PCS
of the amount of spectrum (not to exceed 10 MHz) it wishes to
purchase. After the purchase Manager will allow:
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(1) subscribers of Sprint PCS to roam on
Manager's network; and
(2) Sprint PCS to resell Manager's Products
and Services.
Manager will charge Sprint PCS a MFN price in either case.
11.2.3 EXTENDED TERM AWAITING FCC APPROVAL. If Manager is
buying the Disaggregated License as permitted or required under Sections
11.2.1.2 or 11.2.2.2, then the Term of this agreement will extend beyond the
original expiration date until the closing of the purchase of the Disaggregated
License. The parties agree to exercise their respective commercially reasonable
efforts to obtain FCC approval of the transfer of the Disaggregated License.
11.3 EVENTS OF TERMINATION. An "Event of Termination" is deemed to
occur when a party gives written notice to the other party of the Event of
Termination as permitted below:
11.3.1 TERMINATION OF LICENSE.
(a) At the election of either party this agreement may be
terminated at the time the FCC revokes or fails to renew the License. Unless
Manager has the right to terminate this agreement under Section 11.3.1(b),
neither party has any claim against the other party if the FCC revokes or fails
to renew the License, even if circumstances would otherwise permit one party to
terminate this agreement based on a different Event of Termination, except that
the parties will have the right to pursue claims against each other as permitted
under Section 11.4(b).
(b) If the FCC revokes or fails to renew the License because
of a breach of this agreement by Sprint PCS, then Manager has the right to
terminate this agreement under Section 11.3.3 and not this Section 11.3.1.
11.3.2 BREACH OF AGREEMENT: PAYMENT OF MONEY TERMS. At the
election of the non- breaching party this agreement may be terminated upon the
failure by the breaching party to pay any amount due under this agreement or any
other agreement between the parties or their respective Related Parties, if the
breach is not cured within 30 days after the breaching party's receipt of
written notice of the nonpayment from the non-breaching party.
11.3.3 BREACH OF AGREEMENT: OTHER TERMS. At the election of
the nonbreaching party this agreement may be terminated upon the material breach
by the breaching party of any material term contained in this agreement that
does not regard the payment of money, if the breach is not cured within 30 days
after the breaching party's receipt of written notice of the breach from the
non-breaching party, except the cure period will continue for a reasonable
period beyond the 30-day period, but will under no circumstances exceed 180 days
after the breaching party's receipt of written notice of the breach, if it is
unreasonable to cure the breach within the 30-day period, and the breaching
party takes action prior to the end of the 30-day period that is reasonably
likely to cure the breach and continues to diligently take action necessary to
cure the breach.
11.3.4 REGULATORY CONSIDERATIONS.
(a) At the election of either party this agreement may be
terminated if this agreement violates any applicable law in any material respect
where such violation (i) is classified as a felony or (ii)
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subjects either party to substantial monetary fines or other substantial
damages, except that before causing any termination the parties must use best
efforts to modify this agreement, as necessary to cause this agreement (as
modified) to comply with applicable law and to preserve to the extent possible
the economic arrangements set forth in this agreement.
(b) At the election of Manager this agreement may be
terminated if the regulatory action described under 11.3.4(a) is the result of a
deemed change of control of the License and the parties are unable to agree upon
a satisfactory resolution of the matter with the regulatory authority without a
complete termination of this agreement.
11.3.5 TERMINATION OF TRADEMARK LICENSE AGREEMENTS. If either
Trademark License Agreement terminates under its terms, then:
(a) Manager may terminate this agreement if the Trademark
License Agreement terminated because of a breach of the Trademark License
Agreement by Sprint PCS or Sprint; and
(b) Sprint PCS may terminate this agreement if the Trademark
License Agreement terminated because of a breach of the Trademark License
Agreement by Manager.
11.3.6 FINANCING CONSIDERATIONS. At the election of Sprint PCS
this agreement may be terminated upon the failure of Manager to obtain the
financing described in Exhibit 1.7 by the deadline(s) set forth on such Exhibit.
11.3.7 BANKRUPTCY OF A PARTY. At the election of the
non-bankrupt party, this agreement may be terminated upon the occurrence of a
Voluntary Bankruptcy or an Involuntary Bankruptcy of the other party.
"Voluntary Bankruptcy" means:
(a) the inability of a party generally to pay its
debts as the debts become due, or an admission in writing by a
party of its inability to pay its debts generally or a general
assignment by a party for the benefit of creditors;
(b) the filing of any petition or answer by a party
seeking to adjudicate itself a bankrupt or insolvent, or
seeking any liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition
for itself or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking,
consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian or
other similar official for itself or for substantially all of
its property; or
(c) any action taken by a party to authorize any of
the actions set forth above.
"Involuntary Bankruptcy" means, without the consent
or acquiescence of a party:
(a) the entering of an order for relief or approving
a petition for relief or reorganization;
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(b) any petition seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or other similar relief under any present or
future bankruptcy, insolvency or similar statute, law or
regulation;
(c) the filing of any petition against a party, which
petition is not dismissed within 90 days; or
(d) without the consent or acquiescence of a party,
the entering of an order appointing a trustee, custodian,
receiver or liquidator of party or of all or any substantial
part of the property of the party, which order is not
dismissed within 90 days.
11.4 EFFECT OF AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination, the party
with the right to terminate this agreement or to elect the remedy upon the Event
of Termination, as the case may be, may:
(i) in the case of an Event of Termination under
Sections 11.3.1(a) or 11.3.7, give the other party written notice that
the agreement is terminated effective as of the date of the notice, in
which case neither party will have any other remedy or claim for
damages (except any claim the non-bankrupt party has against the
bankrupt party and any claims permitted under Section 11.4(b)); or
(ii) in the case of an Event of Termination other
than under Section 11.3.1(a), give the other party written notice that
the party is exercising one of its rights, if any, under Section 11.5
or Section 11.6.
(b) If the party terminates this agreement under Section
11.4(a)(i) then all rights and obligations of each party under this agreement
will immediately cease, except that:
(i) any rights arising out of a breach of any terms
of this agreement will survive any termination of this agreement;
(ii) the provisions described in Section 17.23 will
survive any termination of this agreement;
(iii) the payment obligations under Section 10 will
survive any termination of this agreement if, and to the extent, any
costs or fees have accrued or are otherwise due and owing as of the
date of termination of this agreement from Manager to Sprint PCS or any
Sprint PCS Related Party or from Sprint PCS to Manager or any Manager
Related Party;
(iv) either party may terminate this agreement in
accordance with the terms of this agreement without any liability for
any loss or damage arising out of or related to such termination,
including any loss or damage arising out of the exercise by Sprint PCS
of its rights under Section 11.6.3;
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(v) Manager will use all commercially reasonable
efforts to cease immediately all of their respective efforts to market,
sell, promote or distribute the Sprint PCS Products and Services;
(vi) Sprint PCS has the option to buy from Manager
any new unsold subscriber equipment and accessories, at the prices
charged to Manager;
(vii) the parties will immediately stop making any
statements or taking any action that might cause third parties to infer
that any business relationship continues to exist between the parties,
and where necessary or advisable, the parties will inform third parties
that the parties no longer have a business relationship; and
(viii) if subscriber equipment and accessories are in
transit when this agreement is terminated, Sprint PCS may, but does not
have the obligation to, cause the freight carrier to not deliver the
subscriber equipment and accessories to Manager but rather to deliver
the subscriber equipment and accessories to Sprint PCS.
(c) If the party exercises its rights under Section
11.4(a)(ii), this agreement will continue in full force and effect until
otherwise terminated.
(d) If this agreement terminates for any reason other than
Manager's purchase of the Disaggregated License, Manager will not, for 3 years
after the date of termination compile, create, or use for the purpose of selling
merchandise or services similar to any Sprint PCS Products and Services, or
sell, transfer or otherwise convey to a third party, a list of customers who
purchased, leased or used any Sprint PCS Products and Services. Manager may use
such a list for its own internal analysis of its business practices and
operations. If this agreement terminates because of Manager's purchase of the
Disaggregated License, then Sprint PCS will transfer to Manager the Sprint PCS
customers with a MIN assigned to the Service Area covered by the Disaggregated
License, but Sprint PCS retains the customers of a national account and any
resellers who have entered into a resale agreement with Sprint PCS. Manager
agrees not to solicit, directly or indirectly, any customers of Sprint PCS not
transferred to Manager under this Section 11.4(d) for 2 years after the
termination of this agreement, except that Manager's advertising through mass
media will not be considered a solicitation of Sprint PCS customers.
11.5 MANAGER'S EVENT OF TERMINATION RIGHTS AND REMEDIES. In addition to
any other right or remedy that Manager may have under this agreement, the
parties agree that Manager will have the rights and remedies set forth in this
Section 11.5 and that such rights and remedies will survive the termination of
this agreement. If Manager has a right to terminate this agreement as the result
of the occurrence of an Event of Termination under Sections 11.3.2, 11.3.3,
11.3.5 or 11.3.7 (if Manager is the non-bankrupt party), then Manager has the
right to elect one of the following three (3) remedies, except Manager cannot
elect its remedies under Sections 11.5.1 or 11.5.2 during the first 2 years of
the Initial Term with respect to an Event of Termination under Section 11.3.3.
11.5.1 MANAGER'S PUT RIGHT. Manager may put to Sprint PCS
within 30 days after the Event of Termination all of the Operating Assets.
Sprint PCS will pay to Manager an amount equal to 80% of the Entire Business
Value. The closing of the purchase of the Operating Assets will occur within 20
days after the later of:
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(a) the receipt by Sprint PCS of the written notice of
determination of the Entire Business Value by the appraisers under Section 11.7;
or
(b) the receipt of all materials required to be delivered to
Sprint PCS under Section 11.8.
Upon closing the purchase of the Operating Assets this agreement will
be deemed terminated. The exercise of the put, the determination of the
Operating Assets, the representations and warranties made by the Manager with
respect to the Operating Assets and the business, and the process for closing
the purchase will be subject to the terms and conditions set forth in Section
11.8.
11.5.2 MANAGER'S PURCHASE RIGHT.
(a) If Sprint PCS owns 20 MHz or more of PCS spectrum in the
Service Area under the License on the date this agreement is executed, then
Manager may, subject to receipt of FCC approval, purchase from Sprint PCS the
Disaggregated License for the greater of (1) the original cost of the License to
Sprint PCS (pro rated on a pops and spectrum basis) plus the microwave
relocation costs paid by Sprint PCS or (2) 9% (10% minus a 10% penalty) of the
Entire Business Value.
(b) Upon closing the purchase of the Disaggregated License
this agreement will be deemed terminated. The closing of the purchase of the
Disaggregated License will occur within the later of:
(1) 20 days after the receipt by Manager of
the written notice of determination of the Entire
Business Value by the appraisers under Section 11.7;
or
(2) 10 days after the approval of the sale
of the Disaggregated License by the FCC.
The exercise of the purchase right, the determination of the geographic extent
of the Disaggregated License coverage, the representations and warranties made
by Sprint PCS with respect to the Disaggregated License, and the process for
closing the purchase will be subject to the terms and conditions set forth in
Section 11.8.
(c) After the closing of the purchase Manager will allow:
(1) subscribers of Sprint PCS to roam on
Manager's network; and
(2) Sprint PCS to resell Manager's Product
and Services.
Manager will charge Sprint PCS a MFN price in either case.
11.5.3 MANAGER'S ACTION FOR DAMAGES OR OTHER RELIEF. Manager,
in accordance with the dispute resolution process in Section 14, may seek
damages or other appropriate relief.
11.6 SPRINT PCS' EVENT OF TERMINATION RIGHTS AND REMEDIES. In addition
to any other right or remedy that Sprint PCS may have under this agreement, the
parties agree that Sprint PCS will have the rights and remedies set forth in
this Section 11.6 and that such rights and remedies will survive the termination
of this agreement. If Sprint PCS has a right to terminate this agreement as the
result of the occurrence of an Event of Termination under Sections 11.3.2,
11.3.3, 11.3.5, 11.3.6 or 11.3.7 (if Sprint PCS is the non-bankrupt party),
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then Sprint PCS has the right to elect one of the following four (4) remedies,
except that (i) if Sprint PCS elects the remedies under Sections 11.6.1, 11.6.2
or 11.6.4, Sprint PCS may pursue its rights under Section 11.6.3 concurrently
with its pursuit of one of the other three remedies, (ii) Sprint PCS cannot
elect its remedies under Sections 11.6.1 or 11.6.2 during the first 2 years
of the Initial Term with respect to an Event of Termination under Section 11.3.3
(unless the Event of Termination is caused by a breach related to the Build-out
Plan or the build-out of the Service Area Network), and (iii) Sprint PCS cannot
elect its remedy under Section 11.6.2 during the first 2 years of the Initial
Term with respect to an Event of Termination under Section 11.3.6.
11.6.1 SPRINT PCS' PURCHASE RIGHT. Sprint PCS may purchase
from Manager all of the Operating Assets. Sprint PCS will pay to Manager an
amount equal to 72% (80% minus a 10% penalty) of the Entire Business Value. The
closing of the purchase of the Operating Assets will occur within 20 days after
the later of:
(a) the receipt by Sprint PCS of the written notice of
determination of the Entire Business Value by the appraisers pursuant to Section
11.7; or
(b) the receipt of all materials required to be delivered to
Sprint PCS under Section 11.8.
Upon closing the purchase of the Operating Assets this agreement will
be deemed terminated. The exercise of the purchase right, the determination of
the Operating Assets, the representations and warranties made by Manager with
respect to the Operating Assets and the business, and the process for closing
the purchase will be subject to the terms and conditions set forth in Section
11.8.
11.6.2 SPRINT PCS' PUT RIGHT.
(a) Sprint PCS may, subject to receipt of FCC approval, put to
Manager the Disaggregated License for a purchase price equal to the greater of
(1) the original cost of the License to Sprint PCS (pro rated on a pops and
spectrum basis) plus the microwave relocation costs paid by Sprint PCS or (2)
10% of the Entire Business Value.
(b) Upon closing the purchase of the Disaggregated License
this agreement will be deemed terminated. The closing of the purchase of the
Disaggregated License will occur within the later of:
(1) 20 days after the receipt by Sprint PCS
of the written notice of determination of the Entire
Business Value by the appraisers under Section 11.7;
or
(2) 10 days after the approval of the sale
of the Disaggregated License by the FCC.
(c) The exercise of the put, the determination of the
geographic extent of the Disaggregated License coverage, the representations and
warranties made by Sprint PCS with respect to the Disaggregated License, and the
process for closing the purchase will be subject to the terms and conditions set
forth in Section 11.8.
(d) Manager may, within 10 days after it receives notice of
Sprint PCS' exercise of its put, advise Sprint PCS of the amount of spectrum
(not to exceed 10 MHz) it wishes to purchase. After the closing of the purchase
Manager will allow:
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(1) subscribers of Sprint PCS to roam on
Manager's network; and
(2) Sprint PCS to resell Manager's Products
and Services.
Manager will charge Sprint PCS a MFN price in either case.
11.6.3 SPRINT PCS' RIGHT TO CAUSE A CURE.
(a) Sprint PCS' Right. Sprint PCS may, but is not obligated
to, take such action as it deems necessary to cure Manager's breach of this
agreement, including assuming operational responsibility for the Service Area
Network to complete construction, continue operation, complete any necessary
repairs, implement changes necessary to comply with the Program Requirements and
terms of this agreement, or take such other steps as are appropriate under the
circumstances, or Sprint PCS may designate a third party or parties to do the
same, to assure uninterrupted availability and deliverability of Sprint PCS
Products and Services in the Service Area, or to complete the build-out of the
Service Area Network in accordance with the terms of this agreement. In the
event that Sprint PCS elects to exercise its right under this Section 11.6.3,
Sprint PCS will give Manager written notice of such election. Upon giving such
notice:
(1) Manager will collect and make available
at a convenient, central location at its principal
place of business, all documents, books, manuals,
reports and records related to the Build-out Plan and
required to operate and maintain the Service Area
Network; and
(2) Sprint PCS, its employees, contractors
and designated third parties will have the
unrestricted right to enter the facilities and
offices of Manager for the purpose of curing the
breach and, if Sprint PCS deems necessary, operate
the Service Area Network.
Manager agrees to cooperate with and assist Sprint PCS to the extent requested
by Sprint PCS to enable Sprint PCS to exercise its rights under this Section
11.6.3.
(b) Liability. Sprint PCS' exercise of its rights under this
Section 11.6.3 will not be deemed an assumption by Sprint PCS of any liability
attributable to Manager or any other party, except that, without limiting the
provisions of Section 13, during the period that Sprint PCS is curing a breach
under this agreement or operating any portion of the Service Area Network
pursuant to this Section 11.6.3, Sprint PCS will indemnify and defend Manager
and its directors, partners, officers, employees and agents from and against,
and reimburse and pay for, all claims, demands, damages, losses, judgments,
awards, liabilities, costs and expenses (including reasonable attorneys' fees,
court costs and other expenses of litigation), whether or not arising out of
third party claims, in connection with any suit, claim, action or other legal
proceeding relating to the bodily injury, sickness or death of persons or the
damage to or destruction of property, real or personal, resulting from or
arising out of Sprint PCS' negligence or willful misconduct in curing the breach
or in the operation of the Service Area Network. Sprint PCS' obligation under
this Section 11.6.3(b) will not apply to the extent of any claims, demands,
damages, losses, judgments, awards, liabilities, costs and expenses resulting
from the negligence or willful misconduct of Manager or arising from any
contractual obligation of Manager.
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(c) Costs and Payments. During the period that Sprint PCS is
curing a breach or operating the Service Area Network under this Section 11.6.3,
Sprint PCS and Manager will continue to make any and all payments due to the
other party and to third parties under this agreement, the Services Agreement
and any other agreements to which such party is bound, except that Sprint PCS
may deduct from its payments to Manager all reasonable costs and expenses
incurred by Sprint PCS in connection with the exercise of its right under this
Section 11.6.3. Sprint PCS' operation of the Service Area Network pursuant to
this Section 11.6.3 is not a substitution for Manager's performance of its
obligations under this agreement and does not relieve Manager of its other
obligations under this agreement.
(d) Length of Right. Sprint PCS may continue to operate the
Service Area Network in accordance with Section 11.6.3 until (i) Sprint PCS
cures all breaches by Manager under this agreement; (ii) Manager cures all
breaches and demonstrates to Sprint PCS' satisfaction that it is financially and
operationally willing, ready and able to perform in accordance with this
agreement and resumes such performance; (iii) Sprint PCS consummates the
purchase of the Operating Assets under Section 11.6.1 or the sale of the
Disaggregated License under Section 11.6.2; or (iv) Sprint PCS terminates this
agreement.
(e) Not Under Services Agreement. The exercise by Sprint PCS
of its right under this Section 11.6.3 does not represent services rendered
under the Services Agreement, and therefore it does not allow Manager to be
deemed in compliance with the Program Requirements under Sections 7.1(a)(ii),
8.1(b).
11.6.4 SPRINT PCS' ACTION FOR DAMAGES OR OTHER RELIEF. Sprint
PCS, in accordance with the dispute resolution process in Section 14, may seek
damages or other appropriate relief.
11.7 DETERMINATION OF ENTIRE BUSINESS VALUE.
11.7.1 APPOINTMENT OF APPRAISERS. Sprint PCS and Manager must
each designate an independent appraiser within 30 days after giving the Purchase
Notice under Exhibit 11.8. Sprint PCS and Manager will direct the two appraisers
to jointly select a third appraiser within 15 days after the day the last of
them is appointed. Each appraiser must be an expert in the valuation of wireless
telecommunications businesses. Sprint PCS and Manager must direct the three
appraisers to each determine, within 45 days after the appointment of the last
appraiser, the Entire Business Value. Sprint PCS and Manager will each bear the
costs of the appraiser appointed by it, and they will share equally the costs of
the third appraiser.
11.7.2 MANAGER'S OPERATING ASSETS. The following assets are
included in the Operating Assets (as defined in the Schedule of Definitions):
(a) network assets, including all personal property, real
property interests in cell sites and switch sites, leasehold interests,
collocation agreements, easements, and rights-of-way;
(b) all of the real, personal, tangible and intangible
property and contract rights that Manager owns and uses in conducting , the
business of providing the Sprint PCS Products and Services, including the
goodwill resulting from Manager's customer base;
(c) sale and distribution assets primarily dedicated (i.e., at
least 80% of their revenue is derived from the sale of Sprint PCS Products and
Services) to the sale by Manager of Sprint PCS Products and Services. For
example, a retail store that derives at least 80% of its revenue from the sale
of Sprint PCS
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Products and Services is an Operating Asset. A store that derives 65 % of its
revenue from Sprint PCS Products and Services is not an Operating Asset;
(d) customers, if any, that use both the other products and
services approved under Section 3.2 and the Sprint PCS Products and Services;
(e) handset inventory;
(f) books and records of the wireless business, including all
engineering drawings and designs and financial records; and
(g) all contracts used by Manager in operating the wireless
business including T1 service agreements, service contracts, interconnection
agreements, distribution agreements, software license agreements, equipment
maintenance agreements, sales agency agreements and contracts with all equipment
suppliers.
11.7.3 ENTIRE BUSINESS VALUE. Utilizing the valuation
principles set forth below and in Section 11.7.4, "Entire Business Value" means
the fair market value of Manager's wireless business in the Service Area, valued
on a going concern basis.
(a) The fair market value is based on the price a willing
buyer would pay a willing seller for the entire on-going business.
(b) The appraisers will use the then-current customary means
of valuing a wireless telecommunications business.
(c) The business is conducted under the Brands and existing
agreements between the parties and their respective Related Parties.
(d) Manager owns the Disaggregated License (in the case where
Manager will be buying the Disaggregated License under Sections 11.2.1.2,
11.2.2.2, 11.5.2 or 11.6.2) or Manager owns the spectrum and the frequencies
actually used by Manager under this agreement (in the case where Sprint PCS will
be buying the Operating Assets under Sections 11.2.1.1, 11.2.2.1, 11.5.1 or
11.6.1).
(e) The valuation will not include any value for the business
represented by Manager's Products and Services or any business not directly
related to Sprint PCS Products and Services.
11.7.4 CALCULATION OF ENTIRE BUSINESS VALUE. The Entire
Business Value to be used to determine the purchase price of the Operating
Assets or the Disaggregated License under this agreement is as follows:
(a) If the highest fair market value determined by the
appraisers is within 10% of the lowest fair market value, then the Entire
Business Value used to determine the purchase price under this agreement will be
the arithmetic mean of the three appraised fair market values.
(b) If two of the fair market values determined by the
appraisers are within 10% of one another, and the third value is not within 10%
of the other fair market values, then the Entire Business Value
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used to determine the purchase price under this agreement will be the arithmetic
mean of the two more closely aligned fair market values.
(c) If none of the fair market values is within 10% of the
other two fair market values, then the Entire Business Value used to determine
the purchase price under this agreement will be the middle value of the three
fair market values.
11.8 CLOSING TERMS AND CONDITIONS. The closing terms and conditions for
the transactions contemplated in this Section 11 are attached as Exhibit 11.8.
11.9 CONTEMPORANEOUS AND IDENTICAL APPLICATION. The parties agree that
any action regarding renewal or non-renewal and any Event of Termination will
occur contemporaneously and identically with respect to all Licenses. For
example, if Manager exercises its purchase right under Section 11.5.2, it must
exercise such right with respect to all of the Licenses under this agreement.
The Term of this agreement will be the same for all Licenses; Manager will not
be permitted to operate a portion of the Service Area Network with fewer than
all of the Licenses.
12. BOOKS AND RECORDS; CONFIDENTIAL INFORMATION; INSURANCE
12.1 BOOKS AND RECORDS.
12.1.1 GENERAL. Each party must keep and maintain books and
records to support and document any fees, costs, expenses or other charges due
in connection with the provisions set forth in this agreement. The records must
be retained for a period of at least 3 years after the fees, costs, expenses or
other charges to which the records relate have accrued and have been paid, or
such other period as may be required by law.
12.1.2 AUDIT. On reasonable advance notice, each party must
provide access to appropriate records to the independent auditors selected by
the other party for purposes of auditing the amount of fees, costs, expenses or
other charges payable in connection with the Service Area with respect to the
period audited. The auditing party will conduct the audit no more frequently
than annually. If the audit shows that Sprint PCS was underpaid then, unless the
amount is contested, Manager will pay to Sprint PCS the amount of the
underpayment within 10 Business Days after Sprint PCS gives Manager written
notice of the determination of the underpayment. If the audit determines that
Sprint PCS was overpaid then, unless the amount is contested, Sprint PCS will
pay to Manager the amount of the overpayment within 10 Business Days after
Sprint PCS determines Sprint PCS was overpaid. The auditing party will pay all
costs and expenses related to the audit unless the amount owed to the audited
party is reduced by more than 10% or the amount owed by the audited party is
increased by more than 10%, in which case the costs and expenses related to the
audit will be paid by the audited party.
Notwithstanding the above provisions of this Section 12.1.2, rather
than allow Manager's independent auditors access to Sprint PCS' records, Sprint
PCS may provide a report issued in conformity with Statement of Auditing
Standard No. 70 "Reports on the Processing of Transactions by Service
Organizations" ("Type II Report" or "Manager Management Report"). Such report
will be prepared by independent auditors and will provide an opinion on the
controls placed in operation and tests of operating effectiveness of those
controls in effect at Sprint PCS over the Manager Management Processes. "Manager
Management Processes" include
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those services generally provided within the Management Agreement, primarily
billing and collection of Collected Revenues.
12.1.3 CONTESTING AN AUDIT. If the party that did not select
the independent auditor does not agree with the findings of the audit, then such
party can contest the findings by providing notice of such disagreement to the
other party (the "Dispute Notice"). The date of delivery of such notice is the
"Dispute Notice Date." If the parties are unable to resolve the disagreement
within 10 Business Days after the Dispute Notice Date, they will resolve the
disagreement in accordance with the following procedures.
The two parties and the auditor that conducted the audit will all agree
on an independent certified public accountant with a regional or national
accounting practice in the wireless telecommunications industry (the "Arbiter")
within 15 Business Days after the Dispute Notice Date. If, within 15 Business
Days after the Dispute Notice Date, the three parties fail to agree on the
Arbiter, then at the request of either party to this agreement, the Arbiter will
be selected pursuant to the rules then in effect of the American Arbitration
Association. Each party will submit to the Arbiter within 5 Business Days after
its selection and engagement all information reasonably requested by the Arbiter
to enable the Arbiter to independently resolve the issue that is the subject of
the Dispute Notice. The Arbiter will make its own determination of the amount of
fees, costs, expenses or other charges payable under this agreement with respect
to the period audited. The Arbiter will issue a written report of its
determination in reasonable detail and will deliver a copy of the report to the
parties within 10 Business Days after the Arbiter receives all of the
information reasonably requested. The determination made by the Arbiter will be
final and binding and may be enforced by any court having jurisdiction. The
parties will cooperate fully in assisting the Arbiter and will take such actions
as are necessary to expedite the completion of and to cause the Arbiter to
expedite its assignment.
If the amount owed by a contesting party is reduced by more than 10% or
the amount owed to a contesting party is increased by more than 10% then the
non-contesting party will pay the costs and expenses of the Arbiter, otherwise
the contesting party will pay the costs and expenses of the Arbiter.
12.2 CONFIDENTIAL INFORMATION.
(a) Except as specifically authorized by this agreement, each
of the parties must, for the Term and 3 years after the date of termination of
this agreement, keep confidential, not disclose to others and use only for the
purposes authorized in this agreement, all Confidential Information disclosed by
the other party to the party in connection with this agreement, except that the
foregoing obligation will not apply to the extent that any Confidential
Information:
(i) is or becomes, after disclosure to a party,
publicly known by any means other than through unauthorized acts or
omissions of the party or its agents; or
(ii) is disclosed in good faith to a party by a third
party entitled to make the disclosure.
(b) Notwithstanding the foregoing, a party may use, disclose
or authorize the disclosure of Confidential Information that it receives that:
(i) has been published or is in the public domain, or
that subsequently comes into the public domain, through no fault of the
receiving party;
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(ii) prior to the effective date of this agreement
was properly within the legitimate possession of the receiving party,
or subsequent to the effective date of this agreement, is lawfully
received from a third party having rights to publicly disseminate the
Confidential Information without any restriction and without notice to
the recipient of any restriction against its further disclosure;
(iii) is independently developed by the receiving
party through persons or entities who have not had, either directly or
indirectly, access to or knowledge of the Confidential Information;
(iv) is disclosed to a third party consistent with
the terms of the written approval of the party originally disclosing
the information;
(v) is required by the receiving party to be produced
under order of a court of competent jurisdiction or other similar
requirements of a governmental agency, and the Confidential Information
will otherwise continue to be Confidential Information required to be
held confidential for purposes of this agreement;
(vi) is required by the receiving party to be
disclosed by applicable law or a stock exchange or association on which
the receiving party's securities (or those of its Related Parties) are
or may become listed; or
(vii) is disclosed by the receiving party to a
financial institution or accredited investor (as that term is defined
in Rule 501(a) under the Securities Act of 1933) that is considering
providing financing to the receiving party and which financial
institution or accredited investor has agreed to keep the Confidential
Information confidential in accordance with an agreement at least as
restrictive as this Section 12.2.
(c) Notwithstanding the foregoing, Manager and Sprint PCS
authorize each other to disclose to the public in regulatory filings the other's
identity and the Service Area to be developed and managed by Manager, and
Manager authorizes Sprint PCS to mention Manager and the Service Area in public
relations announcements.
(d) The party making a disclosure under Sections 12.2(b)(v),
12.2(b)(vi) or 12.2(b)(vii) must inform the disclosing party as promptly as is
reasonably necessary to enable the disclosing party to take action to, and use
the party's reasonable best efforts to, limit the disclosure and maintain
confidentiality to the extent practicable.
(e) Manager will not except when serving in the capacity of
Manager under this agreement, use any Confidential Information of any kind that
it receives under or in connection with this agreement. For example, if Manager
operates a wireless company in a different license area, Manager may not use any
of the Confidential Information received under or in connection with this
agreement in operating the other wireless business.
12.3 INSURANCE.
12.3.1 GENERAL. During the term of this agreement, Manager
must obtain and maintain, and will cause any subcontractors to obtain and
maintain, with financially reputable insurers licensed to do business
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in all jurisdictions where any work is performed under this agreement and who
are reasonably acceptable to Sprint PCS, the insurance described in the Sprint
PCS Insurance Requirements. The Sprint PCS Insurance Requirements as of the date
of this agreement are attached as Exhibit 12.3. Sprint PCS may modify the Sprint
PCS Insurance Requirements as is commercially reasonable from time to time by
delivering to Manager a new Exhibit 12.3.
12.3.2 WAIVER OF SUBROGATION. Manager must look first to any
insurance in its favor before making any claim against Sprint PCS or Sprint, and
their respective directors, officers, employees, agents or representatives for
recovery resulting from injury to any person (including Manager's or its
subcontractor's employees) or damage to any property arising from any cause,
regardless of negligence. Manager does hereby release and waive to the fullest
extent permitted by law, and will cause its respective insurers to waive, all
rights of recovery by subrogation against Sprint PCS or Sprint, and their
respective directors, officers, employees, agents or representatives.
12.3.3 CERTIFICATES OF INSURANCE. Manager and all of its
subcontractors, if any, must, as a material condition of this agreement and
prior to the commencement of any work under and any renewal of this agreement,
deliver to Sprint PCS a certificate of insurance, satisfactory in form and
content to Sprint PCS, evidencing that the above insurance, including waiver of
subrogation, is in force and will not be canceled or materially altered without
first giving Sprint PCS at least 30 days prior written notice and that all
coverages are primary to any insurance carried by Sprint PCS, its directors,
officers, employees, agents or representatives.
Nothing contained in this Section 12.3.3 will limit Manager's liability
to Sprint PCS, its directors, officers, employees, agents or representatives to
the limits of insurance certified or carried.
13. INDEMNIFICATION
13.1 INDEMNIFICATION BY SPRINT PCS. Sprint PCS agrees to indemnify,
defend and hold harmless Manager, its directors, managers, officers, employees,
agents and representatives from and against any and all claims, demands, causes
of action, losses, actions, damages, liability and expense, including costs and
reasonable attorneys' fees, against Manager, its directors, managers, officers,
employees, agents and representatives arising from or relating to the violation
by Sprint PCS of any law, regulation or ordinance applicable to Sprint PCS or by
Sprint PCS' breach of any representation, warranty or covenant contained in this
agreement or any other agreement between Sprint PCS or Sprint PCS' Related
Parties and Manager or Manager's Related Parties except where and to the extent
the claim, demand, cause of action, loss, action, damage, liability and/or
expense results solely from the negligence or willful misconduct of Manager.
13.2 INDEMNIFICATION BY MANAGER. Manager agrees to indemnify, defend
and hold harmless Sprint PCS and Sprint, and their respective directors,
managers, officers, employees, agents and representatives from and against any
and all claims, demands, causes of action, losses, actions, damages, liability
and expense, including costs and reasonable attorneys' fees, against Sprint PCS
or Sprint, and their respective directors, managers, officers, employees, agents
and representatives arising from or relating to Manager's violation of any law,
regulation or ordinance applicable to Manager, Manager's breach of any
representation, warranty or covenant contained in this agreement or any other
agreement between Manager or Manager's Related Parties and Sprint PCS and Sprint
PCS' Related Parties, Manager's ownership of the Operating Assets or the
operation of the Service Area Network, or the actions or failure to act of any
of Manager's contractors, subcontractors, agents, directors, managers, officers,
employees and representatives of any of them in the
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performance of any work under this agreement, except where and to the extent the
claim, demand, cause of action, loss, action, damage, liability and expense
results solely from the negligence or willful misconduct of Sprint PCS or
Sprint, as the case may be.
13.3 PROCEDURE.
13.3.1 NOTICE. Any party being indemnified ("Indemnitee") will
give the party making the indemnification ("Indemnitor") written notice as soon
as practicable but no later than 5 Business Days after the party becomes aware
of the facts, conditions or events that give rise to the claim for
indemnification if:
(a) any claim or demand is made or liability is asserted
against Indemnitee; or
(b) any suit, action, or administrative or legal proceeding is
instituted or commenced in which Indemnitee is involved or is named as a
defendant either individually or with others.
Failure to give notice as described in this Section 13.3.1 does not
modify the indemnification obligations of this provision, except if Indemnitee
is harmed by failure to provide timely notice to Indemnitor, then Indemnitor
does not have to indemnify Indemnitee for the harm caused by the failure to give
the timely notice.
13.3.2 DEFENSE BY INDEMNITOR. If within 30 days after giving
notice Indemnitee receives written notice from Indemnitor stating that
Indemnitor disputes or intends to defend against the claim, demand, liability,
suit, action or proceeding, then Indemnitor will have the right to select
counsel of its choice and to dispute or defend against the claim, demand,
liability, suit, action or proceeding, at its expense.
Indemnitee will fully cooperate with Indemnitor in the dispute or
defense so long as Indemnitor is conducting the dispute or defense diligently
and in good faith. Indemnitor is not permitted to settle the dispute or claim
without the prior written approval of Indemnitee, which approval will not be
unreasonably withheld. Even though Indemnitor selects counsel of its choice,
Indemnitee has the right to retain additional representation by counsel of its
choice to participate in the defense at Indemnitee's sole cost and expense.
13.3.3 DEFENSE BY INDEMNITEE. If no notice of intent to
dispute or defend is received by Indemnitee within the 30-day period, or if a
diligent and good faith defense is not being or ceases to be conducted,
Indemnitee has the right to dispute and defend against the claim, demand or
other liability at the sole cost and expense of Indemnitor and to settle the
claim, demand or other liability, and in either event to be indemnified as
provided in this Section 13.3.3. Indemnitee is not permitted to settle the
dispute or claim without the prior written approval of Indemnitor, which
approval will not be unreasonably withheld.
13.3.4 COSTS. Indemnitor's indemnity obligation includes
reasonable attorneys' fees, investigation costs, and all other reasonable costs
and expenses incurred by Indemnitee from the first notice that any claim or
demand has been made or may be made, and is not limited in any way by any
limitation on the amount or type of damages, compensation, or benefits payable
under applicable workers' compensation acts, disability benefit acts, or other
employee benefit acts.
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14. DISPUTE RESOLUTION
14.1 NEGOTIATION. The parties will attempt in good faith to resolve any
dispute arising out of or relating to this agreement promptly by negotiation
between or among representatives who have authority to settle the controversy.
Either party may escalate any dispute not resolved in the normal course of
business to the appropriate (as determined by the party) officers of the parties
by providing written notice to the other party.
Within 10 Business Days after delivery of the notice, the appropriate
officers of each party will meet at a mutually acceptable time and place, and
thereafter as often as they deem reasonably necessary, to exchange relevant
information and to attempt to resolve the dispute.
Either party may elect, by giving written notice to the other party, to
escalate any dispute arising out of or relating to the determination of fees
that is not resolved in the normal course of business or by the audit process
set forth in Sections 12.1.2 and 12.1.3, first to the appropriate financial or
accounting officers to be designated by each party. The designated officers will
meet in the manner described in the preceding paragraph. If the matter has not
been resolved by the designated officers within 30 days after the notifying
party's notice, either party may elect to escalate the dispute to the
appropriate (as determined by the party) officers in accordance with the prior
paragraphs of this Section 14.1.
14.2 UNABLE TO RESOLVE. If a dispute has not been resolved within 60
days after the notifying party's notice, either party may continue to operate
under this agreement and sue the other party for damages or seek other
appropriate remedies as provided in this agreement. If, and only if, this
agreement does not provide a remedy (as in the case of Sections 3.4 and 4.5,
where the parties are supposed to reach an agreement), then either party may
give the other party written notice that it wishes to resolve the dispute or
claim arising out of the parties' inability to agree under such Sections of this
agreement by using the arbitration procedure set forth in this Section 14.2.
Such arbitration will occur in Kansas City, Missouri, unless the parties
otherwise mutually agree, with the precise location being as agreed upon by the
parties or, absent such agreement, at a location in Kansas City, Missouri
selected by Sprint PCS. Such arbitration will be conducted pursuant to the
procedures prescribed by the Missouri Uniform Arbitration Act, as amended from
time to time, or, if none, pursuant to the rules then in effect of the American
Arbitration Association (or at any other place and by any other form of
arbitration mutually acceptable to the parties). Any award rendered in such
arbitration will be confidential and will be final and conclusive upon the
parties, and a judgment on the award may be entered in any court of the forum,
state or federal, having jurisdiction. The expenses of the arbitration will be
borne equally by the parties to the arbitration, except that each party must pay
for and bear the cost of its own experts, evidence, and attorneys' fees.
The parties must each, within 30 days after either party gives notice
to the other party of the notifying party's desire to resolve a dispute or claim
under the arbitration procedure in this Section 14.2, designate an independent
arbitrator, who is knowledgeable with regard to the wireless telecommunications
industry, to participate in the arbitration hearing. The two arbitrators thus
selected will select a third independent arbitrator, who is knowledgeable with
regard to the wireless telecommunications industry, who will act as chairperson
of the board of arbitration. If, within 15 days after the day the last of the
two named arbitrators is appointed, the two named arbitrators fail to agree upon
the third, then at the request of either party, the third arbitrator shall be
selected pursuant to the rules then in effect of the American Arbitration
Association. The three independent arbitrators will comprise the board of
arbitration, which will preside over the arbitration hearing and will render all
decisions by majority vote. If either party refuses or neglects to appoint an
independent arbitrator within such 30-day period, the independent arbitrator who
has been appointed as of the 31st day after the notifying party's notice will be
the sole independent arbitrator and will solely preside over the arbitration
hearing. The
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arbitration hearing will commence no sooner than 30 days after the date the last
arbitrator is appointed and no later than 60 days after such date. The
arbitration hearing will be conducted during normal working hours on Business
Days without interruption or adjournment of more than 2 Business Days at any one
time or 6 Business Days in the aggregate.
The arbitrators will deliver their decision to the parties in writing
within 10 days after the conclusion of the arbitration hearing. The arbitration
award will be accompanied by findings of fact and a statement of reasons for the
decision. There will be no appeal from the written decision, except as permitted
by applicable law. The arbitration proceedings, the arbitrators' decision, the
arbitration award, and any other aspect, matter, or issue of or relating to the
arbitration are confidential, and disclosure of such confidential information is
an actionable breach of this agreement.
Notwithstanding any other provision of this agreement, arbitration will
not be required of any issue for which injunctive relief is properly sought by
either party.
14.3 ATTORNEYS AND INTENT. If an officer intends to be accompanied at a
meeting by an attorney, the other party's officer will be given at least 3
Business Days prior notice of the intention and may also be accompanied by an
attorney. All negotiations under Section 14.1 are confidential and will be
treated as compromise and settlement negotiations for purposes of the Federal
Rules of Civil Procedure and state rules of evidence and civil procedure.
14.4 TOLLING OF CURE PERIODS. Any cure period under Section 11.3 that
is less than 90 days will be tolled during the pendency of the dispute
resolution process. Any cure period under Section 11.3 that is 90 days or longer
will not be tolled during the pendency of the dispute resolution process.
15. REPRESENTATIONS AND WARRANTIES
Each party for itself makes the following representations and
warranties to the other party:
15.1 DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENTS. The
party is either a corporation, limited liability company, or limited partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Manager is qualified to do business and in
good standing in every jurisdiction in which the Service Area is located. The
party has the full power and authority to execute and deliver this agreement and
to perform its obligations under this agreement.
15.2 VALID AND BINDING OBLIGATION. This agreement constitutes the valid
and binding obligation of the party, enforceable in accordance with its terms,
except as may be limited by principles of equity or by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally.
15.3 NO CONFLICT; NO DEFAULT. Neither the execution, delivery and
performance of this agreement nor the consummation by the party of the
transactions contemplated in this agreement will conflict with, violate or
result in a breach of (a) any law, regulation, order, writ, injunction, decree,
determination or award of any governmental authority or any arbitrator,
applicable to such party, (b) any term, condition or provision of the articles
of incorporation, certificate of limited partnership, certificate of
organization, bylaws, partnership agreement or limited liability company
agreement (or other governing documents) of such party or of any
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material agreement or instrument to which such party is or may be bound or to
which any of its material properties or assets is subject.
15.4 LITIGATION. No action, suit, proceeding or investigation is
pending or, to the knowledge of the party, threatened against or affecting the
party or any of its properties, assets or businesses in any court or before or
by any governmental agency that could, if adversely determined, reasonably be
expected to have a material adverse effect on the party's ability to perform its
obligations under this agreement. The party has not received any currently
effective notice of any default that could reasonably be expected to result in a
breach of the preceding sentence.
16. REGULATORY COMPLIANCE
16.1 REGULATORY COMPLIANCE. Manager will construct, operate, and manage
the Service Area Network in compliance with applicable federal, state, and local
laws and regulations, including Siting Regulations. Nothing in this Section 16.1
will limit Manager's obligations under Section 2.2 and the remainder of this
Section 16. Manager acknowledges that failure to comply with applicable federal,
state, and local laws and regulations in its construction, operation, and
management of the Service Area Network may subject the parties and the License
to legal and administrative agency actions, including forfeiture penalties and
actions that affect the License, such as license suspension and revocation, and
accordingly, Manager agrees that it will cooperate with Sprint PCS to maintain
the License in full force and effect.
Manager will write and implement practices and procedures governing
construction and management of the Service Area Network in compliance with
Siting Regulations. Manager will make its Siting Regulations practices and
procedures available upon request to Sprint PCS in the manner specified by
Sprint PCS for its inspection and review, and Manager will modify those Siting
Regulations practices and procedures as may be requested by Sprint PCS. Every
six months, and at the request of Sprint PCS, Manager will provide a written
certification from one of Manager's chief officers that Manager's Service Area
Network complies with Siting Regulations. Manager's first certification of
compliance with Siting Regulations will be provided to Sprint PCS six months
after the date of this agreement.
Manager will conduct an audit and physical inspection of its Service
Area Network at the request of Sprint PCS to confirm compliance with Siting
Regulations, and Manager will report the results of the audit and physical
inspection to Sprint PCS in the form requested by Sprint PCS. Manager will bear
the cost of Siting Regulations compliance audits and physical inspections
requested by Sprint PCS.
Manager will retain for 3 years records demonstrating compliance with
Siting Regulations, including compliance audit and inspection records. Manager
will make those records available upon request to Sprint PCS for production,
inspection, and copying in the manner specified by Sprint PCS. Sprint PCS will
bear the cost of production, inspection, and copying.
16.2 FCC COMPLIANCE. The parties agree to comply with all applicable
FCC rules governing the License or the Service Area Network and specifically
agree as follows:
(a) The party billing a customer will advise the customer that
service is provided over spectrum licensed to Sprint PCS. Neither Manager nor
Sprint PCS will represent itself as the legal representative of the other before
the FCC or any other third party, but will cooperate with each other with
respect to FCC matters concerning the License or the Service Area Network.
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(b) Sprint PCS will use commercially reasonable efforts to
maintain the License in accordance with the terms of the License and all
applicable laws, policies and regulations and to comply in all material respects
with all other legal requirements applicable to the operation of the Sprint PCS
Network and its business. Sprint PCS has sole responsibility, except as
specifically provided otherwise in Section 2.2, for keeping the License in full
force and effect and for preparing submissions to the FCC or any other relevant
federal, state or local authority of all reports, applications, interconnection
agreements, renewals, or other filings or documents. Manager must cooperate and
coordinate with Sprint PCS' actions to comply with regulatory requirements,
which cooperation and coordination must include, without limitation, the
provision to Sprint PCS of all information that Sprint PCS deems necessary to
comply with the regulatory requirements. Manager must refrain from taking any
action that could impede Sprint PCS from fulfilling its obligations under the
preceding sentence, and must not take any action that could cause Sprint PCS to
forfeit or cancel the License.
(c) Sprint PCS and Manager are familiar with Sprint PCS'
responsibility under the Communications Act of 1934, as amended, and applicable
FCC rules. Nothing in this agreement is intended to diminish or restrict Sprint
PCS' obligations as an FCC Licensee and both parties desire that this agreement
and each party's obligations under this agreement be in compliance with the FCC
rules.
(d) Nothing in this agreement will preclude Sprint PCS from
permitting or facilitating resale of Sprint PCS Products and Services to the
extent required or elected under applicable FCC regulations. Manager will take
the actions necessary to facilitate Sprint PCS' compliance with FCC regulations.
To the extent permitted by applicable regulations, Sprint PCS will not authorize
a reseller that desires to sell services and products in only the Service Area
to resell Sprint PCS wholesale products and services, unless Manager agrees in
advance to such sales.
(e) If a change in FCC policy or rules makes it necessary to
obtain FCC consent for the implementation, continuation or further effectuation
of any term or provision of this agreement, Sprint PCS will use all commercially
reasonable efforts diligently to prepare, file and prosecute before the FCC all
petitions, waivers, applications, amendments, rulemaking comments and other
related documents necessary to secure and/or retain FCC approval of all aspects
of this agreement. Manager will use commercially reasonable efforts to provide
to Sprint PCS any information that Sprint PCS may request from Manager with
respect to any matter involving Sprint PCS, the FCC, the License, the Sprint PCS
Products and Services or any other products and services approved under Section
3.2. Each party will bear its own costs of preparation of the documents and
prosecution of the actions.
(f) If the FCC determines that this agreement is inconsistent
with the terms and conditions of the License or is otherwise contrary to FCC
policies, rules and regulations, or if regulatory or legislative action
subsequent to the date of this agreement alters the permissibility of this
agreement under the FCC's rules or other applicable law, rules or regulations,
then the parties must use best efforts to modify this agreement as necessary to
cause this agreement (as modified) to comply with the FCC policies, rules,
regulations and applicable law and to preserve to the extent possible the
economic arrangements set forth in this agreement.
(g) Manager warrants and represents to Sprint PCS that Manager
is and at all times during the Term of this agreement will be in compliance with
FCC rules and regulations regarding limits on classes and amounts of spectrum
that may be owned by Manager. Manager agrees that in the event that Manager is
or at any time becomes in violation of such rules and regulations, Manager will
promptly take all
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action necessary and appropriate (other than terminating this agreement) to cure
such violation and comply with such rules and regulations, including without
limitation disposing of its direct or indirect interests in cellular licenses.
16.3 MARKING AND LIGHTING. Manager will conform to applicable FAA
standards when Siting Regulations require marking and lighting of Manager's
Service Area Network cell sites. Manager will cooperate with Sprint PCS in
reporting lighting malfunctions as required by Siting Regulations.
16.4 REGULATORY NOTICES. Manager will, within 2 Business Days after its
receipt, give Sprint PCS written notice of all oral and written communications
it receives from regulatory authorities (including but not limited to the FCC,
the FAA, state public service commissions, environmental authorities, and
historic preservation authorities) and complaints respecting Manager's
construction, operation, and management of the Service Area Network that could
result in actions affecting the License as well as written notice of the details
respecting such communications and complaints, including a copy of any written
material received in connection with such communications and complaints. Manager
will cooperate with Sprint PCS in responding to such communications and
complaints received by Manager. Sprint PCS has the right to respond to all such
communications and complaints, with counsel and consultants of its own choice.
If Sprint PCS chooses to respond to such communications and complaints, Manager
will not respond to them without the consent of Sprint PCS, and Manager will pay
the costs of Sprint PCS' responding to such communications and complaints,
including reasonable attorneys' and consultants' fees, investigation costs, and
all other reasonable costs and expenses incurred by Sprint PCS.
16.5 REGULATORY POLICY-SETTING PROCEEDINGS. Manager will not intervene
in or otherwise participate in a rulemaking, investigation, inquiry, contested
case, or similar regulatory policy setting proceedings before a regulatory
authority concerning the License or construction, operation, and management of
the Service Area Network and the Sprint PCS business operated using the Service
Area Network.
17. GENERAL PROVISIONS
17.1 NOTICES. Any notice, payment, demand, or communication required or
permitted to be given by any provision of this agreement must be in writing and
mailed (certified or registered mail, postage prepaid, return receipt
requested), sent by hand or overnight courier, or sent by facsimile (with
acknowledgment received and a copy sent by overnight courier), charges prepaid
and addressed as described on the Notice Address Schedule attached to the Master
Signature Page, or to any other address or number as the person or entity may
from time to time specify by written notice to the other parties.
All notices and other communications given to a party in accordance
with the provisions of this agreement will be deemed to have been given when
received.
17.2 CONSTRUCTION. This agreement will be construed simply according to
its fair meaning and not strictly for or against either party.
17.3 HEADINGS. The table of contents, section and other headings
contained in this agreement are for reference purposes only and are not intended
to describe, interpret, define, limit or expand the scope, extent or intent of
this agreement.
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17.4 FURTHER ACTION. Each party agrees to perform all further acts and
execute, acknowledge, and deliver any documents that may be reasonably
necessary, appropriate, or desirable to carry out the intent and purposes of
this agreement.
17.5 COUNTERPART EXECUTION. This agreement will be executed by affixing
the parties' signatures to the Master Signature Page, which Master Signature
Page, and thus this agreement, may be executed in any number of counterparts
with the same effect as if both parties had signed the same document. All
counterparts will be construed together and will constitute one agreement.
17.6 SPECIFIC PERFORMANCE. Each party agrees with the other party that
the party would be irreparably damaged if any of the provisions of this
agreement were not performed in accordance with their specific terms and that
monetary damages alone would not provide an adequate remedy. Accordingly, in
addition to any other remedy to which the non-breaching party may be entitled,
at law or in equity, the non- breaching party will be entitled to injunctive
relief to prevent breaches of this agreement and specifically to enforce the
terms and provisions of this agreement.
17.7 ENTIRE AGREEMENT; AMENDMENTS. The provisions of this agreement,
the Services Agreement and the Trademark License Agreements (including the
exhibits to those agreements) set forth the entire agreement and understanding
between the parties as to the subject matter of this agreement and supersede all
prior agreements, oral or written, and other communications between the parties
relating to the subject matter of this agreement. Except for Sprint PCS' right
to amend the Program Requirements in accordance with Section 9.2 and its right
to unilaterally modify and amend certain other provisions as expressly provided
in this agreement, this agreement may be modified or amended only by a written
amendment signed by persons or entities authorized to bind each party and, with
respect to the sections set forth for Sprint on the Master Signature Page, the
persons or entities authorized to bind Sprint.
17.8 LIMITATION ON RIGHTS OF OTHERS. Except as set forth on the Master
Signature Page for Sprint, nothing in this agreement, whether express or
implied, will be construed to give any person or entity other than the parties
any legal or equitable right, remedy or claim under or in respect of this
agreement.
17.9 WAIVERS.
17.9.1 WAIVERS-GENERAL. The observance of any term of this
agreement may be waived (whether generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce the
term, but any waiver is effective only if in a writing signed by the party
against which the waiver is to be asserted. Except as otherwise provided in this
agreement, no failure or delay of either party in exercising any power or right
under this agreement will operate as a waiver of the power or right, nor will
any single or partial exercise of any right or power preclude any other or
further exercise of the right or power or the exercise of any other right or
power.
17.9.2 WAIVERS-MANAGER. Manager is not in breach of any
covenant in this agreement and no Event of Termination will have occurred as a
result of the occurrence of any event, if Manager had delegated to Sprint
Spectrum under the Services Agreement (or any successor to that agreement)
responsibility for taking any action necessary to ensure compliance with the
covenant or to prevent the occurrence of the event.
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17.9.3 FORCE MAJEURE. Neither Manager nor Sprint PCS, as the
case may be, is in breach of any covenant in this agreement and no Event of
Termination will occur as a result of the failure of such party to comply with
such covenant, if such party's noncompliance with the covenant results primarily
from:
(i) any FCC order or any other injunction issued by
any governmental authority impeding the party's ability to comply with
the covenant;
(ii) the failure of any governmental authority to
grant any consent, approval, waiver, or authorization or any delay on
the part of any governmental authority in granting any consent,
approval, waiver or authorization;
(iii) the failure of any vendor to deliver in a
timely manner any equipment or services; or
(iv) any act of God, act of war or insurrection,
riot, fire, accident, explosion, labor unrest, strike, civil unrest,
work stoppage, condemnation or any similar cause or event not
reasonably within the control of such party.
17.10 WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
17.11 BINDING EFFECT. Except as otherwise provided in this agreement,
this agreement is binding upon and inures to the benefit of the parties and
their respective and permitted successors, transferees, and assigns, including
any permitted successor, transferee or assignee of the Service Area Network or
of the License. The parties intend that this agreement bind only the party
signing this agreement and that the agreement is not binding on the Related
Parties of a party unless the agreement expressly provides that Related Parties
are bound.
17.12 GOVERNING LAW. The internal laws of the State of Missouri
(without regard to principles of conflicts of law) govern the validity of this
agreement, the construction of its terms, and the interpretation of the rights
and duties of the parties.
17.13 SEVERABILITY. The parties intend every provision of this
agreement to be severable. If any provision of this agreement is held to be
illegal, invalid, or unenforceable for any reason, the parties intend that a
court enforce the provision to the maximum extent permissible so as to effect
the intent of the parties (including the enforcement of the remaining
provisions). If necessary to effect the intent of the parties, the parties will
negotiate in good faith to amend this agreement to replace the unenforceable
provision with an enforceable provision that reflects the original intent of the
parties.
17.14 LIMITATION OF LIABILITY. NO PARTY WILL BE LIABLE TO THE OTHER
PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE
DAMAGES, OR LOSS OF PROFITS, ARISING FROM THE RELATIONSHIP OF THE PARTIES OR THE
CONDUCT OF BUSINESS UNDER, OR BREACH OF, THIS AGREEMENT, EXCEPT WHERE SUCH
DAMAGES OR LOSS OF PROFITS ARE CLAIMED BY OR AWARDED TO A THIRD PARTY IN A
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CLAIM OR ACTION AGAINST WHICH A PARTY TO THIS AGREEMENT HAS A SPECIFIC
OBLIGATION TO INDEMNIFY ANOTHER PARTY TO THIS AGREEMENT.
17.15 NO ASSIGNMENT; EXCEPTIONS.
17.15.1 GENERAL. Neither party will, directly or indirectly,
assign this agreement or any of the party's rights or obligations under this
agreement without the prior written consent of the other party, except as
otherwise specifically provided in this Section 17.15. Sprint PCS may deny its
consent to any assignment or transfer in its sole discretion except as otherwise
provided in this Section 17.15.
Any attempted assignment of this agreement in violation of this Section
17.15 will be void and of no effect.
A party may assign this agreement to a Related Party of the party,
except that Manager cannot assign this agreement to a Related Party that is a
significant competitor of Sprint, Sprint PCS or their respective Related Parties
in the telecommunications business. Except as provided in Section 17.15.5, an
assignment does not release the assignor from its obligations under this
agreement unless the other party to this agreement consents in writing in
advance to the assignment and expressly grants a release to the assignor.
Except as provided in Section 17.15.5, Sprint PCS must not assign this
agreement to any entity that does not also own the License covering the Service
Area directly or indirectly through a Related Party. Manager must not assign
this agreement to any entity (including a Related Party), unless such entity
assumes all rights and obligations under the Services Agreement, the Trademark
License Agreements and any related agreements.
17.15.2 ASSIGNMENT RIGHT OF MANAGER TO FINANCIAL LENDER. If
Manager is no longer able to satisfy its financial obligations and other duties,
then Manager has the right to assign its obligations and rights under this
agreement to its Financial Lender, if:
(a) Manager or Financial Lender provides Sprint PCS at least
10 days advance written notice of such assignment;
(b) Financial Lender cures or commits to cure any outstanding
material breach of this agreement by Manager prior to the end of any applicable
cure period. If Financial Lender fails to make a timely cure then Sprint PCS may
exercise its rights under Section 11;
(c) Financial Lender agrees to serve as an interim trustee for
the obligations and duties of Manager under this agreement for a period not to
exceed 180 days. During this interim period, Financial Lender must identify a
proposed successor to assume the obligations and rights of Manager under this
agreement;
(d) Financial Lender assumes all of Manager's rights and
obligations under the Services Agreement, the Trademark License Agreements and
any related agreements; and
(e) Financial Lender provides to Sprint PCS advance written
notice of the proposed successor to Manager that Financial Lender has identified
("Successor Notice"). Sprint PCS may give to Financial Lender written notice of
Sprint PCS' decision whether to consent to such proposed successor within
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30 days after Sprint PCS' receipt of the Successor Notice. Sprint PCS may not
unreasonably withhold such consent, except that Sprint PCS is not required to
consent to a proposed successor that:
(i) has, in the past, materially breached prior
agreements with Sprint PCS or its Related Parties;
(ii) is a significant competitor of Sprint PCS or its
Related Parties in the telecommunications business;
(iii) does not meet Sprint PCS' reasonable credit
criteria;
(iv) fails to execute an assignment of all relevant
documents related to this agreement including the Services Agreement
and the Trademark License Agreements; or
(v) refuses to assume the obligations of Manager
under this Agreement, the Services Agreement, the Trademark License
Agreements and any related agreements.
If Sprint PCS fails to provide a response to Financial Lender within 30
days after receiving the Successor Notice, then the proposed successor is deemed
rejected. Any Financial Lender disclosed on the Build-out Plan on Exhibit 2.1
is deemed acceptable to Sprint PCS.
17.15.3 CHANGE OF CONTROL RIGHTS. If there is a Change of
Control of Manager, then:
(a) Manager must provide to Sprint PCS advance written notice
detailing relevant and appropriate information about the new ownership interests
effecting the Change of Control of Manager.
(b) Sprint PCS must provide to Manager written notice of its
decision whether to consent to or reject the proposed Change of Control within
30 days after its receipt of such notice. Sprint PCS may not unreasonably
withhold such consent, except that Sprint PCS is not required to consent to a
Change of Control in which:
(i) the final controlling entity or any of its
Related Parties has in the past materially breached prior agreements
with Sprint PCS or its Related Parties;
(ii) the final controlling entity or any of its
Related Parties is a significant competitor of Sprint PCS or its
Related Parties in the telecommunications business;
(iii) the final controlling entity does not meet
Sprint PCS' reasonable credit criteria;
(iv) the final controlling entity fails to execute an
assignment of all relevant documents related to this agreement
including the Services Agreement and the Trademark License Agreements;
or
(v) the final controlling entity or its Related
Parties refuse to assume the obligations of Manager under this
agreement.
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(c) In the event that Sprint PCS provides notice that it does
not consent to the Change of Control, Manager is entitled to either:
(i) contest such determination pursuant to the
dispute resolution procedure in Section 14; or
(ii) abandon the proposed Change of Control.
(d) Nothing in this agreement requires Sprint PCS' consent to:
(i) a public offering of Manager that does not result
in a Change of Control (i.e., a shift from one party being in control
to no party being in control is not a Change of Control); or
(ii) a recapitalization or restructuring of the
ownership interests of Manager that Manager determines is necessary to:
(A) facilitate the acquisition of commercial
financing and lending arrangements that will support Manager's
operations and efforts to fulfill its obligations under this
agreement; and
(B) that does not constitute a Change of
Control.
(e) "Change of Control" means a situation where in any one
transaction or series of related transactions occurring during any 365-day
period, the ultimate parent entity of the Manager changes. The ultimate parent
entity is to be determined using the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 rules. A Change of Control does not occur if:
(i) a party changes the form of its organization
without materially changing their ultimate ownership (e.g., converting
from a limited partnership to a limited liability company); or
(ii) one of the owners of the party on the date of
this agreement or on the date of the closing of Manager's initial
equity offering for purposes of financing its obligations under this
agreement ultimately gains control over the party, unless such party is
a significant competitor of Sprint PCS or Sprint PCS' Related Parties
in the telecommunications business.
17.15.4 RIGHT OF FIRST REFUSAL. Notwithstanding any other
provision in this agreement, Manager grants Sprint PCS the right of first
refusal described below. If Manager determines it wishes to sell an Offered
Interest, upon receiving any Offer to purchase an Offered Interest, Manager
agrees to promptly deliver to Sprint PCS an Offer Notice. The Offer Notice is
deemed to constitute an offer to sell to Sprint PCS, on the terms set forth in
the Offer, all but not less than all of the Offered Interest. Sprint PCS will
have a period of 60 days from the date of the Offer Notice to notify Manager
that it agrees to purchase the Offered Interest on such terms. If Sprint PCS
timely agrees in writing to purchase the Offered Interest, the parties will
proceed to consummate such purchase not later than the 180th day after the date
of the Offer Notice. If Sprint PCS does not agree within the 60-day period to
purchase the Offered Interest, Manager will have the right, for a period of 120
days after such 60th day, subject to the restrictions set forth in this Section
17, to sell to the person or entity identified in the Offer Notice all of the
Offered Interest on terms and conditions no less favorable to Manager than those
set forth in the Offer. If Manager fails to sell the Offered
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Interest to such person or entity on such terms and conditions within such
120-day period, Manager will again be subject to the provisions of this Section
17.15.4 with respect to the Offered Interest.
17.15.5 TRANSFER OF SPRINT PCS NETWORK. Sprint PCS may sell,
transfer or assign the Sprint PCS Network or any of the Licenses, including its
rights and obligations under this agreement, the Services Agreement and any
related agreements, to a third party without Manager's consent so long as the
third party assumes the rights and obligations under this agreement and the
Services Agreement. Manager agrees that Sprint PCS and Sprint PCS' Related
Parties will be released from any and all obligations under and with respect to
any and all such agreements upon such sale, transfer or assignment in accordance
with this Section 17.15.5, without the need for Manager to execute any document
to effect such release.
17.16 PROVISION OF SERVICES BY SPRINT SPECTRUM. As described in the
Recitals, the party or parties to this agreement that own the Licenses are
referred to in this agreement as "Sprint PCS." Sprint Spectrum will provide most
or all of the services required to be provided by Sprint PCS under this
agreement on behalf of Sprint PCS, other than the services to be rendered by
Manager. For example, Sprint Spectrum is the party to the contracts relating to
the national distribution network, the roaming and long distance services, and
the procurement arrangements. Accordingly, Sprint PCS and Manager will deal with
Sprint Spectrum to provide many of the attributes of the Sprint PCS Network.
17.17 NUMBER PORTABILITY. Manager understands that the manner in which
customers are assigned to the Service Area Network could change as telephone
numbers become portable without any relation to the service area in which they
are initially activated. To the extent the relationship between NPA-NXX and the
Service Area changes, Sprint PCS will develop an alternative system to attempt
to assign customers who primarily live and work in the Service Area to the
Service Area. The terms of this agreement will be deemed to be amended to
reflect the new system that Sprint PCS develops.
17.18 DISCLAIMER OF AGENCY. Neither party by this agreement makes the
other party a legal representative or agent of the party, nor does either party
have the right to obligate the other party in any manner, except if the other
party expressly permits the obligation by the party or except for provisions in
this agreement expressly authorizing one party to obligate the other.
17.19 INDEPENDENT CONTRACTORS. The parties do not intend to create any
partnership, joint venture or other profit-sharing arrangement, landlord-tenant
or lessor-lessee relationship, employer-employee relationship, or any other
relationship other than that expressly provided in this agreement. Neither party
to this agreement has any fiduciary duty to the other party.
17.20 EXPENSE. Each party bears the expense of complying with this
agreement except as otherwise expressly provided in this agreement. The parties
must not allocate any employee cost or other cost to the other party, except as
otherwise provided in the Program Requirements or to the extent the parties
expressly agree in advance to the allocation.
17.21 GENERAL TERMS.
(a) This agreement is to be interpreted in accordance with the
following rules of construction:
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(i) The definitions in this agreement apply equally
to both the singular and plural forms of the terms defined unless the
context otherwise requires.
(ii) The words "include," "includes" and "including"
are deemed to be followed by the phrase "without limitation".
(iii) All references in this agreement to Sections
and Exhibits are references to Sections of, and Exhibits to, this
agreement, unless otherwise specified; and
(iv) All references to any agreement or other
instrument or statute or regulation are to it as amended and
supplemented from time to time (and, in the case of a statute or
regulation, to any corresponding provisions of successor statutes or
regulations), unless the context otherwise requires.
(b) Any reference in this agreement to a "day" or number of
"days" (without the explicit qualification of "Business") is a reference to a
calendar day or number of calendar days. If any action or notice is to be taken
or given on or by a particular calendar day, and the calendar day is not a
Business Day, then the action or notice may be taken or given on the next
Business Day.
17.22 CONFLICTS WITH OTHER AGREEMENTS. The provisions of this
Management Agreement govern over those of the Services Agreement if the
provisions contained in this agreement conflict with analogous provisions in the
Services Agreement. The provisions of each Trademark License Agreement governs
over those of this agreement if the provisions contained in this agreement
conflict with analogous provisions in a Trademark License Agreement.
17.23 SURVIVAL UPON TERMINATION. The provisions of Sections 10, 11.4,
11.5, 11.6, 12.2, 13, 14, 16 and 17 of this agreement will survive any
termination of this agreement.
17.24 ANNOUNCED TRANSACTION. Sprint Enterprises, L.P., TCI Telephony
Services, Inc., Comcast Telephony Services and Cox Telephony Partnership have
executed a Restructuring and Merger Agreement and related agreements that
provide for restructuring the ownership of Sprint Spectrum L.P., SprintCom,
Inc., PhillieCo Partners I, L.P., and Cox Communications PCS, L.P. Upon
consummation of the transactions contemplated by those agreements, Sprint would
control each of the four entities. While Sprint and Sprint PCS anticipate the
proposed transactions will be consummated, there can be no assurances.
17.25 ADDITIONAL TERMS AND PROVISIONS. Certain additional and
supplemental terms and provisions of this agreement, if any, are set forth in
the Addendum to Sprint PCS Management Agreement attached hereto and incorporated
herein by this reference. Manager represents and warrants that the Addendum also
describes all existing contracts and arrangements (written or verbal) that
relate to or affect the rights of Sprint PCS or Sprint under this agreement
(e.g., agreements relating to long distance telephone services (Section 3.4) or
backhaul and transport services (Section 3.7)).
17.26 MASTER SIGNATURE PAGE. Each party agrees that it will execute the
Master Signature Page that evidences such party's agreement to execute, become a
party to and be bound by this agreement, which document is incorporated herein
by this reference.
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17.27 AGENT AUTHORIZATION. Because of the close operational
relationship between the parties listed together below, each entity authorizes
the other entity to act on its behalf in every capacity under this agreement:
(a) WirelessCo, L.P. and Sprint Spectrum L.P.; (b) Cox PCS License, L.L.C. and
Cox Communications PCS, L.P.; (c) APC PCS, LLC and American PCS Communications,
LLC; and (d) PhillieCo, L.P. and PhillieCo Partners I, L.P.
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SPRINT PCS/ALAMOSA PCS LLC
[SOUTHWEST]
MASTER SIGNATURE PAGE
This Master Signature Page is dated and effective as of December 06,
1999 (the "Effective Date"). This document provides the means by which each of
the undersigned entities executes and becomes a party to and bound by, to the
extent set forth above such party's signature, the Management Agreement,
Services Agreement, Sprint Trademark and Service Mark License Agreement, Sprint
Spectrum Trademark and Service Mark License Agreement, and Addendum I to the
Management Agreement. This document may be executed in one or more counterparts.
The Notice Address Schedule attached to this document sets forth the addresses
to which notices should be sent under the agreements. The Management Agreement,
Services Agreement, Sprint Trademark and Service Mark License Agreement, and
Sprint Spectrum Trademark and Service Mark License Agreement replace and
supersede in their entirety the Management Agreement, Services Agreement, Sprint
Trademark and Service Mark License Agreement, and Sprint Spectrum Trademark and
Service Mark License Agreement, entered into as of July 17, 1998 by the parties
hereto.
THE MANAGEMENT AGREEMENT AND THE SERVICES AGREEMENT
CONTAIN BINDING ARBITRATION PROVISIONS THAT MAY BE
ENFORCED BY THE PARTIES TO THOSE AGREEMENTS
SPRINT SPECTRUM L.P.
For and in consideration of the covenants contained in the Management
Agreement, Services Agreement, Sprint Spectrum Trademark and Service Mark
License Agreement, and Addendum I to the Management Agreement (collectively, the
"Executed Agreements"), and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sprint Spectrum L.P. executes,
becomes a party to, and agrees to be bound by and to perform its obligations
under each of the Executed Agreements as of the Effective Date. The execution by
Sprint Spectrum L.P. of this Master Signature Page has the same force and effect
as if Sprint Spectrum L.P. executed individually each of the Executed
Agreements.
SPRINT SPECTRUM L.P.
By: /s/ Bernard A. Bianchino
Bernard A. Bianchino
Chief Business Development Officer
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<PAGE> 58
WIRELESSCO, L.P.
For and in consideration of the covenants contained in the Management
Agreement and Addendum I to the Management Agreement (collectively, the
"Executed Agreements"), and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, WirelessCo, L.P. executes, becomes
a party to, and agrees to be bound by and to perform its obligations under each
of the Executed Agreements as of the Effective Date. The execution by
WirelessCo, L.P. of this Master Signature Page has the same force and effect as
if WirelessCo, L.P. executed individually each of the Executed Agreements.
WIRELESSCO, L.P.
By: /s/ Bernard A. Bianchino
Bernard A. Bianchino
Senior Vice President and
Chief Business Development Officer
COX COMMUNICATIONS PCS, L.P.
For and in consideration of the covenants contained in the Management
Agreement and Addendum I to the Management Agreement (collectively, the
"Executed Agreements"), and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cox Communications PCS, L.P.
executes, becomes a party to, and agrees to be bound by and to perform its
obligations under each of the Executed Agreements as of the Effective Date. The
execution by Cox Communications PCS, L.P. of this Master Signature Page has the
same force and effect as if Cox Communications PCS, L.P. executed individually
each of the Executed Agreements.
COX COMMUNICATIONS PCS
By: /s/ BERNARD A. BIANCHINO
----------------------------------
Bernard A. Bianchino,
Senior Vice President and
Chief Business Development Officer
COX PSC LICENSE, LLC
For and in consideration of the covenants contained in the Management
Agreement and Addendum I to the Management Agreement (colletively, the "Executed
Agreements"), and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cox PCS License, LLC
executes, becomes a party to, and agrees to be bound by and to perform its
obligations under each of the Executed Agreements as of the Effective Date. The
execution by Cox PCS License, LLC of this Master Signature Page has the
same force and effect as if Cox PCS License, LLC executed individually
each of the Executed Agreements.
COX PCS LICENSE, LLC
By: /s/ BERNARD A. BIANCHINO
---------------------------
Bernard A. Bianchino,
Senior Vice President and
Chief Business Development Officer
SPRINTCOM, INC.
For and in consideration of the covenants contained in the Management
Agreement and Addendum I to the Management Agreement (colletively, the "Executed
Agreements"), and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, SprintCom, Inc. executes, becomes
a party to, and agrees to be bound by and to perform its obligations under each
of the Executed Agreements as of the Effective Date. The execution by SprintCom,
Inc. of this Master Signature Page has the same force and effect as if
SprintCom, Inc. executed individually each of the Executed Agreements.
SPRINTCOM, INC.
By: /s/ BERNARD A. BIANCHINO
---------------------------
Bernard A. Bianchino,
Senior Vice President and
Chief Business Development Officer
SPRINT COMMUNICATIONS COMPANY, L.P.
For and in consideration of the covenants contained in the Management
Agreement, Sprint Trademark and Service Mark License Agreement, and Addendum I
to the Management Agreement (collectively, the "Executed Agreements"), and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sprint Communications Company, L.P. executes, becomes a party to,
and agrees to be bound by and to perform its obligations under each of the
Executed Agreements as of the Effective Date; provided, that Sprint
Communications Company, L.P. only agrees to be bound by and perform its
obligations under, and will enjoy the benefits given to it under the Management
Agreement, with respect to only those provisions that expressly apply to Sprint
Communications Company, L.P., including its obligations and benefits under
Sections 2, 3 and 10. The execution by Sprint Communications Company, L.P. of
this Master Signature Page has the same force and effect as if Sprint
Communications Company, L.P. executed individually each of the Executed
Agreements.
SPRINT COMMUNICATIONS COMPANY, L.P.
By: /s/ DON A. JENSEN
Don A. Jensen
Vice President - Law
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ALAMOSA PCS, LLC
For and in consideration of the covenants contained in the Management
Agreement, Services Agreement, Sprint Trademark and Service Mark License
Agreement, Sprint Spectrum Trademark and Service Mark License Agreement, and
Addendum I to the Management Agreement (collectively, the "Executed
Agreements"), and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Alamosa Wisconsin Limited
Partnership executes, becomes a party to, and agrees to be bound by and to
perform its obligations under each of the Executed Agreements as of the
Effective Date. ne execution by Alamosa Wisconsin Limited Partnership of this
Master Signature Page has the same force and effect as if Alamosa Wisconsin
Limited Partnership executed individually each of the Executed Agreements.
ALAMOSA WISCONSIN LIMITED PARTNERSHIP
By: /s/ Jerry W. Brantley
Jerry W. Brantley
Chief Operating Officer
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NOTICE ADDRESS SCHEDULE
The addresses to which notice is to be sent pursuant to Section 17.1 of
the Management Agreement, Section 9.1 of the Services Agreement, Section 15.1 of
the Sprint Trademark and Service Mark License Agreement, or Section 15.1 of the
Sprint Spectrum Trademark and Service Mark License Agreement are as follows:
SPRINT SPECTRUM L.P., WIRELESS CO., L.P., COX COMMUNICATIONS PCS, L.P.
AND COX PCS LICENSE, LLC.
4900 Main, 12th Floor with a copy to: 4900 Main, 11th Floor
Kansas City, Missouri 64112 Kansas City, Missouri 64112
Telephone: (816) 559-1000 Telephone: (816) 559-1000
Telecopier: (816) 559-1290 Telecopier: (816) 559-2591
Attention: Chief Executive Officer Attention: General Counsel
SPRINT COMMUNICATIONS COMPANY, L.P. (and notices regarding the Sprint Brands)
c/o Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Telephone: 913-624-3326
Telecopier: 913-624-8233
Attention: Corporate Secretary
Mail Stop: KSWESA0110
ALAMOSA PCS, LLC
4403 Brownfield Highway
Lubbock, TX 79407
Telephone: (806) 791-7700
Telecopier: (806) 722-7806
Attention: Chairman
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SCHEDULE OF DEFINITIONS
This Schedule of Definitions is the "SCHEDULE OF DEFINITIONS" referred
to in and incorporated by reference under the Management Agreement, Services
Agreement, and Trademark License Agreements (as such agreements are defined
below). Whenever the phrase "this agreement" is used below, such phrase refers
to the particular agreement under whose terms this Schedule of Definitions is
being applied in that instance. If citations to sections or exhibits of
different agreements are included in a definition, the citation to the
particular agreement under whose terms this Schedule of Definitions is being
applied controls to the exclusion of the citations to different agreements.
The following words and phrases used in this agreement have the
following meanings:
"ADDENDUM" means any addendum attached to this agreement that contains
the amendments to this agreement; such Addendum is expressly incorporated as a
part of this agreement.
"AFFILIATION AGREEMENT" means any and all of the agreements, known as
Sprint PCS Affiliation Agreements, whereby an affiliate and Sprint PCS and/or
one or more of Sprint PCS' Related Parties agree to the terms and conditions
under which such affiliate will manage the Service Area Network identified in
such agreement, using such Affiliate's own PCS license issued by the FCC and any
documents incorporated by reference in such agreement.
"AGENT" has the meaning set forth in Section 3.1 of the Sprint Spectrum
Trademark and Service Mark License Agreement or Section 3.1 of the Sprint
Trademark and Service Mark License Agreement.
"ARBITER" has the meaning set forth in Section 12.1.3 of the Management
Agreement or Section 5.1.3 of the Services Agreement.
"AVAILABLE SERVICES" means those categories of services listed on
Exhibit 2.1.1 to the Services Agreement (as the same may be amended from time to
time by Sprint Spectrum and made available to Manager under the terms of the
Services Agreement).
"AVAILABLE SERVICES AND FEES SCHEDULE" means that schedule set forth on
Exhibit 2.1.1 to the Services Agreement, which sets forth the Available Services
offered from time to time and the fees charged for such Available Services.
"BANKRUPTCY" means, for the purposes of the Trademark License
Agreements, either a Voluntary Bankruptcy or an Involuntary Bankruptcy.
"BRANDS" means the Sprint PCS Brands and the Sprint Brands.
"BTA" means a Basic Trading Area for which a Basic Trading Area (BTA)
license is issued by the FCC.
"BUILD-OUT PLAN" means the plan agreed upon by Manager and Sprint PCS,
along with any modifications and updates to the plan, respecting the
construction and design of the Service Area Network, a copy of which is attached
as Exhibit 2.1 to the Management Agreement.
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"BUSINESS DAY" means a day of the year that banks are not required or
authorized to close in the State of New York.
"CANCELLED SERVICE" has the meaning set forth in Section 3.2 of the
Services Agreement.
"CDMA" means code division multiple access.
"CHANGE OF CONTROL" has the meaning set forth in Section 17.15.3 of the
Management Agreement.
"COLLECTED REVENUES" has the meaning, set forth in Section 10.4 of the
Management Agreement.
"CONFIDENTIAL INFORMATION" means all Program Requirements, guidelines,
standards, and programs, the technical, marketing, financial, strategic and
other information provided by each party under the Management Agreement,
Services Agreement, and Trademark License Agreements, and any other information
disclosed by one party to the other party pursuant to the Management Agreement,
Services Agreement, and Trademark License Agreements that is not specifically
excluded by Section 12.2 of the Management Agreement. In addition to the
preceding sentence, "Confidential Information" has the meaning set forth in
Section 3.1 of the Sprint Spectrum Trademark and Service Mark License Agreement
or Section 3.1 of the Sprint Trademark and Service Mark License Agreement.
"CONTROLLED RELATED PARTY" means the Parent of any Person and each
Subsidiary of such Parent. As used in Section 1.2 and Article 3 of the Sprint
Spectrum Trademark and Service Mark License Agreement or Section 1.2 and Article
3 of the Sprint Trademark and Service Mark License Agreement, the term
"Controlled Related Party" will also include any Related Party of a Person that
such Person or its Parent can directly or indirectly unilaterally cause to take
or refrain from taking any of the actions required, prohibited or otherwise
restricted by such Section, whether through ownership of voting securities,
contractually or otherwise.
"DEFAULT RATE" means the rate per annum (computed on the basis of the
actual number of days elapsed in a year of 365 or 366 days, as applicable),
compounded monthly, equal to the Prime Rate (adjusted as and when changes in the
Prime Rate occur) plus five percent (5%).
"DISAGGREGATED LICENSE" means that portion of the License that Manager
may or is required to purchase under Section 11 of the Management Agreement from
Sprint PCS under certain circumstances, after Sprint PCS' receipt of FCC
approval of the necessary disaggregation and partition, which portion comprises
no less than the amount of spectrum sufficient to operate one duplex CDMA
carrier (including the required guard bands) within the PCS Spectrum, and no
more than 10 MHz of the Spectrum (at Manager's designation) covering the Service
Area, and which includes the frequencies then in use in the Service Area Network
and, if applicable, adjacent frequencies, so long as such frequencies in the
aggregate do not exceed 10 MHz.
"DISPUTE NOTICE" has the meaning set forth in Section 12.1.3 of the
Management Agreement or Section 5.1.3 of the Services Agreement.
"DISPUTE NOTICE DATE" has the meaning set forth in Section 12.1.3 of
the Management Agreement or Section 5.1.3 of the Services Agreement.
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"ENCUMBRANCES" has the meaning set forth in Section 5.1 (a) of the
Sprint Spectrum Trademark and Service Mark License Agreement or Section 5.1 (a)
of the Sprint Trademark and Service Mark License Agreement.
"ENTIRE BUSINESS VALUE" has the meaning set forth in Section 11.7.3 of
the Management Agreement.
"EVENT OF TERMINATION" means any of the events described in Section
11.3 of the Management Agreement. For the purposes of the Sprint Spectrum
Trademark and Service Mark License Agreement only, "Event of Termination" has
the meaning set forth in Section 13.2 of that agreement. For the purposes of the
Sprint Trademark and Service Mark License Agreement only, "Event of Termination"
has the meaning set forth in Section 13.2 of that agreement.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"FINANCIAL LENDER" means any and all of those commercial and financial
institutions that provide material credit to Manager for the purpose of
assisting Manager with the fulfillment of its obligations and duties under this
agreement.
"FIXED WIRELESS LOCAL LOOP" has the meaning set forth in Section 2.4 of
the Management Agreement.
"HOME SERVICE AREA" means the geographic area within which a customer
can make a local call on the customer's PCS phone (i.e., the customer does not
incur an extra charge).
"INBOUND ROAMING" means calls placed by a non-Sprint PCS Network
customer on the Sprint PCS Network.
"INDEMNITEE" and "INDEMNITOR" have the meanings set forth in Section
13.3.1 of the Management Agreement or Section 6.3.1 of the Services Agreement.
"INITIAL TERM" has the meaning set forth in Section 11. 1 of the
Management Agreement.
"INVOLUNTARY BANKRUPTCY" has the meaning set forth in Section 11.3.7 of
the Management Agreement.
"LAW" means all laws (statutory or otherwise), ordinances, rules,
regulations, bylaws, Orders and codes of all governmental and regulatory
authorities, whether United States Federal, state or local, which are applicable
to the Sprint PCS Products and Services.
"LICENSE" means the PCS license(s) issued by the FCC described on the
Service Area Exhibit to the Management Agreement.
"LICENSED MARKS" means the trademarks and service marks referred to in
the Recitals section of the Trademark License Agreement under whose terms this
definition is being applied, and such other marks as may be adopted and
established under said agreement from time to time.
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"LICENSEE" has the meaning set forth in the introductory paragraph to
the particular agreement under whose terms this definition is being applied.
"LICENSOR" has the meaning set forth in the introductory paragraph to
the particular agreement under whose terms this definition is being applied.
"LOCAL CALLING AREA" means the geographic area within which a customer
can make a local call on the customer's PCS handset without incurring a long
distance charge.
"LOSS" means any and all damage, loss, liability, claim, out-of-pocket
cost and expense, including reasonable expenses of investigation and reasonable
attorneys' fees and expenses, but excluding consequential or special damages.
"MANAGEMENT AGREEMENT" means that certain Sprint PCS Management
Agreement executed by Manager and Sprint PCS and any documents incorporated by
reference in said agreement.
"MANAGER" means the party to this agreement as indicated in the
introductory paragraph of this agreement.
"MANAGER MANAGEMENT REPORT" has the meaning set forth in Section 12.1.2
of the Management Agreement.
"MANAGER'S PRODUCTS AND SERVICES" means all types and categories of
wireless communications services and associated products that are offered by
Manager in the Service Area under Section 3.2 of the Management Agreement.
"MARKETING COMMUNICATIONS GUIDELINES" means the guidelines issued by
Sprint or Sprint PCS in accordance with Section 5.2 of the Management Agreement
with respect to the marketing, promotion, advertising, distribution, lease and
sale of Sprint PCS Products and Services, as they may be amended from time to
time by Sprint or Sprint PCS in accordance with the terms of the Trademark
License Agreements.
"MASTER SIGNATURE PAGE" means the document that the parties to the
Management Agreement, Services Agreement and/or one or more of the Trademark
License Agreements sign to evidence their agreement to execute, become a party
to and be bound by each of the agreements, or parts thereof, listed above the
particular party's signature on such Master Signature Page.
"MFN PRICE" or "MOST FAVORED NATION PRICE" means, with respect to
resale, the best local market price offered to any third party for the purchase
of air time on Manager's network including but not limited to any third party
who may use the air time for its own wireless communications services or resell
the air time, and, with respect to roaming, the lowest roaming charge of Manager
to other wireless carriers when their customers roam on the Service Area
Network.
"MIN" means the 24-bit mobile identification number corresponding to
the 7-digit telephone number assigned to the handset, used for both billing and
receiving calls.
"MTA" means a Major Trading Area for which a MTA license is issued by
the FCC.
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"NEW COVERAGE" means the build-out in the Service Area that is in
addition to the build-out required under the then-existing Build-out Plan, which
build-out Sprint PCS or Manager decides should be built-out.
"NOTICE ADDRESS SCHEDULE" means the schedule attached to the Master
Signature Page that provides the mailing and courier delivery addresses, and the
facsimile number, for giving notices to each of the parties signing the Master
Signature Page. The Notice Address Schedule may include supplemental addresses
that serve as additional or alternate notice addresses for use by the parties in
specifically prescribed situations.
"NPA-NXX" means as follows: "NPA" means numbering plan area, which is
the area code for a telephone number. "NXX" refers to the first three digits of
a telephone number, which identify the specific telephone company central office
that serves that number.
"OFFER" means an offer received by Manager to sell substantially all of
the assets comprising or used in connection with the operation and management of
the Service Area Network or any portion of the Service Area Network.
"OFFER NOTICE" means a written notice given by Manager to Sprint PCS
that sets forth in detail the terms and conditions of an Offer and the name and
address of the person or entity making the Offer.
"OFFERED INTEREST" means the assets that Manager proposes to sell
pursuant to an Offer.
"OPERATING ASSETS" means the assets Manager or its Related Parties owns
and uses in connection with the operation of the Service Area Network, at the
time of termination, to provide the Sprint PCS Products and Services. Operating
Assets does not include items such as furniture, fixtures and buildings that
Manager or its Related Parties use in connection with other businesses. Examples
of Operating Assets include without limitation: switches, towers, cell sites,
systems, records and retail stores.
"OPERATIONAL LEVEL OF SPRINT PCS" means the average operational level
of all the service area networks operated by Sprint PCS and its Related Parties
without the use of a manager or affiliate, as measured by Sprint PCS, unless the
operational level, as measured by Sprint PCS, of all of the service area
networks operated by Sprint PCS and its Related Parties without the use of a
manager or affiliate that are contiguous to the Service Area are below the
national average, in which case "Operational Level of Sprint PCS" means the
average operational level of those contiguous service area networks.
"ORDER" means any order, writ, injunction, decree, judgment, award or
determination of any court or governmental or regulatory authority.
"OTHER MANAGERS" means any person or entity with which Sprint PCS has
entered into an agreement similar to this agreement or an Affiliation Agreement,
including without limitation an affiliate under an Affiliation Agreement or a
manager under another Management Agreement, under which the person or entity
designs, constructs and manages a service area network and offers and promotes
Sprint PCS Products or Services.
"OUTBOUND ROAMING" means calls placed by a Sprint PCS Network customer
on a non-Sprint PCS network.
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"PARENT" means, with respect to any Person, the ultimate parent entity
(as determined in accordance with the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the rules and regulations promulgated thereunder) of such
Person; except that if such ultimate parent entity is an individual, the Parent
will be the highest entity in the ownership chain from the ultimate parent
entity to and including such Person that is not an individual.
"PARTIES" means, with respect to the Management Agreement, Sprint PCS
and Manager. For the purpose of the services Agreement only, "parties" means
Sprint Spectrum and Manager. Sprint is not a party to the Management Agreement,
except to the limited extent described on the signature page executed on behalf
of Sprint. For the purpose of the Trademark License Agreements only, "parties"
means Licensor and Licensee.
"PCS" means a radio communication system authorized under the rules for
broadband personal communications services designated as Subpart E of Part 24 of
the FCC's rules, including the network, marketing, distribution, sales, customer
interface and operations functions relating thereto.
"PCS SPECTRUM" means the range of frequencies that Sprint PCS is
authorized to use under the License.
"PERMITTED ASSIGNEE" means any assignee of the rights and obligations
of Licensee pursuant to an assignment consented to in writing by Licensor, in
its sole discretion, in accordance with Section 14.1 of the Sprint Spectrum
Trademark and Service Mark License Agreement or Section 14.1 of the Sprint
Trademark and Service Mark License Agreement, or any subsequent permitted
assignee of any such permitted assignee.
"PERSON" means any individual, partnership, limited partnership,
limited liability company, corporation, trust, other business association or
business entity, estate, or other entity.
"POPS" means the population covered by a license or group of licenses.
Unless otherwise noted, as used in the Management Agreement, pops means the most
recent Rand-McNally Population Survey estimate of the population of a geographic
area.
"PREMIUM AND PROMOTIONAL ITEMS" means all items, including clothing,
memorabilia and novelties, used to display the Licensed Marks for the purpose of
promoting the awareness, sale or image of the Sprint PCS Products and Services;
provided, however, that Premium and Promotional Items does not include marketing
and advertising materials prepared by Licensee that are subject to the Marketing
Communications Guidelines (e.g. printed materials such as bill stuffers,
brochures and similar materials).
"PRIME RATE" means the rate announced from time to time by The Chase
Manhattan Bank, or its successor(s), as its prime rate.
"PROGRAM REQUIREMENTS" means the standards, guidelines, plans, policies
and programs established by Sprint PCS from time to time regarding the operation
and management of the Service Area Network and the Sprint PCS business operated
using the Service Area Network, including the Program Requirements set forth in
Sections 4.1, 4.2, 4.3, 7.2 and 8.1 of the Management Agreement. Sprint PCS may
also implement Program Requirements respecting a voluntary resale program, as
defined in Section 3.5.2 of the Management Agreement.
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"PURCHASE NOTICE" has the meaning set forth in Section 1.2 of Exhibit
11.8 to the Management Agreement.
"QUALITY STANDARDS" has the meaning set forth in Section 2.1 (a) of the
Sprint Spectrum Trademark and Service Mark License Agreement or Section 2.1 (a)
of the Sprint Trademark and Service Mark License Agreement.
"RAND-MCNALLY POPULATION SURVEY" means the most recent population
survey published by Rand- McNally or, if Rand-McNally no longer publishes the
surveys, then the most recent population survey published by any successor
organization to Rand-McNally or, if no such organization exists, an organization
selected by Sprint PCS that provides surveys similar to the Rand-McNally
surveys.
"RECEIVING PARTY" has the meaning, set forth in Section 3. 1 of the
Sprint Spectrum Trademark and Service Mark License Agreement or Section 3.1 of
the Sprint Trademark and Service Mark License Agreement.
"RELATED EQUIPMENT" means customer-controlled equipment for use in
connection with the Sprint PCS Products and Services including telephones,
wireless handsets and related accessories, PCMCIA cards, "smart" cards, PDA's,
PBX's, set-top boxes and data terminals.
"RELATED PARTY" means, with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the Person. For purposes of the
Management Agreement, Sprint Spectrum, SprintCom, American PCS Communications,
LLC, PhillieCo Partners I, L.P., and Cox Communications PCS, L.P. will be deemed
to be Related Parties. For purposes of this definition, the term "controls"
(including its correlative meanings "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"RESTRICTED PARTY" has the meaning set forth in Section 3.1 of the
Sprint Spectrum Trademark and Service Mark License Agreement or Section 3.1 of
the Sprint Trademark and Service Mark License Agreement.
"SELECTED SERVICES" means those Available Services selected by Manager
to be provided by Sprint Spectrum under Section 2.1 of the Services Agreement.
An Available Service will not be treated as a Selected Service until Sprint
Spectrum begins providing that service.
"SERVICE AREA" means the geographic area described on the Service Area
Exhibit to the Management Agreement.
"SERVICE AREA NETWORK" means the network and business activities
managed by Manager under the Management Agreement in the Service Area under the
License.
"SERVICES AGREEMENT" means that certain Sprint PCS Services Agreement
executed by Manager and Sprint Spectrum and any documents incorporated by
reference in said agreement, whereby Manager may delegate the performance of
certain services to Sprint PCS for fees that represent an adjustment of the fees
paid by Sprint PCS to Manager under Section 10 of the Management Agreement.
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"SITING REGULATIONS" means:
(1) FCC regulations governing tower siting, lighting, marking
monitoring, and reporting of lighting malfunctions as set forth in 47
CFR Sections 17.1 through 17.58, and as may be amended;
(2) FAA regulations governing tower siting, lighting, marking,
monitoring, and reporting of lighting malfunctions as set forth in 14
CFR Sections 77.1 through 77.75, and as may be amended;
(3) FCC land use regulations as set forth in 47 CFR Sections
1.1301 through 1.1319, and as may be amended; and
(4) FCC radio frequency exposure regulations as set forth in
47 CFR Sections 1. 1301 through 1. 1319, and as may be amended.
"SPECTRUM" has the same meaning as PCS Spectrum.
"SPRINT" means Sprint Communications Company, L.P., a Delaware limited
partnership.
"SPRINT BRANDS" means the "Licensed Marks" as that term is defined
under the Sprint Trademark and Service Mark License Agreement.
"SPRINT PCS" means any or all of the following Related Parties who are
License holders and signatories to the Management Agreement: Sprint Spectrum
L.P., a Delaware limited partnership, SprintCom, Inc., a Kansas corporation,
PhillieCo Partners I, L.P., a Delaware limited partnership, Cox Communications
PCS, L.P., a Delaware limited partnership, and American PCS Communications, LLC,
a Delaware limited liability company. Each entity listed above is a Related
Party to each of the other listed entities.
"SPRINT PCS AFFILIATION AGREEMENT" has the same meaning as Affiliation
Agreement.
"SPRINT PCS BRANDS" means the "Licensed Marks" as that term is defined
under the Sprint Spectrum Trademark and Service Mark License Agreement.
"SPRINT PCS COMMUNICATIONS POLICIES" means the policies established in
accordance with Section 6.4 of the Management Agreement with respect to public
relations development, maintenance and management, as they may be amended from
time to time by Sprint PCS in accordance with the terms of the Management
Agreement.
"SPRINT PCS CUSTOMER SERVICE PROGRAM REQUIREMENTS" means the program
and requirements established in accordance with Section 8.1 of the Management
Agreement with respect to customer service development, maintenance and
management, as it may be amended from time to time by Sprint PCS in accordance
with the terms of the Management Agreement.
"SPRINT PCS CUSTOMER SERVICE STANDARDS" means those customer service
standards developed by Sprint PCS with respect to customer service and
maintenance as described in Section 8.1 of the Management
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Agreement, as it may be amended from time to time by Sprint PCS in accordance
with the terms of the Management Agreement.
"SPRINT PCS INSURANCE REQUIREMENTS" means the insurance requirements
developed by Sprint PCS as described in Section 12.3 of the Management
Agreement, as they may be amended from time to time by Sprint PCS in accordance
with the terms of the Management Agreement.
"SPRINT PCS MANAGEMENT AGREEMENT" has the same meaning as Management
Agreement.
"SPRINT PCS NATIONAL ACCOUNTS PROGRAM REQUIREMENTS" means the program
and requirements established in accordance with Section 4.2 of the Management
Agreement with respect to national accounts development, maintenance and
management, as it may be amended from time to time by Sprint PCS in accordance
with the terms of the Management Agreement.
"SPRINT PCS NATIONAL OR REGIONAL DISTRIBUTION PROGRAM REQUIREMENTS"
means any distribution program and requirements established in accordance with
Section 4.1 of the Management Agreement, as it may be amended from time to time
by Sprint PCS in accordance with the terms of the Management Agreement, and
entered into by Sprint PCS or its Related Parties and a third-party distributor
(for example, a national chain of retail electronics stores) from time to time,
under which the third party will distribute, lease, or sell Sprint PCS Products
and Services on a national or regional basis. The term "distributor" means a
reseller of Sprint PCS Products and Services, or an agent of Sprint PCS
authorized to sell Sprint PCS Products and Services on behalf of Sprint PCS, or
a person engaged in any other means of wholesale or retail distribution of
Sprint PCS Products and Services.
"SPRINT PCS NETWORK" means the national wireless network and business
activities to be developed by Sprint PCS, Manager and Other Managers in the
United States and certain of its territories and possessions, which network
includes the Service Area Network.
"SPRINT PCS PRODUCTS AND SERVICES" means all types and categories of
wireless communications services and associated products that are designated by
Sprint PCS (whether now existing or developed and implemented in the future) as
products and services to be offered by Sprint PCS, Manager and all Other
Managers as the products and services of the Sprint PCS Network for fixed and
mobile voice, short message and other data services under the FCC's rules for
broadband personal communications services, including all local area service
plans. Sprint PCS Products and Services do not include wireline products or
services, including local exchange service, wireline long distance service, and
wireline based Internet access.
"SPRINT PCS ROAMING AND INTER SERVICE AREA PROGRAM REQUIREMENTS" means:
(i) the roaming program and requirements established in
accordance with Section 4.3 of the Management Agreement, as amended from time to
time by Sprint PCS in accordance with the terms of the Management Agreement, to
provide for customers from a carrier not associated with the Sprint PCS Network
to operate the customer's handset on the Sprint PCS Network and for customers
from the Sprint PCS Network (whether customers of Sprint PCS, Manager or an
Other Manager) to operate the customer's handset on a network of a carrier not
associated with the Sprint PCS Network, and
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<PAGE> 70
(ii) the program established in accordance with Section 4.3 of
the Management Agreement, as amended from time to time by Sprint PCS in
accordance with the terms of the Management Agreement, to provide for customers
from one Service Area on the Sprint PCS Network, whether managed by Sprint PCS,
Manager, or an Other Manager, to operate the customer's handsets and otherwise
receive seamless service, regardless of whether the customer makes its call to
or from the Sprint PCS Network and regardless of whether the customer is a
customer of Sprint PCS, Manager or an Other Manager.
"SPRINT PCS TECHNICAL PROGRAM REQUIREMENTS" means the operating and
technical performance standards established by Sprint PCS, in accordance with
Section 7.2 of the Management Agreement, as amended from time to time by Sprint
PCS in accordance with the terms of the Management Agreement, for the Sprint PCS
Network as they may be amended from time to time by Sprint PCS in accordance
with the terms of the Management Agreement.
"SPRINT SPECTRUM" means Sprint Spectrum L.P., a Delaware limited
partnership.
"SPRINT SPECTRUM BRANDS" means the "Licensed Marks" as that term is
defined under the Sprint Spectrum Trademark and Service Mark License Agreement.
"SPRINT SPECTRUM TRADEMARK AND SERVICE MARK LICENSE AGREEMENT" means
that certain Sprint Spectrum Trademark and Service Mark License Agreement
executed by Manager and Sprint Spectrum and any documents incorporated by
reference in said agreement.
"SPRINT TRADEMARK AND SERVICE MARK LICENSE AGREEMENT" means that
certain Sprint Trademark and Service Mark License Agreement executed by Manager
and Sprint and any documents incorporated by reference in said agreement.
"SPRINTCOM" means SprintCom, Inc., a Kansas corporation.
"SUBSIDIARY" of any Person as of any relevant date means a corporation,
company or other entity (i) more than 50% of whose outstanding shares or equity
securities are, as of such date, owned or controlled, directly or indirectly
through one or more Subsidiaries, by such Person, and the shares or securities
so owned entitle such Person and/or Subsidiaries to elect at least a majority of
the members of the board of directors or other managing authority of such
corporation, company or other entity notwithstanding the vote of the holders of
the remaining shares or equity securities so entitled to vote or (ii) which does
not have outstanding shares or securities, as may be the case in a partnership,
joint venture or unincorporated association, but more than 50% of whose
ownership interest is, as of such date, owned or controlled, directly or
indirectly through one or more Subsidiaries, by such Person, and in which the
ownership interest so owned entitles such Person and/or Subsidiaries to make the
decisions for such corporation, company or other entity.
"SUCCESSOR NOTICE" has the meaning set forth in Section 17.15.2(e) of
the Management Agreement.
"TERM" means during the term of the Management Agreement, including the
Initial Term and any renewal terms.
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"TRADEMARK AND SERVICE MARK USAGE GUIDELINES" means the rules governing
the depiction and presentation of the Licensed Marks then generally in use by
Licensor, to be furnished by Licensor to Licensee, as the same may be amended
and updated from time to time by Licensor.
"TRADEMARK LICENSE AGREEMENTS" means the Sprint Trademark and Service
Mark License Agreement and the Sprint Spectrum Trademark and Service Mark
License Agreement.
"TYPE II REPORT" has the meaning set forth in Section 12.1.2 of the
Management Agreement.
"VOLUNTARY BANKRUPTCY" has the meaning set forth in Section 11.3.7 of
the Management Agreement.
"WIRELESS MOBILITY COMMUNICATIONS NETWORK" means a radio communications
system operating in the 1900 MHz spectrum range under the rules designated as
Subpart E of Part 24 of the FCC's rules.
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<PAGE> 72
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT WITH "[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]"
ADDENDUM I
TO
SPRINT PCS MANAGEMENT AGREEMENT
Manager: ALAMOSA PCS, LLC
SERVICE AREA BTAs:
Flagstaff, AZ # 144 Abilene, TX # 3
Phoenix, AZ # 347 (Navajo County, AZ) Amarillo, TX # 13
Prescott, AZ # 362 Eagle Pass, TX # 121
Grand Junction, CO # 168 El Paso, TX # 128
Pueblo, CO # 366 Laredo, TX # 242
Albuquerque, NM # 8 Lubbock, TX # 264
Carlsbad, NM # 68 Midland, TX # 296
Farmington, NM-Durango, CO # 139 Odessa, TX # 327
Gallup, NM # 162 San Angelo, TX # 400
Las Cruces, NM # 244
Roswell, NM # 386
Santa Fe, NM # 407
EXPANSION SERVICE AREA BTAs:
Las Vegas, AZ # 245 (portion of Mohave County)
Colorado Springs, CO # 89 (portion of El Paso County)
Phoenix, AZ # 347 (portion of Maricopa and Pinal County)
Clovis, NM # 87
Sierra Vista-Douglas, AZ # 420
Hobbs, NM # 191
Tucson, AZ # 447 (portion of Pinia County)
Big Spring, TX # 40
Yuma, AZ # 486
El Centro-Calexico, CA # 124
San Diego, CA # 402 (portion of San Diego County)
This Addendum contains certain additional and supplemental terms and
provision of that certain Sprint PCS Management Agreement (the "MANAGEMENT
AGREEMENT") entered into contemporaneously with and by the same parties as this
Addendum. The terms and provisions of the Addendum control, supersede and amend
any conflicting terms and provisions contained in the Management Agreement.
Except for express modification made in this Addendum, the Management Agreement
continues in full force and effect.
December 23, 1999
<PAGE> 73
Capitalized terms used and not otherwise defined in this Addendum have
the meaning ascribed to them in the Schedule of Definitions. Section and Exhibit
references are to Sections and Exhibits of the Management Agreement unless
otherwise noted.
The Management Agreement is modified as follows:
1. COVERAGE ENHANCEMENT. Section 2.5 is deleted in its entirety and
replaced by the following language:
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
2. REGULATORY NOTICES (COSTS). The following two sentences replace the
last sentence of Section 16.4: "If Sprint PCS chooses to respond to such
communications and complaints, Manager will not respond to them without the
consent of Sprint PCS. Sprint PCS will bear the cost of responding to any such
communications and complaints unless (1) such response is primarily the result
of Manager's acts or omissions that constitute negligence, willful misconduct,
or breach of any provision of this agreement (in which case Manager will pay the
costs of Sprint PCS' response), or (2) Manager's response is not requested by
Sprint PCS."
3. COMPLIANCE. Sprint PCS acknowledges that smaller population centers
within the Service Area may merit an adjusted application of Sprint PCS' Retail
Store requirements and its Customer Service requirements in order to preserve
the economic benefits of this agreement for Manager and Sprint PCS. Accordingly,
with respect to cities located within the Service Area having a population of
less than 100,000 according to the most recently completed United States
government census), Sprint PCS will exercise commercial reasonableness with
respect to its Retail Store requirements and its Customer Service requirements.
4. VOLUNTARY RESALE OF PRODUCTS AND SERVICES. Section 3.5.2 is modified
by amending the second sentence of the second paragraph in its entirety to read
as follows: "If Manager wants handsets of subscribers of resellers with NPA-NXXs
of Manager to be activated, Manager must agree to comply with the terms of the
program, including its pricing provisions."
5. FINANCING. (a) The word "and" is inserted between the words
"thereto" and "before" in the last sentence of Section 1.7.
(b) The following paragraph is added at the end of Section 1.7:
Sprint PCS agrees to propose modifications to the Management Agreement,
and perhaps to the Schedule of Definitions, the Services Agreement, the Sprint
Trademark and Service Mark License Agreement, and the Sprint Spectrum Trademark
and Service Mark License Agreement, that will enhance Manager's ability to
obtain financing for the Service Area Network. Sprint PCS will not be required
to offer the Manager subsequent modifications offered or agreed to with Other
Managers subsequent to the initial set of modifications.
6. LONG-DISTANCE PRICING. (a) The first sentence of Section 3.4 is
deleted in its entirety and replaced by the following language:
Manager must purchase long-distance telephony services from
Sprint through Sprint PCS both (i) to provide long-distance telephony
service to users of the Sprint PCS Network and (ii) to
December 23, 1999
<PAGE> 74
connect the Service Area Network with the national platforms used by
Sprint PCS to provide services to Manager under the agreement and/or
the Services Agreement. Sprint will bill Sprint PCS for such services
rendered to Sprint PCS, Manager and all Other Managers, and in turn,
Sprint PCS will bill Manager for the services used by Manager. Manager
will be charged the same price for such long-distance service as Sprint
PCS is charged by Sprint (excluding interservice area long-distance
travel rates) plus an additional administrative fee to cover Sprint
PCS' processing costs.
(b) The following sentence is added as a second paragraph in Section
3.4: "Manager may not resell the long-distance telephony services acquired from
Sprint under this Section 3.4."
7. RIGHT OF LAST OFFER. Section 3.7 is modified by adding the following
language: "(other than backhaul services relating to national platform and IT
application connections, which Manager must purchase from Sprint)" both between
(i) "Service Area Network" and "if Manager decides to use" in the first sentence
of the first paragraph and (ii) "for these services" and "and the agreement was
not made" in the first sentence of the second paragraph.
8. NON-TERMINATION OF AGREEMENT. The following language is added at the
end of Section 11.5.3 and Section 11.6.4: "but such action does not terminate
this agreement."
9. ANNOUNCED TRANSACTIONS. Section 17.24 is deleted in its entirety.
10. ADDITIONAL TERMS AND PROVISIONS. The phrase "the Addendum also
describes" is deleted from the second sentence of Section 17.25, and the
following language is inserted at the end of that second sentence: "are
described on Exhibit 17.25, and photocopies of any such written agreements have
been delivered to Sprint PCS".
11. FEDERAL CONTRACTOR COMPLIANCE. A new Section 17.28, the text of
which is attached as Exhibit A, is added and incorporated by this reference.
When and to the extent required by applicable law, Manager will comply with the
requirement of this Section 17.28.
12. YEAR 2000 COMPLIANCE. The following Section 17.29 is added:
17.29 YEAR 2000 COMPLIANCE. Sprint PCS and Manager each
separately represents and warrants that any system or equipment
acquired, operated or designated by it for use in the Service Area
Network or for use to support the Service Area Network, including
(without limitation) billing, ordering and customer service system,
will be capable of correctly processing and receiving date data, as
well as properly exchanging date data with all products (for example,
hardware, software and firmware) with which the Service Area Network is
designed to be used, and will not malfunction or fail to function due
to an inability to process correctly date data in conformance with
Sprint PCS requirements for "Year 2000 Compliance." If the Service Area
Network or any system used to support the Service Area Network fails to
operate as warranted due to defects or failures in any system or
equipment selected by Manager (including systems or equipment of third
party vendors and subcontractors selected by Manager rather than by
Sprint PCS) Manager will, at its own expense, make the repairs,
replacements or upgrades necessary to correct the failure and provide a
Year 2000 Compliant Service Area Network. If the Service Area Network
or any system used to support the Service Area Network fails to operate
as warranted due to defects or failures in any systems or equipment
selected by Sprint PCS (including systems or equipment of third party
vendors and subcontractors that Sprint PCS selects and requires Manager
to use), Sprint PCS will, at its own
December 23, 1999
<PAGE> 75
expense, make the repairs, replacements or upgrades necessary to
correct the failure and provide a Year 2000 Compliant Service Area
Network.
"Year 2000 Compliance" means the functions, calculations, and
other computing processes of the Service Area Network (collectively
"Processes") that perform and otherwise process, date-arithmetic,
display, print or pass date/time data in a consistent manner,
regardless of the date in time on which the Processes are actually
performed or the dates used in such data or the nature of the date/time
data input, whether before, during or after January 1, 2000 and whether
or not the date/time data is affected by leap years. To the extent any
part of the Service Area Network is intended to be used in combination
with other software, hardware or firmware, it will properly exchange
date/time data with such software, hardware or firmware. The Service
Area Network will accept and respond to two-digit year-date input,
correcting or supplementing as necessary, and store, print, display or
pass date/time data in a manner that is unambiguous as to century. No
date/time data will cause any part of the Service Area Network to
perform an abnormally ending routine or function within the Processes
or generate incorrect final values or invalid results.
13. PAYMENT OF FEES UNDER SERVICES AGREEMENT. The second sentence of
Section 3.1 of the Services Agreement is deleted in its entirety and replaced by
the following two sentences:
Except with respect to fees paid for billing-related services,
the monthly charge for any fees based on the number of subscribers of
the Service Area Network will be determined based on the number of
subscribers as of the 15th day of the month for which the charge is
being calculated. With respect to fees paid for billing-related
services, the monthly charge for any fees based on the number of
subscribers will be based on the number of gross activations in the
month for which the charge is being calculated plus the number of
subscribers of the Service Area Network on the last day of the prior
calendar mouth.
14. SAN DIEGO ASSETS. Upon written notice to Manager by Sprint PCS of
its decision to acquire Manager's assets located within the San Diego BTA #402
(the "SD Assets"), the parties will negotiate in good faith to determine the
fair market value of the SD Assets (the "FMV").
If the parties are unable to agree upon the FMV within 60 days after
the date on which Sprint PCS sent notice (the "Notice Date"), the parties will,
within 90 days after the Notice Date, appoint appraisers in the manner set forth
in Section 11.7.1 of the Management Agreement. The appraised value of the SD
Assets (the "Appraised Value") will be determined based on the appraisers'
valuation using the principles set forth in Section 11.7.4 of the Management
Agreement.
Upon determination of the FMV or Appraised Value, as the case may be,
the parties will consummate the transaction on the terms and conditions set
forth in Exhibit 11.8 to the Management Agreement. Upon the consummation of the
transfer, the San Diego BTA #402 will be removed from Manager's Service Area.
[The remainder of this page is intentionally left blank.]
December 23, 1999
<PAGE> 1
EXHIBIT 10.23
SPRINT PCS
SERVICES AGREEMENT
Between
SPRINT SPECTRUM L.P.
and
ALAMOSA PCS, LLC
December 23, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. ENGAGEMENT OF SPRINT SPECTRUM.................................................................................1
1.1 Engagement of Sprint Spectrum...................................................................1
1.2 Reliance on Manager.............................................................................1
1.3 Non-exclusive Service...........................................................................1
1.4 Manager's Use of Services.......................................................................2
2. SERVICES......................................................................................................2
2.1 Available Services; Selected Services...........................................................2
2.1.1 Available Services.....................................................................2
2.1.2 Selected Services......................................................................2
2.1.3 Changes to Selected Services...........................................................2
2.1.4 Performance of Selected Services.......................................................2
2.2 Third Party Vendors.............................................................................3
2.3 Contracts.......................................................................................3
3. FEES FOR SELECTED SERVICES....................................................................................3
3.1 Payment of Fees.................................................................................3
3.2 Adjustment of Fees..............................................................................3
3.3 Late Payments...................................................................................4
3.4 Taxes...........................................................................................4
4. TERM; TERMINATION; EFFECT OF TERMINATION......................................................................4
4.1 Term............................................................................................4
4.2 Effect of Termination...........................................................................4
5. BOOKS AND RECORDS; CONFIDENTIAL INFORMATION...................................................................4
5.1 Books and Records...............................................................................4
5.1.1 General................................................................................4
5.1.2 Audit..................................................................................4
5.1.3 Contesting an Audit....................................................................5
5.2 Confidential Information........................................................................5
6. INDEMNIFICATION...............................................................................................7
6.1 Indemnification by Sprint Spectrum..............................................................7
6.2 Indemnification by Manager......................................................................7
6.3 Procedure.......................................................................................7
6.3.1 Notice.................................................................................7
6.3.2 Defense by Indemnitor..................................................................8
6.3.3 Defense by Indemnitee..................................................................8
6.3.4 Costs..................................................................................8
7. DISPUTE RESOLUTION............................................................................................8
</TABLE>
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<TABLE>
<S> <C> <C>
7.1 Negotiation.....................................................................................8
7.2 Unable to Resolve...............................................................................9
7.3 Attorneys and Intent............................................................................9
8. REPRESENTATIONS AND WARRANTIES................................................................................9
8.1 Due Incorporation or Formation; Authorization of Agreements.....................................9
8.2 Valid and Binding Obligation....................................................................9
8.3 No Conflict; No Default.........................................................................9
8.4 Litigation......................................................................................9
9. GENERAL PROVISIONS............................................................................................9
9.1 Notices.........................................................................................9
9.2 Construction...................................................................................10
9.3 Headings.......................................................................................10
9.4 Further Action.................................................................................10
9.5 Specific Performance...........................................................................10
9.6 Entire Agreement; Amendments...................................................................10
9.7 Limitation on Rights of Others.................................................................10
9.8 Waivers; Remedies..............................................................................10
9.9 Waiver of Jury Trial...........................................................................11
9.10 Binding Effect.................................................................................11
9.11 Governing Law..................................................................................11
9.12 Severability...................................................................................11
9.13 Limitation of Liability........................................................................11
9.14 No Assignment; Exceptions......................................................................11
9.15 Disclaimer of Agency...........................................................................12
9.16 Independent Contractors........................................................................12
9.17 Expense........................................................................................12
9.18 General Terms..................................................................................12
9.19 Conflicts with Management Agreement............................................................12
9.20 Master Signature Page..........................................................................12
</TABLE>
ii
<PAGE> 4
SPRINT PCS SERVICES AGREEMENT
This SERVICES AGREEMENT is made as of December 23,1999, by and between
SPRINT SPECTRUM L.P., a Delaware limited partnership ("SPRINT SPECTRUM"), and
ALAMOSA PCS, LLC, a Delaware limited liability company (but not any Related
Party) ("MANAGER"). THE DEFINITIONS FOR THIS AGREEMENT ARE SET FORTH ON THE
"SCHEDULE OF DEFINITIONS."
RECITALS
A. Manager and the holder of the License ("Sprint PCS") are
entering into a Management Agreement contemporaneously with the execution of
this agreement, under which Manager will design, construct, operate, manage and
maintain a wireless services network in the Service Area in accordance with
Sprint PCS standards and will offer and promote Sprint PCS Products and Services
that operate on the Sprint PCS Network.
B. Manager desires to enter into this agreement with Sprint
Spectrum, under which Sprint Spectrum may furnish certain services to Manager to
assist Manager to build out, operate, manage and maintain the Service Area
Network under the License.
AGREEMENT
In consideration of the recitals and mutual covenants and agreements
contained in this agreement, the sufficiency of which are hereby acknowledged,
the parties, intending to be bound, agree as follows:
1. ENGAGEMENT OF SPRINT SPECTRUM
1.1 ENGAGEMENT OF SPRINT SPECTRUM. Manager engages Sprint Spectrum
to assist Manager with certain specified services in connection with the
operations of Manager and in building out, operating, managing and maintaining
the Service Area Network, subject to the terms and conditions of this agreement.
Sprint Spectrum accepts the engagement and will use the same effort and
demonstrate the same care in performing its obligations under this agreement as
it uses in conducting its own business. Manager will use the efforts and
demonstrate the care necessary for Sprint Spectrum to meet its obligations under
this agreement. When providing the Selected Services, Sprint Spectrum will
provide those services to Manager in the same manner it provides those services
to its own business, including the use of third party vendors to provide certain
Selected Services.
1.2 RELIANCE ON MANAGER. Manager understands that Sprint
Spectrum's ability to provide the Selected Services will depend largely on
Manager's compliance with the Sprint PCS Program Requirements under the
Management Agreement and cooperation with Sprint Spectrum. Manager agrees to
comply with such requirements and to cooperate with Sprint Spectrum to enable
Sprint Spectrum to perform its obligations under this agreement.
1.3 NON-EXCLUSIVE SERVICE. Nothing contained in this agreement
confers upon Manager an exclusive right to any of the Available Services. Sprint
Spectrum may contract with others to provide expertise and services identical or
similar to those to be made available or provided to Manager under this
agreement.
1
<PAGE> 5
1.4 MANAGER'S USE OF SERVICES. Manager agrees it will only use the
Selected Services in connection with its Service Area Network. Manager will not
use the Selected Services outside the Service Area or in connection with any
other business.
2. SERVICES
2.1 AVAILABLE SERVICES; SELECTED SERVICES.
2.1.1 AVAILABLE SERVICES. Subject to the terms of this
agreement, Manager may obtain any of the Available Services from Sprint Spectrum
in accordance with the provisions of this Section 2.1. The Available Services
offered from time to time and the fees charged for such Available Services will
be set forth on the then current Exhibit 2.1.1 (the "Available Services and Fees
Schedule"). If Sprint Spectrum offers any new Available Service, it will deliver
a new Exhibit 2.1.1 indicating the new service and the fee for the new service.
Manager may select one or more of the categories of Available
Services. If Manager selects a particular category of services it must take and
pay for all of the services under the category selected; Manager may not select
only particular services within that category.
If Sprint Spectrum determines to no longer offer an Available
Service and the service is not a Selected Service, then Sprint Spectrum may give
Manager written notice at any time during the term of this agreement that Sprint
Spectrum no longer offers the Available Service.
Sprint Spectrum may modify Exhibit 2.1.1 from time to time.
Exhibit 2.1.1 will be deemed amended upon delivery of the new Exhibit 2.1.1 to
Manager.
2.1.2 SELECTED SERVICES. During the term of this agreement,
and subject to the terms of this agreement, Manager has selected, and Sprint
Spectrum has agreed to furnish or cause to be furnished to Manager, the
Available Services listed on EXHIBIT 2.1.2 (which listed services will be the
Selected Services). Sprint Spectrum may require from time to time that certain
Available Services be Selected Services where necessary to comply with legal or
regulatory requirements (e.g., mandatory provision of emergency 911 service) or
applicable operating constraints (e.g., delivery of merchandise to the regional
distribution centers of national retail distributors).
2.1.3 CHANGES TO SELECTED SERVICES. If Manager determines
it no longer requires a Selected Service, then Manager must give Sprint Spectrum
written notice at least 3 months prior to the date on which Manager wishes to
discontinue its use of such Selected Service.
If Sprint Spectrum determines to no longer offer an Available
Service and such service is one of Manager's Selected Services, then Sprint
Spectrum must give Manager written notice at least 9 months prior to its
discontinuance of such Available Service that Sprint Spectrum will no longer
offer such Available Service. If the Available Service to be discontinued is
required by Sprint Spectrum to be a Selected Service, then Sprint Spectrum will
use commercially reasonable efforts to (a) help Manager provide the service
itself or find another vendor to provide the service, and (b) facilitate
Manager's transition to the new service provider.
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2.1.4 PERFORMANCE OF SELECTED SERVICES. Sprint Spectrum may
select the method, location and means of providing the Selected Services. If
Sprint Spectrum wishes to use Manager's facilities to provide the Selected
Services, Sprint Spectrum must obtain Manager's prior written consent.
2.2 THIRD PARTY VENDORS. Some of the Available Services might be
provided by third party vendors under arrangements between Sprint Spectrum and
the third party vendors. In some instances, Manager may receive Available
Services from a third party vendor under the same terms and conditions that
Sprint Spectrum receives such services. In other instances, Manager may receive
Available Services under the terms and conditions set forth in an agreement
between Manager and the third party vendor. If Manager wishes to engage a third
party vendor to provide Available Services, Selected Services, or Available
Services that Sprint Spectrum will no longer offer, Manager must first obtain
Sprint Spectrum's prior written consent, which consent will not be unreasonably
withheld. Before Manager may obtain from the third party vendor any Available
Services, Selected Services, or Available Services that Sprint Spectrum will no
longer offer, such vendor must execute an agreement prepared by Sprint Spectrum
that obligates the vendor to maintain the confidentiality of any proprietary
information and that prohibits the vendor from using any proprietary technology,
information or methods for its benefit or the benefit of any other person or
entity. Manager's use of a third party vendor that is not providing Available
Services to Manager on behalf of Sprint PCS under the Management Agreement will
not qualify for assumed compliance with the Program Requirements under Sections
7.1 (a)(ii) or 8.1(b) of the Management Agreement.
2.3 CONTRACTS. Manager will notify Sprint Spectrum of any contract
or other arrangement Manager has with any other party that will affect how
Sprint Spectrum is to provide the Selected Services.
3. FEES FOR SELECTED SERVICES
3.1 PAYMENT OF FEES. Sprint Spectrum and Manager agree that the
fees for the Available Services will initially be those set forth on Exhibit
2.1.1, which fees represent an adjustment to any fees paid by Sprint PCS to
Manager under Section 10 of the Management Agreement. The monthly charge for any
fees based on the number of subscribers of the Service Area Network will be
determined based on the number of subscribers as of the 15th day of the month
for which the charge is being calculated. Manager agrees to pay the fees to
Sprint Spectrum within 20 days after the date of the invoice. If Manager enters
into an agreement with a third party vendor under Section 2.2, Manager agrees to
pay the fees for the services rendered by the third party vendor in accordance
with the terms and conditions of such agreement.
3.2 ADJUSTMENT OF FEES. Sprint Spectrum may change the fee for any
service it provides once during any 12-month period by delivering a new Exhibit
2.1.1 to Manager. Exhibit 2.1.1 will be deemed amended on the effective date
noted on the new Exhibit 2.1.1, which will be at least 30 days after delivering
the new Exhibit 2.1.1. Manager must notify Sprint Spectrum in writing before the
effective date of the new Exhibit 2.1.1 if Manager wishes to discontinue a
Selected Service for which the price is being increased (a "CANCELLED SERVICE").
If Manager discontinues a Selected Service under this Section 3.2, Sprint
Spectrum will, at Manager's option, continue to provide the Cancelled Service
and to charge Manager the current fee (i.e., the fee under the Exhibit 2.1.1 in
effect on the date Manager gives its cancellation notice to Sprint Spectrum) for
the Cancelled Service for up to 9 months from the date Sprint Spectrum gives
Manager notice of the price change or until Manager no longer needs the
Cancelled Service, whichever occurs first. If Sprint Spectrum continues to
provide the Cancelled Service after the 9-month period, Sprint Spectrum will
apply the new fee, under the new Exhibit 2.1.1, and such fee will be applied
retroactively as of the effective date of the
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new schedule. Manager agrees to pay such retroactive charge within 10 days after
the date of the invoice for such charge.
3.3 LATE PAYMENTS. Any payment due under this Section 3 that is
not paid by Manager to Sprint Spectrum in accordance with the terms of this
agreement will bear interest at the Default Rate beginning (and including) the
6th day after the due date until (and including) the date on which such payment
is made.
3.4 TAXES. Manager will pay or reimburse Sprint Spectrum for any
sales, use, gross receipts or similar tax, administrative fee,
telecommunications fee or surcharge for taxes or fees levied by a governmental
authority on the fees and charges payable to Sprint Spectrum by Manager.
4. TERM; TERMINATION; EFFECT OF TERMINATION
4.1 TERM. This agreement commences on the date of execution and
continues until the Management Agreement terminates. This agreement
automatically terminates upon termination of the Management Agreement. Neither
party may terminate this agreement for any reason other than the termination of
the Management Agreement.
4.2 EFFECT OF TERMINATION. Upon the termination of this agreement,
all rights and obligations of each party under this agreement will immediately
cease, except that:
(a) Any rights arising out of a breach of any terms of
this agreement will survive any termination of this agreement;
(b) The provisions of this Section 4.2 and Sections 5.2,
6, 7, and 9 will survive any termination of this agreement; and
(c) The payment obligations under Section 3 will survive
any termination of this agreement if, and to the extent, any fees have accrued
or are otherwise due and owing from Manager to Sprint Spectrum or any Sprint
Spectrum Related Party as of the date of termination of this agreement.
5. BOOKS AND RECORDS; CONFIDENTIAL INFORMATION
5.1 BOOKS AND RECORDS.
5.1.1 GENERAL. Each party must keep and maintain books and
records to support and document any fees, costs, expenses or other charges due
in connection with the provisions set forth in this agreement. The records must
be retained for a period of at least 3 years after the fees, costs, expenses or
other charges to which the records relate have accrued and have been paid, or
such other period as may be required by law.
5.1.2 AUDIT. On reasonable advance written notice by the
Manager, but no more frequently than annually, Sprint PCS will provide a report
issued in conformity with Statement of Auditing Standard No. 70 "Reports on the
Processing of Transactions by Service Organizations" ("TYPE II REPORT" or
"MANAGER MANAGEMENT REPORT"). Such report will be prepared by independent
auditors and will provide an opinion on the controls placed in operation and
tests of operating effectiveness of those controls in effect at Sprint PCS over
the Manager Management Processes. "Manager Management Processes" include those
services generally
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provided within the Management Agreement, primarily billing and collection of
Collected Revenues. The Manager is responsible for costs incurred attributable
to such requested procedures with respect to the services provided under this
agreement, including without limitation discussion of the billing and collection
of Collected Revenues. This report will be made available to the other party
upon such other party's request.
5.1.3 CONTESTING AN AUDIT. If the party that did not select
the independent auditor does not agree with the findings of the audit, then such
party can contest the findings by providing notice of such disagreement to the
other party (the "DISPUTE NOTICE"). The date of delivery of such notice is the
"DISPUTE NOTICE DATE." If the parties are unable to resolve the disagreement
within 10 Business Days after the Dispute Notice Date, they will resolve the
disagreement in accordance with the following procedures.
The two parties and the auditor that conducted the audit will all agree
on an independent certified public accountant with a regional or national
accounting practice in the wireless telecommunications industry (the "ARBITER")
within 15 Business Days after the Dispute Notice Date. If, within 15 Business
Days after the Dispute Notice Date, the three parties fail to agree on the
Arbiter, then at the request of either party to this agreement, the Arbiter will
be selected pursuant to the rules then in effect of the American Arbitration
Association. Each party will submit to the Arbiter within 5 Business Days after
its selection and engagement all information reasonably requested by the Arbiter
to enable the Arbiter to independently resolve the issue that is the subject of
the Dispute Notice. The Arbiter will make its own determination of the amount of
fees, costs, expenses or other charges payable under this agreement with respect
to the period audited. The Arbiter will issue a written report of its
determination in reasonable detail and will deliver a copy of the report to the
parties within 10 Business Days after the Arbiter receives all of the
information reasonably requested. The determination made by the Arbiter will be
final and binding and may be enforced by any court having jurisdiction. The
parties will cooperate fully in assisting the Arbiter and will take such actions
as are necessary to expedite the completion of and to cause the Arbiter to
expedite its assignment.
If the amount owed by a contesting party is reduced by more than 10% or
the amount owed to a contesting party is increased by more than 10% then the
noncontesting party will pay the costs and expenses of the Arbiter, otherwise
the contesting party will pay the costs and expenses of the Arbiter.
5.2 CONFIDENTIAL INFORMATION.
(a) Except as specifically authorized by this agreement,
each of the parties must, for the term of this agreement and 3 years after the
date of termination of this agreement, keep confidential, not disclose to others
and use only for the purposes authorized in this agreement, all Confidential
Information disclosed by the other party to the party in connection with this
agreement, except that the foregoing obligation will not apply to the extent
that any Confidential Information:
(i) is or becomes, after disclosure to a party,
publicly known by any means other than through unauthorized acts or
omissions of the party or its agents; or
(ii) is disclosed in good faith to a party by a
third party entitled to make the disclosure.
(b) Notwithstanding the foregoing, a party may use, disclose or
authorize the disclosure of Confidential Information that it receives that:
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(i) has been published or is in the public
domain, or that subsequently comes into the public domain, through no
fault of the receiving party;
(ii) prior to the effective date of this
agreement was properly within the legitimate possession of the
receiving party, or subsequent to the effective date of this agreement,
is lawfully received from a third party having rights to publicly
disseminate the Confidential Information without any restriction and
without notice to the recipient of any restriction against its further
disclosure;
(iii) is independently developed by the receiving
party through persons or entities who have not had, either directly or
indirectly, access to or knowledge of the Confidential Information;
(iv) is disclosed to a third party consistent
with the terms of the written approval of the party originally
disclosing the information;
(v) is required by the receiving party to be
produced under order of a court of competent jurisdiction or other
similar requirements of a governmental agency, and the Confidential
Information will otherwise continue to be Confidential Information
required to be held confidential for purposes of this agreement;
(vi) is required by the receiving party to be
disclosed by applicable law or a stock exchange or association on which
the receiving party's securities (or those of its Related Parties) are
or may become listed; or
(vii) is disclosed by the receiving party to a
financial institution or accredited investor (as that term is defined
in Rule 501 (a) under the Securities Act of 1933) that is considering
providing financing to the receiving party and which financial
institution or accredited investor has agreed to keep the Confidential
Information confidential in accordance with an agreement at least as
restrictive as this Section 5.
(c) The party making a disclosure under Sections 5.2(b)(v),
5.2(b)(vi) or 5.2(b)(vii) must inform the non-disclosing party as promptly as is
reasonably necessary to enable the non-disclosing party to take action to, and
use the disclosing party's reasonable best efforts to, limit the disclosure and
maintain confidentiality to the extent practicable.
(d) Manager will not, except when serving in the capacity of
Manager under this agreement, use any Confidential Information of any kind that
it receives under or in connection with this agreement. For example, if Manager
operates a wireless company in a different licensed area, Manager may not use
any of the Confidential Information received under or in connection with this
agreement in operating its other wireless business.
6. INDEMNIFICATION
6.1 INDEMNIFICATION BY SPRINT SPECTRUM. Sprint Spectrum agrees to
indemnify, defend and hold harmless Manager, its directors, managers, officers
and employees from and against any and all claims, demands, causes of action,
losses, actions, damages, liability and expense, including costs and reasonable
attorneys' fees, against Manager, its directors, managers, officers and
employees arising from or relating to the violation by Sprint Spectrum, its
directors, officers, employees, contractors, subcontractors, agents or
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representatives of any law, regulation or ordinance applicable to Sprint
Spectrum in its performance of the Selected Services, or by Sprint Spectrum's,
or its directors', officers', employees', contractors', subcontractors', agents'
or representatives' breach of any representation, warranty or covenant contained
in this agreement, except where and to the extent the claim, demand, cause of
action, loss, action, damage, liability and expense results from the negligence
or willful misconduct of Manager, its directors, managers, officers, employees,
agents or representatives. Sprint Spectrum's indemnification obligations under
this Section 6.1 do not apply to any third party vendors that provide services
(including Selected Services) directly to Manager or Manager's Related Parties
under a separate agreement.
6.2 INDEMNIFICATION BY MANAGER. Manager agrees to indemnify,
defend and hold harmless Sprint Spectrum, its directors, officers and employees
from and against any and all claims, demands, causes of action, losses, actions,
damages, liability and expense, including costs and reasonable attorneys' fees,
against Sprint Spectrum, its directors, officers and employees arising from or
relating to Manager's, or its directors', managers', officers', employees',
contractors', subcontractors', agents' or representatives' violation of any law,
regulation or ordinance applicable to Manager, or by Manager's, or its
directors', managers', officers', employees', contractors', subcontractors',
agents' or representatives' breach of any representation, warranty or covenant
contained in this agreement, Manager's ownership of the Operating Assets or the
operation of the Service Area Network, except where and to the extent the claim,
demand, cause of action, loss, action, damage, liability and expense results
from the negligence or willful misconduct of Sprint Spectrum, its directors,
officers, employees, contractors, subcontractors, agents or representatives.
6.3 PROCEDURE.
6.3.1 NOTICE. Any party being indemnified ("INDEMNITEE")
will give the party making the indemnification ("INDEMNITOR") written notice as
soon as practicable but no later than 5 Business Days after the party becomes
aware of the facts, conditions or events that give rise to the claim for
indemnification if:
(1) any claim or demand is made or liability is
asserted against Indemnitee; or
(2) any suit, action, or administrative or legal
proceeding is instituted or commenced in which Indemnitee is involved
or is named as a defendant either individually or with others.
Failure to give notice as described in this Section 6.3.1 does not
modify the indemnification obligations of this provision, except if Indemnitor
is harmed by failure to provide timely notice to Indemnitor, then Indemnitor
does not have to indemnify Indemnitee for the harm caused by the failure to give
the timely notice.
6.3.2 DEFENSE BY INDEMNITOR. If within 30 days after giving notice
Indemnitee receives written notice from Indemnitor stating that Indemnitor
disputes or intends to defend against the claim, demand, liability, suit, action
or proceeding, then Indemnitor will have the right to select counsel of its
choice and to dispute or defend against the claim, demand, liability, suit,
action or proceeding, at its expense.
Indemnitee will fully cooperate with Indemnitor in the dispute or
defense so long as Indemnitor is conducting the dispute or defense diligently
and in good faith. Indemnitor is not permitted to settle the dispute or claim
without the prior written approval of Indemnitee, which approval will not be
unreasonably withheld. Even though Indemnitor selects counsel of its choice,
Indemnitee has the right to retain additional representation by counsel of its
choice to participate in the defense at Indemnitee's sole cost and expense.
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6.3.3 DEFENSE BY INDEMNITEE. If no notice of intent to
dispute or defend is received by Indemnitee within the 30-day period, or if a
diligent and good faith defense is not being or ceases to be conducted,
Indemnitee has the right to dispute and defend against the claim, demand or
other liability at the sole cost and expense of Indemnitor and to settle the
claim, demand or other liability, and in either event to be indemnified as
provided in this Section 6. Indemnitee is not permitted to settle the dispute or
claim without the prior written approval of Indemnitor, which approval will not
be unreasonably withheld.
6.3.4 COSTS. Indemnitor's indemnity obligation includes
reasonable attorneys' fees, investigation costs, and all other reasonable costs
and expenses incurred by Indemnitee from the first notice that any claim or
demand has been made or may be made, and is not limited in any way by any
limitation on the amount or type of damages, compensation, or benefits payable
under applicable workers' compensation acts, disability benefit acts, or other
employee benefit acts.
7. DISPUTE RESOLUTION
7.1 NEGOTIATION. The parties will attempt in good faith to resolve
any dispute arising out of or relating to this agreement promptly by negotiation
between or among representatives who have authority to settle the controversy.
Either party may escalate any dispute not resolved in the normal course of
business to the appropriate (as determined by the party) officers of the parties
by providing written notice to the other party.
Within 10 Business Days after delivery of the notice, the appropriate
officers of each party will meet at a mutually acceptable time and place, and
thereafter as often as they deem reasonably necessary, to exchange relevant
information and to attempt to resolve the dispute.
Either party may elect, by giving written notice to the other party, to
escalate any dispute arising out of or relating: to the determination of fees
that is not resolved in the normal course of business or by the audit process
set forth in Sections 5.1.2 and 5.1.3, first to the appropriate financial or
accounting officers to be designated by each party. The designated officers will
meet in the manner described in the preceding paragraph. If the matter has not
been resolved by the designated officers within 30 days after the notifying
party's notice, either party may elect to escalate the dispute to the
appropriate (as determined by the party) officers in accordance with the prior
paragraphs of this Section 7.1.
7.2 UNABLE TO RESOLVE. If a dispute has not been resolved within
60 days after the notifying party's notice, the parties will continue to operate
under this agreement and sue the other party for damages or seek other
appropriate remedies as provided in this agreement, except neither party may
bring a suit for damages based on an event that occurs during the first two
years of this agreement.
7.3 ATTORNEYS AND INTENT. If an officer intends to be accompanied
at a meeting by an attorney, the other party's officer will be given at least 3
Business Days prior notice of the intention and may also be accompanied by an
attorney. All negotiations under this Section 7 are confidential and will be
treated as compromise and settlement negotiations for purposes of the Federal
Rules of Civil Procedure and state rules of evidence and civil procedure.
8. REPRESENTATIONS AND WARRANTIES
Each party for itself makes the following representations and
warranties to the other party:
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8.1 DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENTS.
The party is either a corporation, limited liability company, or limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. Manager is qualified to do business and
in good standing in every jurisdiction in which the Service Area is located. The
party has the full power and authority to execute and deliver this agreement and
to perform its obligations under this agreement.
8.2 VALID AND BINDING OBLIGATION. This agreement constitutes the
valid and binding obligation of the party, enforceable in accordance with its
terms, except as may be limited by principles of equity or by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
8.3 NO CONFLICT; NO DEFAULT. Neither the execution, delivery and
performance of this agreement nor the consummation by the party of the
transactions contemplated in this agreement will conflict with, violate or
result in a breach of (a) any law, regulation, order, writ, injunction, decree,
determination or award of any governmental authority or any arbitrator,
applicable to such party, or (b) any term, condition or provision of the
articles of incorporation, certificate of limited partnership, certificate of
organization, bylaws, partnership agreement or limited liability company
agreement (or other governing documents) of such party or of any material
agreement or instrument to which such party is or may be bound or to which any
of its material properties or assets is subject.
8.4 LITIGATION. No action, suit, proceeding or investigation is
pending or, to the knowledge of the party, threatened against or affecting the
party or any of its properties, assets or businesses in any court or before or
by any governmental agency that could, if adversely determined, reasonably be
expected to have a material adverse effect on the party's ability to perform its
obligations under this agreement. The party has not received any currently
effective notice of any default that could reasonably be expected to result in a
breach of the preceding sentence.
9. GENERAL PROVISIONS
9.1 NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this agreement must be in
writing and mailed (certified or registered mail, postage prepaid, return
receipt requested), sent by hand or overnight courier, or sent by facsimile
(with acknowledgment received and a copy sent by overnight courier), charges
prepaid and addressed described on the Notice Address Schedule attached to the
Master Signature Page, or to any other address or number as the person or entity
may from time to time specify by written notice to the other parties.
All notices and other communications given to a party in accordance
with the provisions of this agreement will be deemed to have been given when
received.
9.2 CONSTRUCTION. This agreement will be construed simply
according to its fair meaning and not strictly for or against either party.
9.3 HEADINGS. The table of contents, section and other headings
contained in this agreement are for reference purposes only and are not intended
to describe, interpret, define, limit or expand the scope, extent or intent of
this agreement.
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9.4 FURTHER ACTION. Each party agrees to perform all further acts
and execute, acknowledge, and deliver any documents that may be reasonably
necessary, appropriate, or desirable to carry out the intent and purposes of
this agreement.
9.5 SPECIFIC PERFORMANCE. Each party agrees with the other party
that the party would be irreparably damaged if any of the provisions of this
agreement were not performed in accordance with their specific terms and that
monetary damages alone would not provide an adequate remedy. Accordingly, in
addition to any other remedy to which the non-breaching party may be entitled,
at law or in equity, the non breaching party will be entitled to injunctive
relief to prevent breaches of this agreement and specifically to enforce the
terms and provisions of this agreement.
9.6 ENTIRE AGREEMENT; AMENDMENTS. The provisions of this agreement
and the Management Agreement (if Sprint Spectrum is a party to that agreement)
(including the exhibits to those agreements) set forth the entire agreement and
understanding between the parties as to the subject matter of this agreement and
supersede all prior agreements, oral or written, and other communications
between the parties relating to the subject matter of this agreement. Except for
Sprint Spectrum's right to amend the Available Services and the fees charged for
such services as shown on Exhibit 2.1.1, and Manager's right to amend the
Selected Services listed on Exhibit 2.1.2, this agreement may be modified or
amended only by a written amendment signed by persons or entities authorized to
bind each party.
9.7 LIMITATION ON RIGHTS OF OTHERS. Nothing in this agreement,
whether express or implied, will be construed to give any person or entity other
than the parties any legal or equitable right, remedy or claim under or in
respect of this agreement.
9.8 WAIVERS; REMEDIES. The observance of any term of this
agreement may be waived (whether generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce the
term, but any waiver is effective only if in a writing signed by the party
against which the waiver is to be asserted. Except as otherwise provided in this
agreement, no failure or delay of either party in exercising any power or right
under this agreement will operate as a waiver of the power or right, nor will
any single or partial exercise of any right or power preclude any other or
further exercise of the right or power or the exercise of any other right or
power.
Sprint Spectrum is not in breach of any covenant in this agreement, if
failure of such party to comply with such covenant or Sprint Spectrum's
non-compliance with the covenant results primarily from:
(i) any FCC order or any other injunction issued
by any governmental authority impeding the ability to comply with the
covenant;
(ii) the failure of any governmental authority to
grant any consent, approval, waiver, or authorization or any delay on
the part of any governmental authority in granting any consent,
approval, waiver or authorization;
(iii) the failure of any vendor to deliver in a
timely manner any equipment or service; or
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(iv) any act of God, act of war or insurrection,
riot, fire, accident, explosion, labor unrest, strike, civil unrest,
work stoppage, condemnation or any similar cause or event not
reasonably within the control of Sprint Spectrum.
9.9 WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
9.10 BINDING EFFECT. Except as otherwise provided in this
agreement, this agreement is binding upon and inures to the benefit of the
parties and their respective and permitted successors, transferees, and assigns,
including any permitted successor, transferee or assignee of the Management
Agreement. The parties intend that this agreement bind only the party signing
this agreement and that the agreement is not binding on the Related Parties of a
party unless the agreement provides that Related Parties are bound.
9.11 GOVERNING LAW. The internal laws of the State of Missouri
(without regard to principles of conflicts of law) govern the validity of this
agreement, the construction of its terms, and the interpretation of the rights
and duties of the parties.
9.12 SEVERABILITY. The parties intend every provision of this
agreement to be severable. If any provision of this agreement is held to be
illegal, invalid, or unenforceable for any reason, the parties intend that a
court enforce the provision to the maximum extent permissible so as to effect
the intent of the parties (including the enforcement of the remaining
provisions). If necessary to effect the intent of the parties, the parties will
negotiate in good faith to amend this agreement to replace the unenforceable
provision with an enforceable provision that reflects the original intent of the
parties.
9.13 LIMITATION OF LIABILITY. NO PARTY WILL BE LIABLE TO THE OTHER
PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE
DAMAGES, OR LOSS OF PROFITS, ARISING FROM THE RELATIONSHIP OF THE PARTIES OR THE
CONDUCT OF BUSINESS UNDER, OR BREACH OF, THIS AGREEMENT, EXCEPT WHERE SUCH
DAMAGES OR LOSS OF PROFITS ARE CLAIMED BY OR AWARDED TO A THIRD PARTY IN A CLAIM
OR ACTION AGAINST WHICH A PARTY TO THIS AGREEMENT HAS A SPECIFIC OBLIGATION TO
INDEMNIFY ANOTHER PARTY TO THIS AGREEMENT.
9.14 NO ASSIGNMENT; EXCEPTIONS. This agreement may only be assigned
in conjunction with and to the same party or parties to whom the Management
Agreement has been validly assigned under the Management Agreement's terms and
conditions.
9.15 DISCLAIMER OF AGENCY. Neither party by this agreement makes
the other party a legal representative or agent of the party, nor does either
party have the right to obligate the other party in any manner, except if the
other party expressly permits the obligation by the party or except for
provisions in this agreement expressly authorizing one party to obligate the
other.
9.16 INDEPENDENT CONTRACTORS. The parties do not intend to create
any partnership, joint venture or other profit-sharing arrangement,
landlord-tenant or lessor-lessee relationship, employer-employee
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relationship, or any other relationship other than that expressly provided in
this agreement. Neither party to this agreement has any fiduciary duty to the
other party.
9.17 EXPENSE. Each party bears the expense of complying with this
agreement except as otherwise expressly provided in this agreement.
9.18 GENERAL TERMS.
(a) This agreement, including the attached Schedule of
Definitions, is to be interpreted in accordance with the following rules of
construction:
(i) The definitions in this agreement apply
equally to both the singular and plural forms of the terms defined
unless the context otherwise requires;
(ii) The words "include," "includes" and
"including" are deemed to be followed by the phrase "without
limitation";
(iii) All references in this agreement to Sections
and Exhibits are references to Sections of, and Exhibits to, this
agreement, unless otherwise specified; and
(iv) All references to any agreement or other
instrument or statute or regulation are to it as amended and
supplemented from time to time (and, in the case of a statute or
regulation, to any corresponding provisions of successor statutes or
regulations), unless the context otherwise requires.
(b) Any reference in this agreement to a "day" or number
of "days" (without the explicit qualification of "BUSINESS") is a reference to a
calendar day or number of calendar days. If any action or notice is to be taken
or given on or by a particular calendar day, and the calendar day is not a
Business Day, then the action or notice may be taken or given on the next
Business Day.
9.19 CONFLICTS WITH MANAGEMENT AGREEMENT. The provisions of the
Management Agreement govern over those of this Services Agreement if the
provisions contained in this agreement conflict with analogous provisions in the
Management Agreement.
9.20 MASTER SIGNATURE PAGE. Each party agrees that it will execute
the Master Signature Page that evidences such party's agreement to execute,
become a party to and be bound by this agreement, which document is incorporated
herein by this reference.
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EXHIBIT 10.24
SPRINT TRADEMARK
AND SERVICE MARK
LICENSE AGREEMENT
Between
SPRINT COMMUNICATIONS COMPANY, L.P.
and
ALAMOSA PCS, LLC
December 23, 1999
<PAGE> 2
SPRINT TRADEMARK AND
SERVICE MARK LICENSE AGREEMENT
THIS AGREEMENT is made as of the 23rd day of December, 1999, by and
between SPRINT COMMUNICATIONS COMPANY, L.P., a Delaware limited partnership, as
licensor ("Licensor ), and ALAMOSA PCS, LLC, a Delaware limited liability
company, as licensee ("Licensee"). THE DEFINITIONS FOR THIS AGREEMENT ARE SET
FORTH ON THE "SCHEDULE OF DEFINITIONS."
RECITALS:
WHEREAS, Licensor is the owner of the U.S. trademarks and service marks
"Sprint", together with related "Diamond" logo, "Sprint PCS", "Sprint Personal
Communications Services" and the goodwill of the business symbolized thereby;
and
WHEREAS, Licensee desires to use the trademarks and service marks in
commerce;
NOW, THEREFORE, the parties, in consideration of the mutual agreements
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, do hereby agree as follows:
ARTICLE 1
GRANT OF TRADEMARK AND SERVICE MARK RIGHTS; EXCLUSIVITY
Section 1.1. License.
(a) Grant of License. Subject to the terms and conditions hereof,
Licensor hereby grants to Licensee, and Licensee hereby
accepts from Licensor, for the term of this agreement, a
non-transferable, royalty-free license to use the Licensed
Marks solely for and in connection with the marketing,
promotion, advertisement, distribution, lease or sale of
Sprint PCS Products and Services and Premium and Promotional
Items in the Service Area.
(b) Related Equipment. The rights granted hereunder to Licensee
shall not include the right to manufacture equipment under the
Licensed Marks. However, subject to the terms and conditions
hereof, Licensor hereby grants to Licensee, and Licensee
hereby accepts from Licensor, for the term of this agreement,
a non-transferable, royalty-free license to market, promote,
advertise, distribute and resell and lease Related Equipment
in connection with the marketing, promotion, advertisement,
distribution, lease or sale by Licensee of Sprint PCS Products
and Services, and to furnish services relating to such Related
Equipment (including installation, repair and maintenance of
Related Equipment), under the Licensed Marks.
ARTICLE 2
QUALITY STANDARDS, MAINTENANCE
Section 2.1. Maintenance of Quality.
(a) Adherence to Quality Standards. In the course of marketing,
promoting, advertising, distributing, leasing and selling
Sprint PCS Products and Services and Premium and Promotional
Items under the Licensed Marks, Licensee shall maintain and
adhere to standards of quality and specifications that conform
to or exceed those quality standards and technical and
operational specifications adopted and/or amended in the
manner provided below
<PAGE> 3
("Quality Standards") and those imposed by Law. Such Quality
Standards are designed to ensure that the quality of the
Sprint PCS Products and Services and Premium and Promotional
Items marketed, promoted, advertised, distributed, leased and
sold under the Licensed Marks are consistent with the high
reputation of the Licensed Marks and are in conformity with
applicable Laws.
(b) Establishment of Quality Standards. The parties acknowledge
that the initial Quality Standards for the Sprint PCS Products
and Services and Premium and Promotional Items are attached to
the Affiliation Agreement as Exhibits 4.1, 4.2, 4.3, 7.2, and
8.1. The Quality Standards shall (i) be consistent with the
reputation for quality associated with the Licensed Marks and
(ii) be commensurate with a high level of quality (taking into
account Licensee's fundamental underlying technology and
standards), consistent with the level of quality being offered
in the market for products and services of the same kind as
the Sprint PCS Products and Services.
(c) Changes in Quality Standards. In the event that Licensor
wishes to change the Quality Standards, it will notify
Licensee in writing of such proposed amendments, and will
afford Licensee a reasonable time period in which to adopt
such changes as may be required in order for Licensee to
conform to the amended Quality Standards.
Section 2.2. Rights of Inspection. In order to ensure that the Quality
Standards are maintained, Licensor and its authorized agents and representatives
shall have the right, but not the obligation, with prior notice to Licensee, to
enter upon the premises of any office or facility operated by or for Licensee
with respect to Sprint PCS Products and Services and Premium and Promotional
Items at all reasonable times, to inspect, monitor and test in a reasonable
manner facilities and equipment used to furnish Sprint PCS Products and Services
and Premium and Promotional Items and, with prior written notice to Licensee, to
inspect the books and records of Licensee in a manner that does not unreasonably
interfere with the business and affairs of Licensee, all as they relate to the
compliance with the Quality Standards maintained hereunder.
Section 2.3. Marking Compliance with Trademark Laws. Licensee shall
cause the appropriate designation "(TM)" or "(sm)" or the registration symbol
"(R)" to be placed adjacent to the Licensed Marks in connection with the use
thereof and to indicate such additional information as Licensor shall reasonably
specify from time to time concerning the license rights under which Licensee
uses the Licensed Marks. Licensee shall place the following notice on all
printed or electronic materials on which the Licensed Marks appear: "SPRINT",
the "DIAMOND" logo and "Sprint PCS", "Sprint Personal Communications Services"
are trademarks and/or service marks of Sprint Communications Company, L.P.,
"used under license" or such other notice as Licensor may specify from time to
time.
Section 2.4. Other Use Restrictions. Licensee shall not use the
Licensed Marks in any manner that would reflect adversely on the image of
quality symbolized by the Licensed Marks.
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ARTICLE 3
CONFIDENTIAL INFORMATION
Section 3.1. Maintenance of Confidentiality. Each of Licensor and
Licensee and their respective Controlled Related Parties (each a "Restricted
Party") shall cause their respective officers and directors (in their capacity
as such) to, and shall take all reasonable measures to cause their respective
employees, attorneys, accountants, consultants and other agents and advisors
(collectively, and together with their respective officers and directors,
"Agents") to keep secret and maintain in confidence the terms of this agreement
and all confidential and proprietary information and data of the other party or
its Related Parties disclosed to it (in each case, a "Receiving Party") in
connection with the performance of its obligations under this agreement (the
"Confidential Information") and shall not, and shall cause their respective
officers and directors not to, and shall take all reasonable measures to cause
their respective other Agents not to, disclose Confidential Information to any
Person other than the parties, their Controlled Related Parties and their
respective Agents that need to know such Confidential Information. Each party
further agrees that it shall not use the Confidential Information for any
purpose other than determining and performing its obligations and exercising its
rights under this agreement. Each party shall take all reasonable measures
necessary to prevent any unauthorized disclosure of the Confidential Information
by any of their respective Controlled Related Parties or any of their respective
Agents. The measures taken by a Restricted Party to protect Confidential
Information shall be not deemed unreasonable if the measures taken are at least
as strong as the measures taken by the disclosing party to protect such
Confidential Information.
Section 3.2. Permitted Disclosures. Nothing herein shall prevent any
Restricted Party or its Agents from using, disclosing, or authorizing the
disclosure of Confidential Information it receives and which:
(i) has been published or is in the public domain, or which
subsequently comes into the public domain, through no fault of
the receiving party;
(ii) prior to receipt hereunder was property within the legitimate
possession of the Receiving Party or, subsequent to receipt
hereunder is lawfully received from a third party having
rights therein without restriction of the third party's right
to disseminate the Confidential Information and without notice
of any restriction against its further disclosure.
(iii) is independently developed by the Receiving Party through
Persons who have not had, either directly or indirectly,
access to or knowledge of such Confidential Information;
(iv) is disclosed to a third party with the written approval of the
party originally disclosing such information, provided that
such Confidential Information shall cease to be confidential
and proprietary information covered by this agreement only to
the extent of the disclosure so consented to;
(v) subject to the Receiving Party's compliance with Section 3.4
below, is required to be produced under order of a court of
competent jurisdiction or other similar requirements of a
governmental agency, provided that such Confidential
Information to the extent covered by a protective order or its
equivalent shall otherwise continue to be Confidential
Information required to be held confidential for purpose of
this agreement; or
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(vi) subject to the Receiving Party's compliance with Section 3.4
below, is required to be disclosed by applicable Law or a
stock exchange or association on which such Receiving Party's
securities (or those of its Related Party) are listed.
Section 3.3. Financial Institutions. Notwithstanding this Article 3,
any party may provide Confidential Information to any financial institution in
connection with borrowings from such financial institution by such party or any
of its Controlled Related Parties, so long as prior to any such disclosure such
financial institution executes a confidentiality agreement that provides
protection substantially equivalent to the protection provided the parties in
this Article 3.
Section 3.4. Procedures. In the event that any Receiving Party (i) must
disclose Confidential Information in order to comply with applicable Law or the
requirements of a stock exchange or association on which such Receiving Party's
securities or those of its Related Parties are listed or (ii) becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demand or otherwise) to disclose any
Confidential Information, the Receiving Party shall provide the disclosing party
with prompt written notice so that in the case of clause (i), the disclosing
party can work with the Receiving Party to limit the disclosure to the greatest
extent possible consistent with legal obligations or in the case of clause (ii),
the disclosing party may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this agreement. In the case of a clause
(ii), (A) if the disclosing party is unable to obtain a protective order or
other appropriate remedy, or if the disclosing party so directs, the Receiving
Party shall, and shall cause its employees to, exercise all commercially
reasonable efforts to obtain a protective order or other appropriate remedy at
the disclosing party's reasonable expense, and (B) failing the entry of a
protective order or other appropriate remedy or receipt of a waiver hereunder,
the Receiving Party shall furnish only that portion of the Confidential
Information which it is advised by opinion of its counsel is legally required to
be furnished and shall exercise all commercially reasonable efforts to obtain
reliable assurance that confidential treatment shall be accorded such
Confidential Information, it being understood that such reasonable efforts shall
be at the cost and expense of the disclosing party whose Confidential
Information has been sought.
Section 3.5. Survival. The obligations under this Article 3 shall
survive, as to any party, until two (2) years following the date of termination
of this agreement, and, as to any Controlled Related Party of a party, until two
(2) years following the earlier to occur of (A) the date that such Person is no
longer a Controlled Related Party of a party, or (B) the date of the termination
of this agreement; provided that such obligations shall continue indefinitely
with respect to any trade secret or similar information which is proprietary to
a party or its Controlled Related Parties and provides such party or its
Controlled Related Parties with an advantage over its competitors.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSEE
Section 4.1. Licensor's Ownership. Licensee acknowledges Licensor's
exclusive right, title and interest in and to the Licensed Marks and
acknowledges that nothing herein shall be construed to accord to Licensee any
rights in the Service Area in the Licensed Marks except as expressly provided,
herein. Licensee acknowledges that its use in the Service Area of the Licensed
Marks shall not create in Licensee any right, title or interest in the Service
Area in the Licensed Marks and that all use in the Service Area of the Licensed
Marks and the goodwill symbolized by and connected with such use of the Licensed
Marks will inure solely to the benefit of the Licensor.
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Section 4.2. No Challenge by Licensee. Licensee covenants that (i)
Licensee will not at any time challenge Licensor's rights, title or interest in
the Licensed Marks (other than to assert the specific rights granted to Licensee
under this agreement), (ii) Licensee will not do or cause to be done or omit to
do anything, the doing, causing or omitting of which would contest or in any way
impair or tend to impair the rights of Licensor in the Licensed Marks, and (iii)
Licensee will not represent to any third party that Licensee has any ownership
or rights in the Service Area with respect to the Licensed Marks other than the
specific rights conferred by this agreement.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR
Section 5.1. Title to the Licensed Marks. Licensor represents and
warrants that:
(a) Licensor has good title to the Licensed Marks and has the
right to grant the licenses provided for hereunder in
accordance with the terms and conditions hereof, free of any
liabilities, charges, liens, pledges, mortgages, restrictions,
adverse claims, security interests, rights of others, and
encumbrances of any kind (collectively, "Encumbrances"), other
than Encumbrances which will not restrict or interfere in any
material respect with the exercise by Licensee of the rights
granted to Licensee hereunder.
(b) There is no claim, action, proceeding or other litigation
pending or, to the knowledge of Licensor, threatened with
respect to Licensor's ownership of the Licensed Marks or
which, if adversely determined, would restrict or otherwise
interfere in any material respect with the exercise by
Licensee of the rights purported to be granted to Licensee
hereunder.
Except as expressly provided above in this Section 5.1, Licensor makes
no representation or warranty of any kind or nature whether express or implied
with respect to the Licensed Marks (including freedom from third party
infringement of the Licensed Marks).
The representations and warranties provided for in this Section 5.1
shall survive the execution and delivery of this agreement.
Section 5.2. Other Licensees. In the event Licensor grants to any third
party any licenses or rights with respect to the Licensed Marks, Licensor shall
not, in connection with the grant of any such license or rights, take any
actions, or suffer any omission that would adversely affect the existence or
validity of the Licensed Marks or conflict with the rights granted to Licensee
hereunder.
Section 5.3. Abandonment. Licensor covenants and agrees that, during
the term of this agreement, it will not abandon the Licensed Marks.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES
Section 6.1. Representations and Warranties. Each party hereby
represents and warrants to the other party as follows:
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(a) Due Incorporation or Formation; Authorization of Agreement.
Such party is a corporation duly organized, a limited
liability company duly organized or a partnership duly formed,
validly existing and, if applicable, in good standing under
the laws of the jurisdiction of its incorporation or formation
and has the corporate, company or partnership power and
authority to own its property and carry on its business as
owned and carried on at the date hereof and as contemplated
hereby. Such party is duly licensed or qualified to do
business and, if applicable, is in good standing in each of
the jurisdictions in which the failure to be so licensed or
qualified would have a material adverse effect on its
financial condition or its ability to perform its obligations
hereunder. Such party has the corporate, company or
partnership power and authority to execute and deliver this
agreement and to perform its obligations hereunder and the
execution, delivery and performance of this agreement have
been duly authorized by all necessary corporate, company or
partnership action. Assuming the due execution and delivery by
the other party hereto. this agreement constitutes the legal,
valid and binding obligation of such party enforceable against
such party in accordance with its terms, subject as to
enforceability to limits imposed by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and the
availability of equitable remedies.
(b) No Conflict with Restrictions; No Default. Neither the
execution, delivery and performance of this agreement nor the
consummation by such party of the transactions contemplated
hereby (i) will conflict with, violate or result in a breach
of any of the terms, conditions or provisions of any law,
regulation, order, writ, injunction, decree, determination or
award of any court, any governmental department, board, agency
or instrumentality, domestic or foreign, or any arbitrator,
applicable to such party or any of its Controlled Related
Parties, (ii) will conflict with, violate, result in a breach
of or constitute a default under any of the terms, conditions
or provisions of the articles of incorporation, articles of
organization or certificate of formation, bylaws, operating
agreement or limited liability company agreement, or
partnership agreement of such party or any of its Controlled
Related Parties or of any material agreement or instrument to
which such party or any of its Controlled Related Parties is a
party or by which such party or any of its Controlled Related
Parties is or may be bound or to which any of its material
properties or assets is subject (other than any such conflict,
violation, breach or default that has been validly and
unconditionally waived), (iii) will conflict with, violate,
result in a breach of, constitute a default under (whether
with notice or lapse of time or both), accelerate or permit
the acceleration of the performance required by, give to
others any material interests or rights or require any
consent, authorization or approval under any indenture,
mortgage, lease agreement or instrument to which such party or
any of its Controlled Related Parties is a party or by which
such party or any of its Controlled Related Parties is or may
be bound, or (iv) will result in the creation or imposition of
any lien upon any of the material properties or assets of such
party or any of its Controlled Related Parties, which in any
such case could reasonably be expected to materially impair
such party's ability to perform its obligations under this
agreement or to have a material adverse effect on the
consolidated financial condition of each party or its Parent.
(c) Governmental Authorizations. Any registration, declaration or
filing with, or consent, approval, license, permit or other
authorization or order by, any governmental or regulatory
authority, domestic or foreign, that is required to be
obtained by such party in connection with the valid execution,
delivery, acceptance and performance by such party under this
agreement
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or the consummation by such party of any transaction
contemplated hereby has been completed, made or obtained, as
the case may be.
(d) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of such party,
threatened against or affecting such party or any of its
Controlled Related Parties or any of their properties, assets
or businesses in any court or before or by any governmental
department, board, agency or instrumentality, domestic or
foreign, or any arbitrator which could, if adversely
determined (or, in the case of an investigation could lead to
any action, suit or proceeding, which if adversely determined
could), reasonably be expected to materially impair such
party's ability to perform its obligations under this
agreement or to have a material adverse effect on the
consolidated financial condition of such party or its parent;
and such party or any of its Controlled Related Parties has
not received any currently effective notice of any default,
and such party or any of its Controlled Related Parties is not
in default, under any applicable order, writ, injunction,
decree, permit, determination or award of any court, any
governmental department, board, agency or instrumentality,
domestic or foreign, or any arbitrator, which default could
reasonably be expected to materially impair such party's
ability to perform its obligations under this agreement or to
have a material adverse effect on the consolidated financial
condition of such party or its Parent.
Section 6.2. Survival. The representations and warranties provided for
under this Article 6 will survive the execution and delivery of this agreement.
ARTICLE 7
PROSECUTION OF INFRINGEMENT CLAIMS
Section 7.1. Notice and Prosecution of Infringement. Licensee agrees to
notify Licensor promptly, in writing, of any alleged, actual or threatened
infringement of any of the Licensed Marks within the Service Area of which
Licensee becomes aware. Licensor has the sole right to determine whether or not
to take any action on such infringements. Licensor has the sole right to employ
counsel of its choosing and to direct any litigation and settlement of
infringement actions. Any recoveries, damages and costs recovered through such
proceedings shall belong exclusively to Licensor, and Licensor shall be solely
responsible for all costs and expenses (including attorney fees) of prosecuting
such actions. Licensee agrees to provide Licensor with all reasonably requested
assistance in connection with such proceedings.
ARTICLE 8
LICENSEE DEFENSE AND INDEMNIFICATION OF LICENSOR
Section 8.1. Indemnification. (a) Each party hereby agrees to indemnify
the other party against and agrees to hold it harmless from any Loss incurred or
suffered by such other party, arising out of or in connection with:
(i) the material breach of any representation or warranty made by
such party in this agreement; and
(ii) the material breach of any covenant or agreement by such party
contained in this agreement.
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(b) In addition to the indemnification provided for in Section
8.1(a), Licensee agrees to indemnify Licensor against and hold
it harmless from any Loss suffered or incurred by Licensor or
its Controlled Related Parties by reason of a third party
claim arising out of or relating to (i) the use of the
Licensed Marks by Licensee; or (ii) the marketing, promotion,
advertisement, distribution, lease or sale by Licensee ( or
any permitted sublicensee) or by any additional Licensee (or
any permitted sublicensee) of any Sprint PCS Products and
Services, Related Equipment or Premium and Promotional Items
under the Licensed Marks pursuant to this agreement, including
unfair or fraudulent advertising claims, warranty claims and
product defect or liability claims, pertaining to the Sprint
PCS Products and Services, Related Equipment or Premium and
Promotional Items. Notwithstanding the foregoing, Licensee
will not be required under this paragraph (b) to indemnify any
Loss arising solely out of Licensee's use of the Licensed
Marks in compliance with the terms of the Trademark and
Service Mark Usage Guidelines; provided that Licensor shall
have no obligation to indemnify for third-party claims alleged
to arise from the specifics of uses of third party trademarks
or service marks, or the specifics of claims made, in
marketing materials prepared by or for Licensee, which
marketing materials have not been approved by Licensor prior
to the publication out of which such claims are alleged to
have arisen.
ARTICLE 9
OBLIGATIONS/SETOFF
Section 9.1. Obligations/Setoff. The obligations of the parties as set
forth in this agreement shall be unconditional and irrevocable, and shall not be
subject to any defense or be released, discharged or otherwise affected by any
matter, including impossibility, illegality, impracticality, frustration of
purpose, force majeure, act of government, the bankruptcy or insolvency of any
party hereto, and the obligations of each party shall not be subject to any
right of setoff or recoupment which such party may not or hereafter have against
the other party.
ARTICLE 10
LIMITATION ON USE OF LICENSED MARKS
Section 10.1. Restrictions on Use. Licensee is not permitted to make
any use of the Licensed Marks in connection with products or services other than
the Sprint PCS Products and Services, and as specifically authorized in Sections
1.1(b) above with respect to Related Equipment and Premium and Promotional
Items, nor to make any use of the Licensed Marks directed outside of the Service
Area.
Section 10.2. Adherence to Trademark and Service Mark Usage Guidelines.
Licensee agrees to comply with and adhere to Trademark and Service Mark Usage
Guidelines for the depiction or presentation of the Licensed Marks, as furnished
by Licensor. Prior to Licensee depicting or presenting any of the Licensed Marks
on any type of marketing, advertising or promotional materials, Licensee agrees
to submit samples of such materials to Licensor for approval. Licensor shall
have fourteen (14) days from the date Licensor receives such materials to
approve or object to any such materials submitted to Licensor for review. In the
event Licensor does not object to such materials within such fourteen (14) day
period, such materials shall be deemed approved by Licensor. Thereafter,
Licensee shall not be obligated to submit to Licensor materials prepared in
accordance with the samples previously approved by Licensor and the Trademark
and Service Mark Usage Guidelines; provided, however, Licensee shall, at the
reasonable request of Licensor, continue to furnish
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samples of such marketing, advertising and promotional materials to Licensor
from time to time during the term hereof at the request of Licensor.
Section 10.3. Use of Similar Trademarks and Service Marks. Licensee
agrees not to use (a) any trademark or service mark which is confusingly similar
to, or a colorable imitation of, the Licensed Marks or any part thereof, or (b)
any work, symbol, character, or set of words, symbols, or characters, which in
any language would be identified as the equivalent of the Licensed Marks or that
are otherwise confusingly similar to, or a colorable imitation of, the Licensed
Marks, whether during the term of this agreement or at any time following
termination of this agreement. Licensee shall not knowingly engage in any
conduct which may place the Sprint PCS Products and Services, the Licensed Marks
or Licensor in a negative light or context.
Section 10.4. Services of Public Figures. Licensee agrees to obtain
Licensor's prior written approval (which approval will not be unreasonably
withheld) before engaging the services of any celebrity or publicly known
individual for endorsement of any Sprint PCS Products and Services or Premium
and Promotional Items.
ARTICLE 11
CONTROL OF BRAND IMAGE
Section 11.1. Exclusive Use of Licensed Marks. The Sprint PCS Products
and Services shall be marketed by Licensee solely under the Licensed Marks.
Section 11.2. Consistency With Brand Image and Principles. Licensee
shall use the Licensed Marks in a manner that is consistent with the brand image
and principles established by Licensor, and mechanics to ensure consistency will
be included in the Marketing Communications Guidelines.
Section 11.3. Management of Brand Image. Licensor shall be responsible
for the overall management of the brand image for the Licensed Marks. All
advertising, marketing and promotional materials using the Licensed Marks
prepared by Licensee shall, in addition to the provisions set forth in Section
11.2 above, comply with the Marketing Communications Guidelines to be furnished
by Licensor to Licensee as such Marketing, Communications Guidelines may be
amended and updated by Licensor from time to time. Such Marketing Communications
Guidelines shall establish reasonable principles to be followed in the
development of advertising, marketing and promotional campaigns in order to
ensure a consistent and coherent brand image. All advertising, marketing and
promotional campaigns conducted by Licensee shall be conducted in a manner
consistent with the Marketing Communications Guidelines.
Section 11.4. Advertising Agencies; Promotions. Licensee may select its
own advertising agencies for development of its advertising and promotional
campaigns; provided, however, that all media buys shall be coordinated by
Licensee with the buying agency of Licensor. Licensee and Licensor shall conduct
ongoing reviews of upcoming advertising, marketing and promotional campaigns of
each party and shall use good faith efforts to coordinate their respective
campaigns in a manner that will maximize the advertising, marketing and
promotional efforts of the parties and be consistent with the Marketing
Communications Guidelines. Licensee shall not initiate any products or
promotions under names which are confusingly similar to any names of national
product offerings or promotions by Licensor. Neither Licensor nor any of its
Controlled Related Parties shall initiate any products or promotions under names
which are confusingly similar to any names of national product offerings or
promotions by Licensee. In addition, Licensor will use its commercially
reasonable efforts to ensure that no third party licensee under the Licensed
Marks initiates any products or
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promotions in the Service Area under names which are confusingly similar to and,
names of national product offerings or promotions by Licensee.
Section 11.5. Ownership of Advertising Materials. All agreements
entered into by Licensee with advertising agencies shall provide that Licensor
shall own all advertising materials (including concepts, themes, characters and
the like) created or developed thereunder. Subject to the terms and conditions
set forth herein, Licensee shall receive a perpetual, non-exclusive,
royalty-free license to use such materials in connection with advertising and
promotional materials developed by Licensee; provided, however, that the rights
granted under such perpetual license shall be limited solely to the use of such
materials and shall not extend the term of the license with respect to the
Licensed Marks provided for hereunder.
ARTICLE 12
RELATIONSHIP OF PARTIES
Section 12.1. Relationship of Parties. It is the express intention of
the parties that Licensee is and shall be an independent contractor and no
partnership shall exist between Licensee and Licensor pursuant hereto. This
agreement shall not be construed to make Licensee the agent or legal
representative of Licensor for any purpose whatsoever (except as expressly
provided in Articles 7 and 8), and Licensee is not granted any right or
authority to assume or create any obligations for, on behalf of, or in the name
of Licensor (except as expressly provided in Articles 7 and 8). Licensee agrees,
and shall require its permitted sublicensees to agree, not to incur or contract
any debt or obligation on behalf of Licensor, or commit any act, make any
representation, or advertise in any manner that may adversely affect any right
of Licensor in or with respect to the Licensed Marks or be detrimental to
Licensor's image.
ARTICLE 13
TERM; TERMINATION; EFFECTS OF TERMINATION
Section 13.1. Term. This agreement commences on the date of execution
and continues until the Affiliation Agreement terminates, unless earlier
terminated in accordance with the terms set forth in this Article 13. This
agreement automatically terminates upon termination of the Affiliation
Agreement.
Section 13.2. Events of Termination. If any of the following events
shall occur with respect to Licensee, each such occurrence shall be deemed an
"Event of Termination":
(a) Bankruptcy. The occurrence of a "Bankruptcy" with respect to
Licensee.
(b) Breach of Agreements. Licensee fails to perform in accordance
with any of the material terms and conditions contained herein
in any material respect.
(c) Material Misrepresentation. Licensee breaches any material
representation or warranty of Licensee made in Section 4.2 or
Article 6 in any material respect.
(d) Termination of Affiliation Agreement. The termination of the
Affiliation Agreement, for whatever reason.
Section 13.3. Licensor's Right to Terminate Upon Event of Termination.
Licensor may, at its option, without prejudice to any other remedies it may
have, terminate this agreement by giving written notice
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of such termination to Licensee as follows: (a) immediately, upon the occurrence
of any Event of Termination pursuant to Section 13.2(a) with respect to
Licensee; or (b) after the expiration of thirty (30) days from Licensee's
receipt of written notice from Licensor of the occurrence of any Event of
Termination pursuant to Sections 13.2(b) or 13.2(c), if such failure to perform
or breach is then still uncured; or (c) immediately upon the repeated or
continuing occurrence of Events of Termination pursuant to Section 13.2(b)
(regardless of whether such continuing failures to perform or breaches have been
cured by Licensee in accordance with the provisions of clause (b) or this
Section 13.3); or (d) immediately upon the occurrence of a termination pursuant
to Section 13.2(d).
Section 13.4. Licensee's Right to Terminate. Licensee may, at its
option, without prejudice to any other remedies it may have, terminate this
agreement by giving written notice of such termination to Licensor as follows:
(a) immediately, in the event that Licensor abandons the Licensed Marks or
otherwise ceases to support the Licensed Marks in Licensor's business; or (b)
immediately in the event of the occurrence of a Bankruptcy with respect to
Licensor; or (c) immediately in the event of an occurrence of termination
pursuant to Section 13.2(d).
Section 13.5. Effects of Termination. Upon the termination of this
agreement for any reason, all rights of Licensee in and to the Licensed Marks in
the Service Area shall cease within thirty (30) days following the date on which
this agreement terminates (except in the case of a termination resulting from an
Event of Termination described in Section 13.2(b), (c) or (d), in which case
such rights to use the Licensed Marks will terminate immediately upon the date
of termination); provided, however, that Licensee may thereafter sell, transfer
or otherwise dispose of any Related Equipment and Premium and Promotional Items
that are then in Licensee's inventory (or which Licensee has purchased or is
then legally obligated to purchase) for an additional reasonable period not to
exceed three (3) months. Licensee's right of disposal under this Section 13.5
shall not prohibit Licensor from granting to third parties during the disposal
period licenses and other rights with respect to the Licensed Marks. The
provisions of Articles 3 , 4, 5, 6 and 8 will survive any termination of this
agreement.
ARTICLE 14
ASSIGNMENT; SUBLICENSING
Section 14.1. Licensee Right to Assign. Licensee, without the prior
written consent of Licensor (in its sole discretion), shall have no right to
assign any of its rights or obligations hereunder.
Section 14.2. Licensor Right to Assign the Licensed Marks. Nothing
herein shall be construed to limit the right of the Licensor to transfer or
assign its interests in the Licensed Marks, subject to the agreement of the
assignee to be bound by the terms and conditions of this agreement.
Section 14.3. Licenses to Additional Licensees; Sublicenses; Licenses
to Additional Licensees. Licensee shall not sublicense (or attempt to
sublicense) any of its rights hereunder without the prior written consent of
Licensor, in the sole discretion of Licensor.
ARTICLE 15
MISCELLANEOUS
Section 15.1. Notices. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this agreement shall be in
writing and mailed (certified or registered mail, postage
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<PAGE> 13
prepaid, return receipt requested) or sent by hand or overnight courier, or by
facsimile (with acknowledgment received), charges prepaid and addressed as
described on the Notice Address Schedule attached to the Master Signature Page,
or to such other address or number as such party may from time to time specify
by written notice to the other party. All notices and other communications given
to a party in accordance with the provisions of this agreement shall be deemed
to have been given and received (i) four (4) Business Days after the same are
sent by certified or registered mail, postage prepaid, return receipt requested,
(ii) when delivered by hand or transmitted by facsimile (with acknowledgment
received and, in the case of a facsimile only, a copy of such notice is sent no
later than the next Business Day by a reliable overnight courier service, with
acknowledgment of receipt) or (iii) one (1) Business Day after the same are sent
by a reliable overnight courier service, with acknowledgment of receipt.
Section 15.2. Binding Effect. Except as otherwise provided in this
agreement, this agreement shall be binding upon and inure to the benefit of the
parties and their respective successors, transferees, and assigns.
Section 15.3. Construction. This agreement shall be construed simply
according to its fair meaning and not strictly for or against any party.
Section 15.4. Time. Time is of the essence with respect to this
agreement.
Section 15.5. Table of Contents; Headings. The table of contents and
section and other headings contained in this agreement are for reference
purposes only and are not intended to describe, interpret, define or limit the
scope, extent or intent of this agreement.
Section 15.6. Severability. Every provision of this agreement is
intended to be severable. If any term or provision hereof is illegal, invalid or
unenforceable for any reason whatsoever, that term or provision will be enforced
to the maximum extent permissible so as to effect the intent of the parties, and
such illegality, invalidity or unenforceability shall not affect the validity or
legality of the remainder of this agreement. If necessary to effect the intent
of the parties, the parties will negotiate in good faith to amend this agreement
to replace the unenforceable language with enforceable language which as closely
as possible reflects such intent.
Section 15.7. Further Action. Each party, upon the reasonable request
of the other party, agrees to perform all further acts and execute, acknowledge,
and deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the intent and purposes of this agreement.
Section 15.8. Governing Law. The internal laws of the State of Missouri
(without regard to principles of conflict of law) shall govern the validity of
this agreement, the construction of its terms, and the interpretation of the
rights and duties of the parties.
Section 15.9. Specific Performance. Each party agrees with the other
party that the other party would be irreparably damaged if any of the provisions
of this agreement are not performed in accordance with their specific terms and
that monetary damages would not provide an adequate remedy in such event.
Accordingly, in addition to any other remedy to which the nonbreaching party may
be entitled, at law or in equity, the nonbreaching party shall be entitled to
injunctive relief to prevent breaches of this agreement and specifically to
enforce the terms and provisions hereof.
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Section 15.10. Entire Agreement. The provisions of this agreement set
forth the entire agreement and understanding between the parties as to the
subject matter hereof and supersede all prior agreements, oral or written, and
other communications between the parties relating to the subject matter hereof
Section 15.11. Limitation on Rights of Others. Nothing in this
agreement, whether express or implied, shall be construed to give any party
other than the parties any legal or equitable right, remedy or claim under or in
respect of this agreement.
Section 15.12. Waivers; Remedies. The observance of any term of this
agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to enforce such
term, but any such waiver shall be effective only if in writing signed by the
party or parties against which such waiver is to be asserted. Except as
otherwise provided herein, no failure or delay of any party in exercising any
power or right under this agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other
further exercise thereof or the exercise of any other right or power.
Section 15.13. Jurisdiction; Consent to Service of Process.
(a) Each party hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of
any Missouri State court sitting in the County of Jackson or
any Federal court of the United States of America sitting in
the Western District of Missouri, and any appellate court from
any such court, in any suit action or proceeding arising out
of or relating to this agreement, or for recognition or
enforcement of any judgment, and each party hereby irrevocably
and unconditionally agrees that all claims in respect of any
such suit, action or proceeding may be heard and determined in
such Missouri State Court or, to the extent permitted by law,
in such Federal court.
(b) Each party hereby irrevocably and unconditionally waives, to
the fullest extent it may legally do so, any objection which
it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this
agreement in Missouri State court sitting in the County of
Jackson or any Federal court sitting in the Western District
of Missouri. Each party hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such suit, action or
proceeding in any such court and further waives the right to
object, with respect to such suit, action or proceeding, that
such court does not have jurisdiction over such party.
(c) Each party irrevocably consents to service of process in the
manner provided for the giving of notices pursuant to this
agreement, provided that such service shall be deemed to have
been given only when actually received by such party. Nothing
in this agreement shall affect the right of a party to serve
process in another manner permitted by law.
Section 15.14. Waiver of Jury Trial. Each party waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any action, suit or proceeding arising out of or relating to this
agreement.
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Section 15.15. Consents. Whenever this agreement requires or permits
consent by or on behalf of a party, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in Section 15.13, with appropriate notice in accordance with Section 15.1 of
this agreement.
Section 15.16. Master Signature Page. Each party agrees that it will
execute the Master Signature Page that evidences such party's agreement to
execute, become a party to and be bound by this agreement, which document is
incorporated herein by this reference.
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EXHIBIT 10.25
SPRINT SPECTRUM
TRADEMARK AND SERVICE MARK
LICENSE AGREEMENT
Between
SPRINT SPECTRUM L.P.
and
ALAMOSA PCS, LLC
December 23, 1999
<PAGE> 2
SPRINT SPECTRUM TRADEMARK AND
SERVICE MARK LICENSE AGREEMENT
THIS AGREEMENT is made as of the 23rd day of December, 1999, by and
between Sprint Spectrum L.P., a limited partnership organized under the laws of
the State of Delaware, as licensor ("Licensor"), and Alamosa PCS, LLC, a
Delaware limited liability company, as licensee ("Licensee"). THE DEFINITIONS
FOR THIS AGREEMENT ARE SET FORTH ON THE "SCHEDULE OF DEFINITIONS".
RECITALS:
WHEREAS, Licensor is the owner of the U.S. trademarks and service marks
"THE CLEAR ALTERNATIVE TO CELLULAR" and "EXPERIENCE THE CLEAR ALTERNATIVE TO
CELLULAR TODAY" and such other marks as may be adopted and established from time
to time and the goodwill of the business symbolized thereby; and
WHEREAS, Licensee desires to use the trademarks and service marks in
commerce;
NOW, THEREFORE, the parties, in consideration of the mutual agreements
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, do hereby agree as follows:
ARTICLE 1
GRANT OF TRADEMARK AND SERVICE MARK RIGHTS; EXCLUSIVITY
Section 1.1. License.
(a) Grant of License. Subject to the terms and conditions hereof,
Licensor hereby grants to Licensee, and Licensee hereby
accepts from Licensor, for the term of this agreement, a
non-transferable, royalty-free license to use the Licensed
Marks solely for and in connection with the marketing,
promotion, advertisement, distribution, lease or sale of
Sprint PCS Products and Services and Premium and Promotional
Items in the Service Area.
(b) Related Equipment. The rights granted hereunder to Licensee
shall not include the right to manufacture equipment under the
Licensed Marks. However, subject to the terms and conditions
hereof, Licensor hereby grants to Licensee, and Licensee
hereby accepts from Licensor, for the term of this agreement,
a non-transferable, royalty-free license to market, promote,
advertise, distribute and resell and lease Related Equipment
in connection with the marketing, promotion, advertisement,
distribution, lease or sale by Licensee of Sprint PCS Products
and Services, and to furnish services relating to such Related
Equipment (including installation, repair and maintenance of
Related Equipment), under the Licensed Marks.
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<PAGE> 3
ARTICLE 2
QUALITY STANDARDS, MAINTENANCE
Section 2.1. Maintenance of Quality.
(a) Adherence to Quality Standards. In the course of marketing,
promoting, advertising, distributing, leasing and selling
Sprint PCS Products and Services and Premium and Promotional
Items under the Licensed Marks, Licensee shall maintain and
adhere to standards of quality and specifications that conform
to or exceed those quality standards and technical and
operational specifications adopted and/or amended in the
manner provided below ("Quality Standards") and those imposed
by Law. Such Quality Standards are designed to ensure that the
quality of the Sprint PCS Products and Services and Premium
and Promotional Items marketed, promoted, advertised,
distributed, leased and sold under the Licensed Marks are
consistent with the high reputation of the Licensed Marks and
are in conformity with applicable Laws.
(b) Establishment of Quality Standards. The parties acknowledge
that the initial Quality Standards for the Sprint PCS Products
and Services and Premium and Promotional Items are attached to
the Management Agreement as Exhibits 4.1, 4.2, 4.3. 7.2. and
8.1. The Quality Standards shall (i) be consistent with the
reputation for quality associated with the Licensed Marks and
(ii) be commensurate with a high level of quality (taking into
account Licensee's fundamental underlying technology and
standards), consistent with the level of quality being offered
in the market for products and services of the same kind as
the Sprint PCS Products and Services.
(c) Changes in Quality Standards. In the event that Licensor
wishes to change the Quality Standards, it will notify
Licensee in writing of such proposed amendments, and will
afford Licensee a reasonable time period in which to adopt
such changes as may be required in order for Licensee to
conform to the amended Quality Standards.
Section 2.2. Rights of Inspection. In order to ensure that the Quality
Standards are maintained, Licensor and its authorized agents and representatives
shall have the right, but not the obligation, with prior notice to Licensee, to
enter upon the premises of any office or facility operated by or for Licensee
with respect to Sprint PCS Products and Services and Premium and Promotional
Items at all reasonable times, to inspect, monitor and test in a reasonable
manner facilities and equipment used to furnish Sprint PCS Products and Services
and Premium and Promotional Items and, with prior written notice to Licensee, to
inspect the books and records of Licensee in a manner that does not unreasonably
interfere with the business and affairs of Licensee, all as they relate to the
compliance with the Quality Standards maintained hereunder.
Section 2.3. Marking; Compliance with Trademark Laws. Licensee shall
cause the appropriate designation "(TM)" or "(sm)" or the registration symbol
"(R)" to be placed adjacent to the Licensed Marks in connection with the use
thereof and to indicate such additional information as Licensor shall reasonably
specify from time to time concerning the license rights under which Licensee
uses the Licensed Marks. Licensee shall place the following notice on all
printed or electronic materials on which the Licensed Marks appear: "THE CLEAR
ALTERNATIVE TO CELLULAR", "EXPERIENCE THE CLEAR ALTERNATIVE TO CELLULAR TODAY",
and such other marks as may be adopted and established from time to time, are
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<PAGE> 4
trademarks and/or service marks of Sprint Spectrum L.P., "used under license" or
such other notice as Licensor may specify from time to time.
Section 2.4. Other Use Restrictions. Licensee shall not use the
Licensed Marks in any manner that would reflect adversely on the image of
quality symbolized by the Licensed Marks.
ARTICLE 3
CONFIDENTIAL INFORMATION
Section 3.1. Maintenance of Confidentiality. Each of Licensor and
Licensee and their respective Controlled Related Parties (each a "Restricted
Party") shall cause their respective officers and directors (in their capacity
as such) to, and shall take all reasonable measures to cause their respective
employees, attorneys, accountants, consultants and other agents and advisors
(collectively, and together with their respective officers and directors,
"Agents") to, keep secret and maintain in confidence the terms of this agreement
and all confidential and proprietary information and data of the other party or
its Related Parties disclosed to it (in each case, a "Receiving Party") in
connection with the performance of its obligations under this agreement (the
"Confidential Information") and shall not, and shall cause their respective
officers and directors not to, and shall take all reasonable measures to cause
their respective other Agents not to, disclose Confidential Information to any
Person other than the parties, their Controlled Related Parties and their
respective Agents that need to know such Confidential Information. Each party
further agrees that it shall not use the Confidential Information for any
purpose other than determining and performing its obligations and exercising its
rights under this agreement. Each party shall take all reasonable measures
necessary to prevent any unauthorized disclosure of the Confidential Information
by any of their respective Controlled Related Parties or any of their respective
Agents. The measures taken by a Restricted Party to protect Confidential
Information shall be not deemed unreasonable if the measures taken are at least
as strong as the measures taken by the disclosing party to protect such
Confidential Information.
Section 3.2. Permitted Disclosures. Nothing herein shall prevent any
Restricted Party or its Agents from using, disclosing, or authorizing the
disclosure of Confidential Information it receives and which:
(i) has been published or is in the public domain, or which
subsequently comes into the public domain, through no fault of
the receiving party;
(ii) prior to receipt hereunder was property within the legitimate
possession of the Receiving Party or, subsequent to receipt
hereunder is lawfully received from a third party having
rights therein without restriction of the third party's right
to disseminate the Confidential Information and without notice
of any restriction against its further disclosure.
(iii) is independently developed by the Receiving Party through
Persons who have not had, either directly or indirectly,
access to or knowledge of such Confidential Information;
(iv) is disclosed to a third party with the written approval of the
party originally disclosing such information, provided that
such Confidential Information shall cease to be confidential
and proprietary information covered by this agreement only to
the extent of the disclosure so consented to;
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<PAGE> 5
(v) subject to the Receiving Party's compliance with Section 3.4
below, is required to be produced under order of a court of
competent jurisdiction or other similar requirements of a
governmental agency, provided that such Confidential
Information to the extent covered by a protective order or its
equivalent shall otherwise continue to be Confidential
Information required to be held confidential for purpose of
this agreement; or
(vi) subject to the Receiving Party's compliance with Section 3.4
below, is required to be disclosed by applicable Law or a
stock exchange or association on which such Receiving Party's
securities (or those of its Related Party) are listed.
Section 3.3. Financial Institutions. Notwithstanding this Article, any
party may provide Confidential Information to any financial institution in
connection with borrowings from such financial institution by such party or any
of its Controlled Related Parties, so long as prior to any such disclosure such
financial institution executes a confidentiality agreement that provides
protection substantially equivalent to the protection provided the parties in
this Article 3.
Section 3.4. Procedures. In the event that any Receiving Party (i) must
disclose Confidential Information in order to comply with applicable Law or the
requirements of a stock exchange or association on which such Receiving Party's
securities or those of its Related Parties are listed or (ii) becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demand or otherwise) to disclose any
Confidential Information, the Receiving Party shall provide the disclosing party
with prompt written notice so that in the case of clause (i), the disclosing
party can work with the Receiving Party to limit the disclosure to the greatest
extent possible consistent with legal obligations or in the case of clause (ii),
the disclosing party may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this agreement. In the case of a clause
(ii), (A) if the disclosing party is unable to obtain a protective order or
other appropriate remedy, or if the disclosing party so directs, the Receiving
Party shall, and shall cause its employees to, exercise all commercially
reasonable efforts to obtain a protective order or other appropriate remedy at
the disclosing party's reasonable expense, and (B) failing the entry of a
protective order or other appropriate remedy or receipt of a waiver hereunder,
the Receiving Party shall furnish only that portion of the Confidential
Information which it is advised by opinion of its counsel is legally required to
be furnished and shall exercise all commercially reasonable efforts to obtain
reliable assurance that confidential treatment shall be accorded such
Confidential Information, it being understood that such reasonable efforts shall
be at the cost and expense of the disclosing party whose Confidential
Information has been sought.
Section 3.5. Survival. The obligations under this Article 3 shall
survive, as to any party, until two (2) years following the date of termination
of this agreement, and, as to any Controlled Related Party of a party, until two
(2) years following the earlier to occur of (A) the date that such Person is no
longer a Controlled Related Party of a party, or (B) the date of the termination
of this agreement; provided that such obligations shall continue indefinitely
with respect to any trade secret or similar information which is proprietary to
a party or its Controlled Related Parties and provides such party or its
Controlled Related Parties with an advantage over its competitors.
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<PAGE> 6
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSEE
Section 4.1. Licensor's Ownership. Licensee acknowledges Licensor's
exclusive right, title and interest in and to the Licensed Marks and
acknowledges that nothing herein shall be construed to accord to Licensee any
rights in the Service Area in the Licensed Marks except as expressly provided,
herein. Licensee acknowledges that its use in the Service Area of the Licensed
Marks shall not create in Licensee any right, title or interest in the Service
Area in the Licensed Marks and that all use in the Service Area of the Licensed
Marks and the goodwill symbolized by and connected with such use of the Licensed
Marks will inure solely to the benefit of the Licensor.
Section 4.2. No Challenge by Licensee. Licensee covenants that (i)
Licensee will not at any time challenge Licensor's rights, title or interest in
the Licensed Marks (other than to assert the specific rights granted to Licensee
under this agreement), (ii) Licensee will not do or cause to be done or omit to
do anything, the doing, causing or omitting of which would contest or in any way
impair or tend to impair the rights of Licensor in the Licensed Marks, and (iii)
Licensee will not represent to any third party that Licensee has any ownership
or rights in the Service Area with respect to the Licensed Marks other than the
specific rights conferred by this agreement.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR
Section 5.1. Title to the Licensed Marks. Licensor represents and
warrants that:
(a) Licensor has good title to the Licensed Marks and has the
right to grant the licenses provided for hereunder in
accordance with the terms and conditions hereof, free of any
liabilities, charges, liens, pledges, mortgages, restrictions,
adverse claims, security interests, rights of others, and
encumbrances of any kind (collectively, "Encumbrances"), other
than Encumbrances which will not restrict or interfere in any
material respect with the exercise by Licensee of the rights
granted to Licensee hereunder.
(b) There is no claim, action, proceeding or other litigation
pending or, to the knowledge of Licensor, threatened with
respect to Licensor's ownership of the Licensed Marks or
which, if adversely determined, would restrict or otherwise
interfere in any material respect with the exercise by
Licensee of the rights purported to be granted to Licensee
hereunder.
Except as expressly provided above in this Section 5.1, Licensor makes
no representation or warranty of any kind or nature whether express or implied
with respect to the Licensed Marks (including freedom from third party
infringement of the Licensed Marks).
The representations and warranties provided for in this Section 5.1
shall survive the execution and delivery of this agreement.
Section 5.2. Other Licensees. In the event Licensor grants to any third
party any licenses or rights with respect to the Licensed Marks, Licensor shall
not, in connection with the grant of any such license or rights, take any
actions, or suffer any omission that would adversely affect the existence or
validity of the Licensed Marks or conflict with the rights granted to Licensee
hereunder.
Section 5.3. Abandonment. Licensor covenants and agrees that, during
the term of this agreement, it will not abandon the Licensed Marks.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES
Section 6.1. Representations and Warranties. Each party hereby
represents and warrants to the other party as follows:
(a) Due Incorporation or Formation; Authorization of Agreement.
Such party is a corporation duly organized, a limited
liability company duly organized or a partnership duly formed,
validly existing and, if applicable, in good standing under
the laws of the jurisdiction of its incorporation or formation
and has the corporate, company or partnership power and
authority to own its property and carry on its business as
owned and carried on at the date hereof and as contemplated
hereby. Such party is duly licensed or qualified to do
business and, if applicable, is in good standing in each of
the jurisdictions in which the failure to be so licensed or
qualified would have a material adverse effect on its
financial condition or its ability to perform its obligations
hereunder. Such party has the corporate, company or
partnership power and authority to execute and deliver this
agreement and to perform its obligations hereunder and the
execution, delivery and performance of this agreement have
been duly authorized by all necessary corporate, company or
partnership action. Assuming the due execution and delivery by
the other party hereto, this agreement constitutes the legal,
valid and binding obligation of such party enforceable against
such party in accordance with its terms, subject as to
enforceability to limits imposed by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and the
availability of equitable remedies.
(b) No Conflict with Restrictions; No Default. Neither the
execution, delivery and performance of this agreement nor the
consummation by such party of the transactions contemplated
hereby (i) will conflict with, violate or result in a breach
of any of the terms, conditions or provisions of any law,
regulation, order, writ, injunction, decree, determination or
award of any court, any governmental department, board, agency
or instrumentality, domestic or foreign, or any arbitrator,
applicable to such party or any of its Controlled Related
Parties, (ii) will conflict with, violate, result in a breach
of or constitute a default under any of the terms, conditions
or provisions of the articles of incorporation, articles of
organization or certificate of formation, bylaws, operating
agreement or limited liability company agreement, or
partnership agreement of such party or any of its Controlled
Related Parties or of any material agreement or instrument to
which such party or any of its Controlled Related Parties is a
party or by which such party or any of its Controlled Related
Parties is or may be bound or to which any of its material
properties or assets is subject (other than any such conflict,
violation, breach or default that has been validly and
unconditionally waived), (iii) will conflict with, violate,
result in a breach of, constitute a default under (whether
with notice or lapse of time or both), accelerate or permit
the acceleration of the performance required by, give to
others any material interests or rights or require any
consent, authorization or approval under any indenture,
mortgage, lease agreement or instrument to which such party or
any of its Controlled Related Parties is a party or by which
such party or any of its Controlled Related Parties is or may
be bound, or (iv) will result in the creation or imposition of
any lien upon any of the material properties or assets of such
party or any of its Controlled Related Parties, which in any
such case could reasonably be expected to materially impair
such party's ability
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to perform its obligations under this agreement or to have a
material adverse effect on the consolidated financial
condition of each party or its Parent.
(c) Governmental Authorizations. Any registration, declaration or
filing with, or consent, approval, license, permit or other
authorization or order by, any governmental or regulatory
authority, domestic or foreign, that is required to be
obtained by such party in connection with the valid execution,
delivery, acceptance and performance by such party under this
agreement or the consummation by such party of any transaction
contemplated hereby has been completed, made or obtained, as
the case may be.
(d) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of such party,
threatened against or affecting such party or any of its
Controlled Related Parties or any of their properties, assets
or businesses in any court or before or by any governmental
department, board, agency or instrumentality, domestic or
foreign, or any arbitrator which could, if adversely
determined (or, in the case of an investigation could lead to
any action, suit or proceeding, which if adversely determined
could), reasonably be expected to materially impair such
party's ability to perform its obligations under this
agreement or to have a material adverse effect on the
consolidated financial condition of such party or its parent;
and such party or any of its Controlled Related Parties has
not received any currently effective notice of any default,
and such party or any of its Controlled Related Parties is not
in default, under any applicable order, writ, injunction,
decree, permit, determination or award of any court, any
governmental department, board, agency or instrumentality,
domestic or foreign, or any arbitrator, which default could
reasonably be expected to materially impair such party's
ability to perform its obligations under this agreement or to
have a material adverse effect on the consolidated financial
condition of such party or its Parent.
Section 6.2. Survival. The representations and warranties provided for
under this Article 6 will survive the execution and delivery of this agreement.
ARTICLE 7
PROSECUTION OF INFRINGEMENT CLAIMS
Section 7.1. Notice and Prosecution of Infringement. Licensee agrees to
notify Licensor promptly, in writing, of any alleged, actual or threatened
infringement of any of the Licensed Marks within the Service Area of which
Licensee becomes aware. Licensor has the sole right to determine whether or not
to take any action on such infringements. Licensor has the sole right to employ
counsel of its choosing and to direct any litigation and settlement of
infringement actions. Any recoveries, damages and costs recovered through such
proceedings shall belong exclusively to Licensor, and Licensor shall be solely
responsible for all costs and expenses (including attorney fees) of prosecuting
such actions. Licensee agrees to provide Licensor with all reasonably requested
assistance in connection with such proceedings.
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ARTICLE 8
LICENSEE DEFENSE AND INDEMNIFICATION OF LICENSOR
Section 8.1. Indemnification. (a) Each party hereby agrees to indemnify
the other party against and agrees to hold it harmless from any Loss incurred or
suffered by such other party arising out of or in connection with:
(i) the material breach of any representation or warranty
made by such party in this agreement; and
(ii) the material breach of any covenant or agreement by
such party contained in this agreement.
(b) In addition to the indemnification provided for in Section
8.1(a), Licensee agrees to indemnify Licensor against and hold
it harmless from any Loss suffered or incurred by Licensor or
its Controlled Related Parties by reason of a third party
claim arising out of or relating to (i) the use of the
Licensed Marks by Licensee; or (ii) the marketing, promotion,
advertisement, distribution, lease or sale by Licensee ( or
any permitted sublicensee) or by any additional Licensee (or
any permitted sublicensee) of any Sprint PCS Products and
Services, Related Equipment or Premium and Promotional Items
under the Licensed Marks pursuant to this agreement, including
unfair or fraudulent advertising claims, warranty claims and
product defect or liability claims, pertaining to the Sprint
PCS Products and Services, Related Equipment or Premium and
Promotional Items. Notwithstanding the foregoing, Licensee
will not be required under this paragraph (b) to indemnify any
Loss arising solely out of Licensee's use of the Licensed
Marks in compliance with the terms of the Trademark and
Service Mark Usage Guidelines; provided that Licensor shall
have no obligation to indemnify for third-party claims alleged
to arise from the specifics of uses of third party trademarks
or service marks, or the specifics of claims made, in
marketing materials prepared by or for Licensee, which
marketing materials have not been approved by Licensor prior
to the publication out of which such claims are alleged to
have arisen.
ARTICLE 9
OBLIGATIONS/SETOFF
Section 9.1. Obligations/Setoff. The obligations of the parties as set
forth in this agreement shall be unconditional and irrevocable, and shall not be
subject to any defense or be released, discharged or otherwise affected by any
matter, including impossibility, illegality, impracticality, frustration of
purpose, force majeure, act of government, the bankruptcy or insolvency of any
party hereto, and the obligations of each party shall not be subject to any
right of setoff or recoupment which such party may not or hereafter have against
the other party.
ARTICLE 10
LIMITATION ON USE OF LICENSED MARKS
Section 10.1. Restrictions on Use. Licensee is not permitted to make
any use of the Licensed Marks in connection with products or services other than
the Sprint PCS Products and Services, and as specifically
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<PAGE> 10
authorized in Sections 1.1(b) above with respect to Related Equipment and
Premium and Promotional Items, nor to make any use of the Licensed Marks
directed outside of the Service Area.
Section 10.2. Adherence to Trademark and Service Mark Usage Guidelines.
Licensee agrees to comply with and adhere to Trademark and Service Mark Usage
Guidelines for the depiction or presentation of the Licensed Marks, as furnished
by Licensor. Prior to Licensee depicting or presenting any of the Licensed Marks
on any type of marketing, advertising or promotional materials, Licensee agrees
to submit samples of such materials to Licensor for approval. Licensor shall
have fourteen (14) days from the date Licensor receives such materials to
approve or object to any such materials submitted to Licensor for review. In the
event Licensor does not object to such materials within such fourteen (14) day
period, such materials shall be deemed approved by Licensor. Thereafter,
Licensee shall not be obligated to submit to Licensor materials prepared in
accordance with the samples previously approved by Licensor and the Trademark
and Service Mark Usage Guidelines; provided, however, Licensee shall, at the
reasonable request of Licensor, continue to furnish samples of such marketing,
advertising and promotional materials to Licensor from time to time during the
term hereof at the request of Licensor.
Section 10.3. Use of Similar Trademarks and Service Marks. Licensee
agrees not to use (a) any trademark or service mark which is confusingly similar
to, or a colorable imitation of, the Licensed Marks or any part thereof, or (b)
any work, symbol, character, or set of words, symbols, or characters, which in
any language would be identified as the equivalent of the Licensed Marks or that
are otherwise confusingly similar to, or a colorable imitation of, the Licensed
Marks, whether during the term of this agreement or at any time following
termination of this agreement. Licensee shall not knowingly engage in any
conduct which may place the Sprint PCS Products and Services, the Licensed Marks
or Licensor in a negative light or context.
Section 10.4. Services of Public Figures. Licensee agrees to obtain
Licensor's prior written approval (which approval will not be unreasonably
withheld) before engaging the services of any celebrity or publicly known
individual for endorsement of any Sprint PCS Products and Services or Premium
and Promotional Items.
ARTICLE 11
CONTROL OF BRAND IMAGE
Section 11.1. Exclusive Use of Licensed Marks. The Sprint PCS Products
and Services shall be marketed by Licensee solely under the Licensed Marks.
Section 11.2. Consistency With Brand Image and Principles. Licensee
shall use the Licensed Marks in a manner that is consistent with the brand image
and principles established by Licensor, and mechanics to ensure consistency will
be included in the Marketing Communications Guidelines.
Section 11.3. Management of Brand Image. Licensor shall be responsible
for the overall management of the brand image for the Licensed Marks. All
advertising, marketing and promotional materials using the Licensed Marks
prepared by Licensee shall, in addition to the provisions set forth in Section
11.2 above, comply with the Marketing Communications Guidelines to be furnished
by Licensor to Licensee as such Marketing Communications Guidelines may be
amended and updated by Licensor from time to time. Such Marketing Communications
Guidelines shall establish reasonable principles to be followed in the
development of advertising, marketing and promotional campaigns in order to
ensure a consistent and coherent brand image.
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All advertising, marketing and promotional campaigns conducted by Licensee shall
be conducted in a manner consistent with the Marketing Communications
Guidelines.
Section 11.4. Advertising Agencies; Promotions. Licensee may select its
own advertising agencies for development of its advertising and promotional
campaigns; provided, however, that all media buys shall be coordinated by
Licensee with the buying agency of Licensor. Licensee and Licensor shall conduct
ongoing reviews of upcoming advertising, marketing and promotional campaigns of
each party and shall use good faith efforts to coordinate their respective
campaigns in a manner that will maximize the advertising, marketing and
promotional efforts of the parties and be consistent with the Marketing
Communications Guidelines. Licensee shall not initiate any products or
promotions under names which are confusingly similar to any names of national
product offerings or promotions by Licensor. Neither Licensor nor any of its
Controlled Related Parties shall initiate any products or promotions under names
which are confusingly similar to any names of national product offerings or
promotions by Licensee. In addition, Licensor will use its commercially
reasonable efforts to ensure that no third party licensee under the Licensed
Marks initiates any products or promotions in the Service Area under names which
are confusingly similar to any names of national product offerings or promotions
by Licensee.
Section 11.5. Ownership of Advertising Materials. All agreements
entered into by Licensee with advertising agencies shall provide that Licensor
shall own all advertising materials (including concepts, themes, characters and
the like) created or developed thereunder. Subject to the terms and conditions
set forth herein, Licensee shall receive a perpetual, non-exclusive,
royalty-free license to use such materials in connection with advertising and
promotional materials developed by Licensee; provided, however, that the rights
granted under such perpetual license shall be limited solely to the use of such
materials and shall not extend the term of the license with respect to the
Licensed Marks provided for hereunder.
ARTICLE 12
RELATIONSHIP OF PARTIES
Section 12.1. Relationship of Parties. It is the express intention of
the parties that Licensee is and shall be an independent contractor and no
partnership shall exist between Licensee and Licensor pursuant hereto. This
agreement shall not be construed to make Licensee the agent or legal
representative of Licensor for any purpose whatsoever (except as expressly
provided in Articles 7 and 8), and Licensee is not granted any right or
authority to assume or create any obligations for, on behalf of, or in the name
of Licensor (except as expressly provided in Articles 7 and 8). Licensee agrees,
and shall require its permitted sublicensees to agree, not to incur or contract
any debt or obligation on behalf of Licensor, or commit any act, make any
representation, or advertise in any manner that may adversely affect any right
of Licensor in or with respect to the Licensed Marks or be detrimental to
Licensor's image.
ARTICLE 13
TERM; TERMINATION; EFFECTS OF TERMINATION
Section 13.1. Term. This agreement commences on the date of execution
and continues until the Management Agreement terminates, unless earlier
terminated in accordance with the terms set forth in this Article 13. This
agreement automatically terminates upon termination of the Management Agreement.
Section 13.2. Events of Termination. If any of the following events
shall occur with respect to Licensee, each such occurrence shall be deemed an
"Event of Termination":
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(a) Bankruptcy. The occurrence of a "Bankruptcy" with respect to
Licensee.
(b) Breach of Agreements. Licensee fails to perform in accordance
with any of the material terms and conditions contained herein
in any material respect.
(c) Material Misrepresentation. Licensee breaches any material
representation or warranty of Licensee made in Section 4.2 or
Article 6 in any material respect.
(d) Termination of Management Agreement. The termination of the
Management Agreement, for whatever reason.
Section 13.3. Licensor's Right to Terminate Upon Event of Termination.
Licensor may, at its option without prejudice to any other remedies it may have,
terminate this agreement by giving written notice of such termination to
Licensee as follows: (a) immediately, upon the occurrence of any Event of
Termination pursuant to Section 13.2(a) with respect to Licensee, or (b) after
the expiration of thirty (30) days from Licensee's receipt of written notice
from Licensor of the occurrence of any Event of Termination pursuant to Sections
13.2(b) or 13.2(c), if such failure to perform or breach is then still uncured;
or (c) immediately upon the repeated or continuing occurrence of Events of
Termination pursuant to Section 13.2(b) (regardless of whether such continuing
failures to perform or breaches have been cured by Licensee in accordance with
the provisions of clause (b) or this Section 13.3); or (d) immediately upon the
occurrence of a termination pursuant to Section 13.2(d).
Section 13.4. Licensee's Right to Terminate. Licensee may, at its
option, without prejudice to any other remedies it may have, terminate this
agreement by giving written notice of such termination to Licensor as follows:
(a) immediately, in the event that Licensor abandons the Licensed Marks or
otherwise ceases to support the Licensed Marks in Licensor's business; or (b)
immediately in the event of the occurrence of a Bankruptcy with respect to
Licensor; or (c) immediately in the event of an occurrence of termination
pursuant to Section 13.2(d).
Section 13.5. Effects of Termination. Upon the termination of this
agreement for any reason, all rights of Licensee in and to the Licensed Marks in
the Service Area shall cease within thirty (30) days following the date on which
this agreement terminates (except in the case of a termination resulting from an
Event of Termination described in Section 13.2(b), (c) or (d), in which case
such rights to use the Licensed Marks will terminate immediately upon the date
of termination); provided, however, that Licensee may thereafter sell, transfer
or otherwise dispose of any Related Equipment and Premium and Promotional Items
that are then in Licensee's inventory (or which Licensee has purchased or is
then legally obligated to purchase) for an additional reasonable period not to
exceed three (3) months. Licensee's right of disposal under this Section 13.5
shall not prohibit Licensor from granting to third parties during the disposal
period licenses and other rights with respect to the Licensed Marks. The
provisions of Articles 3, 4, 5, 6 and 8 will survive any termination of this
agreement.
ARTICLE 14
ASSIGNMENT; SUBLICENSING
Section 14.1. Licensee Right to Assign. Licensee, without the prior
written consent of Licensor (in its sole discretion), shall have no right to
assign any of its rights or obligations hereunder.
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Section 14.2. Licensor Right to Assign the Licensed Marks. Nothing
herein shall be construed to limit the right of the Licensor to transfer or
assign its interests in the Licensed Marks, subject to the agreement of the
assignee to be bound by the terms and conditions of this agreement.
Section 14.3. Licenses to Additional Licensees; Sublicenses; Licenses
to Additional Licensees. Licensee shall not sublicense (or attempt to
sublicense) any of its rights hereunder without the prior written consent of
Licensor, in the sole discretion of Licensor.
ARTICLE 15
MISCELLANEOUS
Section 15.1. Notices. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this agreement shall be in
writing and mailed (certified or registered mail, postage prepaid, return
receipt requested) or sent by hand or overnight courier, or by facsimile (with
acknowledgment received), charges prepaid and addressed as described on the
Notice Address Schedule attached to the Master Signature Page, or to such other
address or number as such party may from time to time specify by written notice
to the other party in accordance with the provisions of this Section 15.1. All
notices and other communications given to a party in accordance with the
provisions of this agreement shall be deemed to have been given and received (i)
four (4) Business Days after the same are sent by certified or registered mail,
postage prepaid, return receipt requested, (ii) when delivered by hand or
transmitted by facsimile (with acknowledgment received and, in the case of a
facsimile only, a copy of such notice is sent no later than the next Business
Day by a reliable overnight courier service, with acknowledgment of receipt) or
(iii) one (1) Business Day after the same are sent by a reliable overnight
courier service, with acknowledgment of receipt.
Section 15.2. Binding Effect. Except as otherwise provided in this
agreement, this agreement shall be binding upon and inure to the benefit of the
parties and their respective successors, transferees, and assigns.
Section 15.3. Construction. This agreement shall be construed simply
according to its fair meaning and not strictly for or against any party.
Section 15.4. Time. Time is of the essence with respect to this
agreement.
Section 15.5. Table of Contents; Headings. The table of contents and
section and other headings contained in this agreement are for reference
purposes only and are not intended to describe, interpret, define or limit the
scope, extent or intent of this agreement.
Section 15.6. Severability. Every provision of this agreement is
intended to be severable. If any term or provision hereof is illegal, invalid or
unenforceable for any reason whatsoever, that term or provision will be enforced
to the maximum extent permissible so as to effect the intent of the parties, and
such illegality, invalidity or unenforceability shall not affect the validity or
legality of the remainder of this agreement. If necessary to effect the intent
of the parties, the parties will negotiate in good faith to amend this agreement
to replace the unenforceable language with enforceable language which as closely
as possible reflects such intent.
Section 15.7. Further Action. Each party, upon the reasonable request
of the other party, agrees to perform all further acts and execute, acknowledge,
and deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the intent and purposes of this agreement.
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Section 15.8. Governing Law. The internal laws of the State of Missouri
(without regard to principles of conflict of law) shall govern the validity of
this agreement, the construction of its terms, and the interpretation of the
rights and duties of the parties.
Section 15.9. Specific Performance. Each party agrees with the other
party that the other party would be irreparably damaged if any of the provisions
of this agreement are not performed in accordance with their specific terms and
that monetary damages would not provide an adequate remedy in such event.
Accordingly, in addition to any other remedy to which the nonbreaching party may
be entitled, at law or in equity, the nonbreaching party shall be entitled to
injunctive relief to prevent breaches of this agreement and specifically to
enforce the terms and provisions hereof.
Section 15.10. Entire Agreement. The provisions of this agreement set
forth the entire agreement and understanding between the parties as to the
subject matter hereof and supersede all prior agreements, oral or written, and
other communications between the parties relating to the subject matter hereof.
Section 15.11. Limitation on Rights of Others. Nothing in this
agreement, whether express or implied, shall be construed to give any party
other than the parties any legal or equitable right, remedy or claim under or in
respect of this agreement.
Section 15.12. Waivers; Remedies. The observance of any term of this
agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to enforce such
term, but any such waiver shall be effective only if in writing signed by the
party or parties against which such waiver is to be asserted. Except as
otherwise provided herein, no failure or delay of any party in exercising any
power or right under this agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other
further exercise thereof or the exercise of any other right or power.
Section 15.13. Jurisdiction; Consent to Service of Process.
(a) Each party hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of
any Missouri State court sitting in the County of Jackson or
any Federal court of the United States of America sitting in
the Western District of Missouri, and any appellate court from
any such court, in any suit action or proceeding arising out
of or relating to this agreement, or for recognition or
enforcement of any judgment, and each party hereby irrevocably
and unconditionally agrees that all claims in respect of any
such suit, action or proceeding may be heard and determined in
such Missouri State Court or, to the extent permitted by law,
in such Federal court.
(b) Each party hereby irrevocably and unconditionally waives, to
the fullest extent it may legally do so, any objection which
it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this
agreement in Missouri State court sitting in the County of
Jackson or any Federal court sitting in the Western District
of Missouri. Each party hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such suit, action or
proceeding in any such court
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and further waives the right to object, with respect to such
suit, action or proceeding, that such court does not have
jurisdiction over such party.
(c) Each party irrevocably consents to service of process in the
manner provided for the giving of notices pursuant to this
agreement, provided that such service shall be deemed to have
been given only when actually received by such party. Nothing
in this agreement shall affect the right of a party to serve
process in another manner permitted by law.
Section 15.14. Waiver of Jury Trial. Each party waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any action, suit or proceeding arising out of or relating to this
agreement.
Section 15.15. Consents. Whenever this agreement requires or permits
consent by or on behalf of a party, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in Section 15.13, with appropriate notice in accordance with Section 15.1 of
this agreement.
Section 15.16. Master Signature Page. Each party agrees that it will
execute the Master Signature Page that evidences such party's agreement to
execute, become a party to and be bound by this agreement, which document in
incorporated herein by this reference.
[The remainder of this page is intentionally left blank.]
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EXHIBIT 10.26
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT WITH "[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]"
FORM OF
AMENDMENT NO. 4
TO
DMS-MTX CELLULAR SUPPLY AGREEMENT
BETWEEN
ALAMOSA PCS LLC
AND
NORTEL NETWORKS INC.
This Amendment No. 4 is made effective as of the _____ day of ______________,
2000, by and between Nortel Networks Inc. (successor in interest to Northern
Telecom Inc.) ("Seller") and Alamosa PCS LLC ("Buyer").
WHEREAS, Buyer and Seller entered into a Supply Agreement dated December 21,
1998, as amended, for the sale and purchase of Seller's Equipment and Services
("Agreement"); and,
WHEREAS, Buyer and Seller now wish to, among other things, amend the Agreement
to extend the Term and adjust Buyer's Volume Commitment; and
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Buyer and Seller hereby agree to amend the Agreement as follows:
1. Amend Article 1 (Definitions), Section 1.46 by deleting the phrase "three
years therefrom" and replacing it with "on July 1, 2002".
2. Amend Section 5.3 by deleting the reference to [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED] and replacing it with [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED].
3. Amend Section 5.4 by deleting the section in its entirety and replacing it
with the following:
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<PAGE> 2
"5.4 Until Buyer's total purchases under this Agreement exceed [TEXT
OMITTED - CONFIDENTIAL TREATMENT REQUESTED] net Price in Equipment
and Services, such Equipment and Services purchased and financed
by Seller shall be subject to an additional [TEXT OMITTED -
CONFIDENTIAL TREATMENT REQUESTED] financing premium ("Financing
Premium") over the Additional Affiliate pricing as set forth in
Annex 1. For subsequent purchases (i.e., purchases of Equipment
and Services in excess of [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED] net Price), such Financing Premium shall no longer
apply."
4. Except as specifically modified herein, the Agreement in all other
respects shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to be
executed by their representatives being thereunto duly authorized.
ALAMOSA PCS LLC NORTEL NETWORKS INC.
By: By:
------------------------- --------------------------
Name: Name:
----------------------- ------------------------
(Type/Print) (Type/Print)
Title: Title:
---------------------- ----------------------
Date: Date:
---------------------- ----------------------
2
<PAGE> 1
EXHIBIT 10.27
FORM OF
REGISTRATION RIGHTS AGREEMENT
Dated as of January ___, 2000
by and among
ALAMOSA PCS HOLDINGS, INC.
and
NORTEL NETWORKS INC.
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of January ___, 2000, by and among ALAMOSA PCS HOLDINGS, INC., a
Delaware corporation (the "Company") and NORTEL NETWORKS INC., a Delaware
corporation ("Nortel Networks").
WHEREAS, the Company has agreed to issue Common Stock warrants (the
"Warrants") to Nortel Networks, representing the right to purchase an aggregate
amount of [_________] shares of the Common Stock, par value $0.01 per share, of
the Company (the "Common Stock").
WHEREAS, the Warrants have been issued pursuant to the Warrant Agreement
dated as of the date hereof by and between the Company and Nortel Networks (the
"Warrant Agreement").
NOW, THEREFORE, in consideration of the foregoing and the premises and
mutual agreements herein set forth, the parties hereto hereby agree as follows:
Section 1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings given to those terms in the
Warrant Agreement. As used in this Agreement, the following terms shall have the
following respective meanings:
"Business Day" shall mean a day that is not a Legal Holiday.
"Common Stock" has the meaning ascribed to such term in the preamble
hereof.
"Demand Registration" has the meaning ascribed to such term in Section
2.1(a) hereof.
"DTC" has the meaning ascribed to such term in Section 3(i) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute, and the rules and regulations
promulgated thereunder.
"Expiration Date" has the meaning ascribed to such term in the Warrant
Agreement.
<PAGE> 2
"Holder" shall mean a Person who is the owner as shown on the Warrant
register maintained by the Company.
"Included Securities" has the meaning ascribed to such term in Section
2.1(a) hereof.
"Indemnified Party" has the meaning ascribed to such term in Section 4(c)
hereof.
"Indemnifying Party" has the meaning ascribed to such term in Section 4(c)
hereof.
"Inspectors" has the meaning ascribed to such term in Section 3(n) hereof.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which banking
institutions in Dallas, Texas are authorized or required by law, regulation or
executive order to remain closed.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Piggy-Back Registration" has the meaning ascribed to such term in Section
2.2 hereof.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective Registration Statement in reliance upon Rule 430A
under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means any of (i) the Warrant Shares and (ii) any
other securities issued or issuable with respect to any Warrant Shares by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise,
unless, in each case, such Warrant Shares and securities, if any, have been
offered and sold to the Holder pursuant to an effective Registration Statement
under the Securities Act declared effective prior to the exercisability of the
Warrants or such Warrant Shares and securities, if any, may be sold to the
public pursuant to Rule 144 without any restriction on the amount of securities
which may be sold by such Holder or the satisfaction of any condition. As to any
particular Registrable Securities held by a Holder, such securities shall cease
to be Registrable Securities when (i) a Registration Statement with respect to
the exercise or offering of such securities by the Holder thereof shall have
been declared effective under the Securities Act and such securities shall have
been exercised and/or disposed of by such Holder pursuant to such Registration
Statement, (ii) such securities may at the time of determination be sold to the
public pursuant to Rule 144 without any restriction on the amount of securities
which may be sold by such Holder (or any similar provision then in force, but
not Rule 144A) promulgated under the Securities Act without the lapse of any
further time or the satisfaction of any condition, (iii) such securities shall
have been otherwise
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<PAGE> 3
transferred by such Holder and new certificates for such securities not bearing
a legend restricting further transfer shall have been delivered by the Company
or its transfer agent and subsequent disposition of such securities shall not
require registration or qualification under the Securities Act or any similar
state securities or blue sky laws then in force or (iv) such securities shall
have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all SEC and stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees and expenses, fees and expenses of compliance with
state securities or blue sky laws (including, without limitation, reasonable
fees and disbursements of counsel for the underwriters in connection with blue
sky qualifications of the Registrable Securities), printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel for the
Company and all independent certified public accountants, the fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities) and
other reasonable out-of-pocket expenses of Holders (including the reasonable
fees and expenses of one counsel for the Holders to be selected by a majority of
such Holders).
"Registration Statement" shall mean any appropriate registration statement
of the Company filed with the SEC pursuant to the Securities Act which covers
any of the Registrable Securities pursuant to the provisions of this Agreement
and all amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Requisite Securities" shall mean a number of Registrable Securities equal
to not less than twenty-five percent (25%) of the Registrable Securities held in
the aggregate by all Holders; provided, however, that with respect to any action
to be taken at the request of the Holders of the Registrable Securities prior to
such time as the Warrants have expired pursuant to the terms thereof and of the
Warrant Agreement, each Warrant outstanding shall be deemed to represent that
number of Registrable Securities for which such Warrant would be then
exercisable (without giving effect to the cashless (net) exercise feature
referred to in the Warrant Agreement).
"Rule 144" shall mean Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent Holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"Rule 144A" shall mean Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
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<PAGE> 4
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, or any successor statute, and the rules and regulations
promulgated thereunder.
"Selling Holder" shall mean a Holder who is selling Registrable Securities
in accordance with the provisions of Section 2.1 or 2.2 hereof.
"Warrants" has the meaning ascribed to such term in the preamble hereof.
"Warrant Agreement" has the meaning ascribed to such term in the preamble
hereof.
"Warrant Shares" means the shares of Common Stock delivered or deliverable
upon exercise of the Warrants.
Section 2. Registration Rights.
Section 2.1. Demand Registration.
(a) General. At any time after the sixtieth (60th) day prior to the second
anniversary of the date of this Agreement, Holders owning, individually or in
the aggregate, not less than the Requisite Securities may make a written request
(each, a "Demand Registration") that the Company register the resale of the
Warrant Shares under the Securities Act. The Company shall file with the SEC and
use commercially reasonable efforts to cause to become effective under the
Securities Act a Registration Statement with respect to such Registrable
Securities within ninety (90) days of receipt of such written request for a
Demand Registration. Any such request will specify the number of Registrable
Securities proposed to be sold and will also specify the intended method of
disposition thereof. The Company shall give written notice of such registration
request to all other Holders of Registrable Securities within fifteen (15)
Business Days after the receipt thereof. Within ten (10) days after receipt by
any Holder of Registrable Securities of such notice from the Company, such
Holder may request in writing that such Holder's Registrable Securities be
included in such Registration Statement and the Company shall include in such
Registration Statement the Registrable Securities of any such Holder requested
to be so included (the "Included Securities"). Each such request by such other
Holders shall specify the number of Included Securities proposed to be sold and
the intended method of disposition thereof. Subject to Sections 2.1(b), 2.1(d)
and 2.3(a) hereof, the Company shall be required to register Registrable
Securities pursuant to this Section 2.1(a) on a maximum of three (3) separate
occasions; provided, however, if and so long as the Company is eligible to file
Form S-3 registration statements, there should be no limit on the number of
occasions that the Holders may request the registration of their Registrable
Securities on a Form S-3 Registration Statement, or any successor registration
form that permits the prospectus to incorporate by reference subsequent periodic
reports filed by the Company.
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Subject to Section 2.1(d) hereof, no other securities of the Company except
(i) Registrable Securities held by any Holder, (ii) equity securities to be
offered and sold for the account of the Company and (iii) any equity securities
of the Company held by any Person having "piggy-back" registration rights
pursuant to any contractual obligation of the Company shall be included in a
Demand Registration. The inclusion of any such securities for the account of the
Company or any other Person shall be on the same terms as that of the
Registrable Securities.
(b) Effective Registration. A Registration Statement will not be deemed to
have been effected as a Demand Registration unless it has been declared
effective by the SEC and the Company has complied in all material respects with
all of its obligations under this Agreement with respect thereto; provided,
however, that if, after such Registration Statement has become effective, the
offering of Registrable Securities pursuant to such Registration Statement is or
becomes the subject of any stop order, injunction or other order or requirement
of the SEC order, injunction or other order or requirement of the SEC or any
other governmental or administrative agency or court that prevents, restrains or
otherwise limits the sale of Registrable Securities pursuant to such
Registration Statement for any reason not attributable to any Holder
participating in such registration and such restraint is not lifted within sixty
(60) days after being imposed, such Registration Statement will be deemed not to
have been effected. If (i) a registration requested pursuant to this Section 2.1
is deemed not to have been effected or (ii) a Demand Registration does not
remain effective under the Securities Act until at least the earlier of (A) an
aggregate of six months after the effective date thereof or (B) the consummation
of the distribution by the Holders of all of the Registrable Securities covered
thereby, then such registration shall not count towards determining if the
Company has satisfied its obligation to three (3) Demand Registrations pursuant
to this Section 2.1. For purposes of calculating the six month period referred
to in the preceding sentence, any period of time during which such Registration
Statement was not in effect shall be excluded. The Holders of Registrable
Securities shall be permitted to withdraw all or any part of the Registrable
Securities from a Demand Registration at any time prior to the effective date of
such Demand Registration; provided, however, that should the Holders of
Registrable Securities remaining after such withdrawal own, individually or in
the aggregate, less than the Requisite Securities, the Company shall have the
right to terminate or withdraw any registration initiated by it under Section
2.1 prior to the effectiveness of such registration. Notwithstanding the
foregoing, if the Holders of at least the Requisite Securities request the
withdrawal of a Registration Statement after it is filed, such Registration
Statement will be deemed to have been a Demand Registration unless the Holders
of the Included Securities pay the Registration Expenses associated with such
Registration Statement unless such withdrawal is the result of a material
adverse change in the financial condition or results of operation of the
Company.
(c) Underwritten Registrations. If any of the Registrable Securities
covered by a Demand Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and will be reasonably acceptable
to the Company.
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No Holder of Registrable Securities may participate in any underwritten
registration pursuant to a Registration Statement filed under this Agreement
(whether a Demand Registration or a Piggy-Back Registration) unless such Holder
(a) agrees to (i) sell such Holder's Registrable Securities on the basis
provided in and in compliance with the underwriting arrangements and (ii) comply
with Rules 101, 102 and 104 of Regulation M promulgated under the Exchange Act
and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required by
the investment bankers under the terms of such underwriting arrangements.
(d) Priority in Demand Registration. In a registration pursuant to Section
2.1 hereof involving an underwritten offering, if the managing underwriter or
underwriters of such underwritten offering have informed, in writing, the
Company and the Selling Holders who have requested such Demand Registration or
who have sought inclusion therein that in such underwriter's or underwriters'
opinion the total number of securities which the Selling Holders and any other
Person entitled to participate in such registration pursuant to Section 2.1(a)
hereof intend to include in such offering is such as to adversely affect the
success of such offering, including the price at which such securities can be
sold, then the Company will be required to include in such registration only the
amount of securities which it is so advised should be included in such
registration. In such event, securities shall be registered in such registration
in the following order of priority: (i) first, the securities which have been
requested to be included in such registration by the Holders of Registrable
Securities, (ii) second, the securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Company (pro rata based on the amount of securities sought to be included in the
registration by such Persons), and (ii) third, provided that no securities
sought to be included by the Holders or any other Person sought to be included
therein have been excluded from such registration, securities to be offered and
sold for the account of the Company.
If twenty-five percent (25%) or more of the Registrable Securities which
the Holders have requested to be included in a Registration Statement pursuant
to Section 2.1 hereof have been excluded from such Registration Statement
pursuant to the provisions of the foregoing paragraph, then such registration
shall not count towards determining whether the Company has satisfied its
obligation to effect three (3) Demand Registrations pursuant to Section 2.1
hereof.
Section 2.2. Piggy-Back Registration.
(a) General. If at any time after the sixtieth (60th) day prior to the
second anniversary of the date of this Agreement the Company proposes to file a
Registration Statement under the Securities Act with respect to an offering by
the Company for its own account, other than (i) a Registration Statement on Form
S-4 or S-8 (or any substitute form that may be adopted by the SEC or other form
of limited purpose), (ii) a Registration Statement filed in connection with an
exchange offer or offering of securities solely to the Company's existing
security holders, or (iii) a Registration Statement filed pursuant to the
exercise of "demand" registration rights of existing security holders pursuant
to a contractual commitment of the Company, then the Company shall give written
notice of such proposed filing to the Holders of Registrable Securities as soon
as practicable (but in no event
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<PAGE> 7
fewer than thirty (30) days before the anticipated filing date or twenty (20)
days before the anticipated filing date if the Company is subject to filing
reports under the Exchange Act and able to use Form S-3 under the Securities
Act), and such notice shall offer such Holders the opportunity to register such
number of shares of Registrable Securities as each such Holder may request in
writing not later than five (5) days prior to the anticipated filing date of the
Registration Statement (so long as the Holder has received such written notice
in accordance with the foregoing time periods from the Company) (which request
shall specify the Registrable Securities intended to be disposed of by such
Selling Holder and the intended method of distribution thereof) (a "Piggy-Back
Registration"). The Company shall have no obligation to effect such Piggy-Back
Registration unless Holders request in writing to include in the Piggy-Back
Registration, individually or in the aggregate, not less than that number of
Registrable Securities that equals the Requisite Securities. The Company shall
use commercially reasonable efforts to keep such Piggy-Back Registration
continuously effective under the Securities Act until the consummation of the
distribution by the Holders of all of the Registrable Securities covered
thereby. The Company shall use its commercially reasonable efforts to cause the
managing underwriter or underwriters, if any, of such proposed offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Company or any other security holder included therein, subject
to the restrictions set forth in Section 2.2(b), and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving timely written
notice to the Company of its request to withdraw. The Company may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective or
the Company may elect to delay the registration; provided, however, that the
Company shall give prompt written notice thereof to participating Selling
Holders.
No Registration effected under this Section 2.2, and no failure to effect a
registration under this Section 2.2, shall relieve the Company of its obligation
to effect a registration pursuant to Section 2.1 hereof, and no failure to
effect a registration under this Section 2.2 and to complete the sale of
securities registered thereunder in connection therewith shall relieve the
Company of any other obligation under this Agreement.
(b) Priority in Piggy-Back Registration. In a registration pursuant to
Section 2.2 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders requesting inclusion in such
offering that in such underwriter's or underwriters' opinion the total number of
securities which the Company, the Selling Holders and any other Persons desiring
to participate in such registration intend to include in such offering is such
as to adversely affect the success of such offering, including the price at
which such securities can be sold, then the Company will be required to include
in such registration only the amount of securities which it is so advised should
be included in such registration. In such event, securities shall be registered
in such offering in the following order of priority: (i) first, the securities
which the Company proposes to register, (ii) second, provided that no securities
sought to be included by the Company have been excluded from such registration,
the
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<PAGE> 8
securities which have been requested to be included in such registration by the
Holders of Registrable Securities and other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Company (pro rata based on the amount of securities held by the Holders of
Registrable Securities requesting such inclusion and such Persons).
If, as a result of the provisions of this Section 2.2(b), any Selling
Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
(c) Underwritten Registrations. If any of the Registrable Securities
covered by a Piggy-Back Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Company.
Section 2.3. Limitations and Conditions to Obligations Under Registration
Covenants.
(a) The Company's obligations shall be subject to the obligations of the
Selling Holders, which the Selling Holders acknowledge, to furnish all
information and materials required of such Selling Holders and to take any and
all actions required of such Selling Holders to permit the Company to comply
with all applicable requirements of the SEC and to obtain any acceleration of
the effective date of such Registration Statement.
(b) Subject to the next sentence of this paragraph, the Company shall be
entitled to postpone the filing or effectiveness of any Registration Statement
otherwise required to be prepared, filed and made effective by it pursuant to
Section 2.1 or 2.2 hereunder; provided, however, that the duration of such
postponement may not exceed the earlier to occur of (A) fifteen (15) days after
the cessation of the circumstances described in the next sentence of this
paragraph on which such postponement is based or (B) ninety (90) days after the
date of the determination of the Board of Directors referred to in the next
sentence. Such postponement may be effected only if the Board of Directors of
the Company makes a reasonable and good faith determination that the filing or
effectiveness of such Registration Statement would materially impede, delay or
interfere with any material financing, offer or sale of securities, acquisition,
corporate reorganization or other significant transaction involving the Company
or any of its Subsidiaries which material financing, offer or sale of
securities, acquisition, corporate reorganization or other significant
transaction is under active consideration at the time of such postponement;
provided, however, that the Company shall not be entitled to such postponement
more than once in any twelve-month period. If the Company shall take any such
action with respect to a Registration Statement it shall, as promptly as
possible, deliver a certificate signed by the Chief Executive Officer or
President of the Company to the Selling Holders as to such determination, and
the Selling Holders shall have the right, upon the affirmative vote of the
Holders of not less than a majority of the Registrable Securities to be included
in such Registration Statement, to withdraw the request for registration by
giving written notice to the Company within ten (10) days after the receipt of
such notice. Any Demand Registration as to which the withdrawal election
referred to in the preceding sentence has been effected shall not be counted
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<PAGE> 9
for purposes of the three Demand Registrations the Company is required to effect
pursuant to Section 2.1 hereof.
(c) The Company shall not be required by this Agreement to file a
registration statement with respect to a Demand Registration for a Holder during
the period starting with the date of filing of, and within ninety (90) days
immediately following, the effective date of any Registration Statement under
the Securities Act pertaining to a firmly underwritten offering of equity
securities of the Company for its own account so long as such Holder has been
given the opportunity to include in such Registration Statement such Holder's
Registrable Securities pursuant to Section 2.2 hereof and not been denied such
opportunity under Section 2.2 (b) or otherwise.
Section 2.4. Restrictions on Sale by the Company and Others. The Company
covenants and agrees that (i) during the 10-day period prior to, and during the
90-day period beginning on, the commencement of any underwritten offering of
Registrable Securities pursuant to a Demand Registration which has been
requested pursuant to this Agreement, it shall not, and shall not cause or
permit any of its Subsidiaries to, effect any public sale or distribution of any
securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for such securities
(or any option or other right for such securities), other than any Common Stock
and/or options, Warrants or other Common Stock purchase rights, and the Common
Stock issued pursuant to such option, Warrants or other rights, to employees,
officers or directors of, or consultants or advisors to the Company or any
Subsidiary pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors of the Company, prior
to the Company or any of its Subsidiaries publicly announcing its intention to
effect any such public sale or distribution; and (ii) the Company will not, and
the Company will not cause or permit any of its Subsidiaries to, after the date
hereof, enter into any agreement or contract that conflicts with or limits or
prohibits the full and timely exercise by the Holders of Registrable Securities
of the rights herein to request a Demand Registration or to join in any
Piggy-Back Registration subject to the other terms and provisions hereof.
Section 2.5. Rule 144 and Rule 144A. The Company covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder or beneficial owner of
Registrable Securities, make available such information necessary to permit
sales pursuant to Rule 144A under the Securities Act. The Company further
covenants that it will take such further action as any Holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144(k) and Rule 144A under the Securities Act, as such Rules may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the SEC
(it being expressly understood that the foregoing shall not create any
obligation on the part of the Company to file periodic reports or other reports
under the Exchange Act at any time that it is not then required to file such
reports pursuant to the Exchange Act). Upon the reasonable request of any Holder
of Registrable Securities, the Company will in a timely manner
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<PAGE> 10
deliver to such Holder a written statement as to whether it has complied with
such information requirements.
Section 3. Registration Procedures. In connection with the obligations of
the Company with respect to any Registration Statement pursuant to Sections 2.1
and 2.2, hereof, the Company shall, except as otherwise provided:
(a) Prepare and file with the SEC as soon as practicable each Registration
Statement (but in any event on or prior to the date of filing thereof required
under this Agreement) and use commercially reasonable efforts to cause such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that before filing any such Registration Statement or
any Prospectus (for registrations pursuant to Sections 2.1 and 2.2 hereof) or
any amendments or supplements thereto (only for registrations pursuant to
Section 2.1 hereof), the Company shall make available to the Holders of the
Registrable Securities covered by such Registration Statement, and the managing
underwriter or underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review and comment of such Holders
and underwriters in connection with such sale, if any, for a period of at least
five (5) Business Days, and the Company will not file any such Registration
Statement or amendment or supplement to any such Registration Statement
(including all such documents incorporated by reference) to which the Holders of
the Registrable Securities covered by such Registration Statement or the
underwriters in connection with such sale, if any, shall reasonably object
within five (5) Business Days after the receipt thereof.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods prescribed
hereby; cause the related Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
and comply with the provisions of the Securities Act, the Exchange Act and the
rules and regulations of the SEC promulgated thereunder applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities, their counsel and the
managing underwriter or underwriters, if any, promptly (but in any event within
two (2) Business Days), and confirm such notice in writing, (i) when a
Prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration
Statement or any preliminary prospectus or the initiation or threatening of any
proceedings for that purpose, (iii) of the receipt by the Company of any
notification with respect to (A) the suspension of the qualification or
exemption from qualification of the Registration Statement or any of the
Registrable Securities covered thereby for offer or sale in any jurisdiction, or
(B) the initiation of any
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proceeding for such purpose, (iv) of the happening of any event, the existence
of any condition or information becoming known to the Company that requires the
making of any changes in such Registration Statement, Prospectus or documents so
that, in the case of such Registration Statement, it will conform in all
material respects with the requirements of the Securities Act and it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
not misleading, and that in the case of the Prospectus, it will conform in all
material respects with the requirements of the Securities Act and it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
not misleading, and (v) of the Company's reasonable determination that a
post-effective amendment to such Registration Statement would be appropriate.
(d) Use commercially reasonable efforts to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction, and, if any such order is issued, to
obtain the withdrawal of any such order at the earliest practicable moment.
(e) If requested by the managing underwriter or underwriters, if any, or
the Holders of a majority of the Registrable Securities being sold in connection
with an underwritten offering (only for registrations pursuant to Section 2.1
hereof), (i) promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters, if any,
or such Holders reasonably request to be included therein to comply with
applicable law, (ii) make all effective amendment as soon as practicable after
the Company has received notification of the matters to be incorporated in such
prospectus supplement or post effective amendment, and (iii) supplement or make
amendments to such Registration Statements.
(f) Furnish to each Holder of Registrable Securities who so requests and to
counsel for the Holders of Registrable Securities and each managing underwriter,
if any, without charge, upon request, one conformed copy of the Registration
Statement and each post effective amendment thereto, including financial
statements and schedules, and of all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (including exhibits
incorporated by reference).
(g) Deliver to each Holder of Registrable Securities, their counsel and
each underwriter, if any, without charge, as many copies of each Prospectus
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and, subject to the last paragraph of this
Section 3, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the Holders of Registrable Securities
and the underwriter or underwriters or agents, if any in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to register or
qualify, and cooperate with the Holders of Registrable Securities, the
underwriter or underwriters, if any, and their
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respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of, such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as the managing underwriter or
underwriters reasonably request in writing, or, in the event of a
non-underwritten offering, as the Holders of a majority of the Registrable
Securities being sold may request; provided, however, that where Registrable
Securities are offered other than through an underwritten offering, the Company
agrees to cause its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this Section
3(h); keep such registration or qualification (or exemption therefrom) effective
during the effectiveness period and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
securities covered thereby; provided, however, that the Company will not be
required to (A) qualify generally to do business in any jurisdiction where it
has not then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
(C) become subject to taxation in any jurisdiction where it is not then so
subject.
(i) Cooperate with the Holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends whatsoever and shall be in a
form eligible for deposit with The Depository Trust Company ("DTC"); and enable
such Registrable Securities to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request at least two (2) Business Days prior to any sale of
Registrable Securities in a firm commitment underwritten public offering.
(j) Pay all Registration Expenses in connection with the registrations
requested pursuant to Sections 2.1 and 2.2 hereof. Each Holder of Registrable
Securities shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to a Registration Statement requested pursuant to Section
2.1.
(k) Upon the occurrence of any event contemplated by Section 3(c)(iv) or
3(c)(v) above, as promptly as practicable prepare a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and, subject to Section 3(a) hereof, file such with the SEC so that,
as thereafter delivered to the purchasers of Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(l) Prior to the effective date of a Registration Statement, (i) provide
the registrar for the Registrable Securities with certificates for such
securities in a form eligible for deposit with DTC and (ii) provide a CUSIP
number for such securities.
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(m) If the offering provided for herein is conducted by means of an
underwriting, enter into an underwriting agreement in form, scope and substance
as is customary in underwritten offerings and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in order to
expedite or facilitate the registration or disposition of such Registrable
Securities in any underwritten offering to be made of the Registrable Securities
in accordance with this Agreement, and in such connection, (i) make such
representations and warranties to the underwriter or underwriters, with respect
to the business of the Company and its Subsidiaries, and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) use reasonable efforts to obtain an
opinion of counsel to the Company, addressed to the underwriter or underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by underwriters;
(iii) use reasonable efforts to obtain "cold comfort" letters from the
independent certified public accountants of the Company (and, if applicable, the
Subsidiaries of the Company) and, if necessary, any other independent certified
public accountants of any Subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement, addressed to each of the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by the
managing underwriter or underwriters and as permitted by the underwriting
agreement is entered into, the same shall contain customary indemnification
provisions and procedures with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(n) Make available for inspection by a representative of the Holders of
Registrable Securities being sold, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney or account
retained by such representative of the Holders or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable business
hours, at the Inspector's expense, all financial and other records, pertinent
corporate documents and properties of the Company and its Subsidiaries as
reasonably requested by the Inspector, and cause the officers, directors and
employees of the Company and its Subsidiaries to supply all information in each
case reasonably requested by any such Inspector in connection with such
Registration Statement; provided, however, that all such information shall be
kept confidential by such Inspector and shall not be used for any purpose other
than as contemplated hereby, except to the extent that (i) the disclosure of
such information is necessary or advisable to avoid or correct a misstatement or
omission in the Registration Statement or in any Prospectus; provided, however,
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that prior notice is given to the Company, and the Company's legal counsel
and such Holder's legal counsel concur that disclosure is required, (ii) the
release of such information is ordered pursuant to a subpoena or other order
from court of competent jurisdiction, (iii) disclosure of such information is
necessary or advisable in connection with any action, claim, suit or proceeding,
directly or indirectly, involving or potentially involving such Inspector and
arising out of, based upon, relating to or involving this Agreement or any of
the transactions contemplated hereby or arising hereunder; provided, however,
that prior notice shall be provided as soon as practicable to the Company of the
potential disclosure of any information by such Inspector pursuant to clauses
(ii) or (iii) of this sentence to permit the Company to obtain a protective
order (or waive the provisions of this paragraph (n)) and that such Inspector
shall take all actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the extent such action
is otherwise not inconsistent with, an impairment of or in derogation of the
rights and interests of the Holder or any Inspector, or (iv) such information
has been made generally available to the public.
(o) Comply with all applicable rules and regulations of the SEC and make
generally available to its security holders earnings statements satisfying the
provisions of Section 10(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than forty-five
(45) days after the end of any 12-month period (or ninety (90) days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold to an
underwriter or to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to an underwriter or to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of the relevant Registration Statement, which
statements shall cover said 12-month periods.
(p) Use commercially reasonable efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each securities
exchange, if any, on which similar securities issued by the Company are then
listed.
(q) Cooperate with the Selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends and
registered in such names as the Selling Holders may reasonably request at least
two (2) Business Days prior to the closing of any sale of Registrable
Securities.
(r) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 3, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 3, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the Registration Statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an Underwritten Offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
(s) Cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD") and in the performance
of any due diligence investigation by
14
<PAGE> 15
any underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD.
Each seller of Registrable Securities as to which any registration is being
effected agrees, as a condition to the registration obligations with respect to
such seller provided herein, to furnish to the Company such information
regarding such seller and the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing to comply with the
Securities Act and other applicable law. The Company may exclude from such
registration the Registrable Securities of any seller for so long as such seller
fails to furnish such information within a reasonable time after receiving such
request. If the identity of a seller of Registrable Securities is to be
disclosed in the Registration Statement, such seller shall be permitted to
include all information regarding such seller as it shall reasonably request.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(c)(ii), 3(c)(iii),
3(c)(iv), or 3(c)(v) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by the Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(k) hereof, or until it is advised
in writing by the Company that the use of the applicable prospectus may be
resumed, and has received copies of any amendments or supplements thereto, and,
if so directed by the Company, such Holder will, at the Company's expense,
deliver to the Company all copies, other than permanent file copies, then in
such Holder's actual possession of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice; provided, however,
that nothing herein shall create any obligation on the part of any Holder to
undertake unreasonable efforts to retrieve or return any such Prospectus not
within the actual possession or control of such Holder. In the event the Company
shall give any such notice, the period of time for which a Registration
Statement is required thereunder to be effective shall be extended by the number
of days during such periods from and including the date of the giving of such
notice to and including the date when each seller of Registrable Securities
covered by such Registration Statement shall have (x) received the copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof or (y)
been in advised in writing by the Company that the use of the applicable
prospectus may be resumed.
Section 4. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Holder, its
officers and directors, and each Person, if any, who controls such Holder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is controlled by, such Holder,
from and against all losses, claims, damages and liabilities (including, without
limitation, and subject to clause (c) of this Section 4 below, the reasonable
legal fees and other reasonable out-of-pocket expenses actually incurred by any
Holder or any such controlling or affiliated Person in connection with any suit,
action or proceeding or any claim asserted), caused by, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
15
<PAGE> 16
contained in any Registration Statement (or any amendment thereto) pursuant to
which the sale of Registrable Securities was registered under the Securities
Act, or caused by any omission or alleged omission to state in any such
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein not misleading, or caused by any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state in any such preliminary prospectus or
Prospectus a material fact required to be stated in any such preliminary
prospectus or Prospectus or necessary to make the statements in any such
preliminary prospectus or Prospectus in light of the circumstances under which
they were made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omissions made in reliance upon and in conformity with
information relating to any Holder furnished to the Company in writing by such
Holder expressly for use in any such Registration Statement, Preliminary
Prospectus or Prospectus; provided, however, that the Company shall not be
required to indemnify any such Person if such untrue statement or omission or
alleged untrue statement or omission was contained or made in any preliminary
prospectus and corrected in the Prospectus, or any amendment or supplement
thereto and the Prospectus does not contain any other untrue statement or
omission or alleged untrue statement or omission of a material fact that was the
subject matter of the related proceeding and any such loss, liability, claim,
damage or expense suffered or incurred by such indemnified Person resulted from
any action, claim or suit by any Person who purchased Registrable Securities
which are the subject thereof from such indemnified Person and it is established
in the related proceeding that such indemnified Person failed to deliver or
provide a copy of the Prospectus (as amended or supplemented) to such Person
with or prior to the confirmation of the sale of such Registrable Securities
sold to such Person if required by applicable law, unless such failure to
deliver or provide a copy of the Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 3 hereof or as a result of
the failure of the Company to provide such Prospectus.
(b) Each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign any Registration
Statement, and each Person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to such Holder, but
only with reference to information furnished by such Holder to the Company
expressly for use in any Registration Statement (or any amendment thereto) or
any Prospectus (or any amendment or supplement thereto). The liability of any
Holder under this paragraph shall in no event exceed the proceeds received by
such Holder from sales of Registrable Securities giving rise to such
obligations.
(c) In case any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to either paragraph
(a) or (b) above, such Person (the "Indemnified Party") shall promptly notify
the Person against which such indemnity may be sought (the "Indemnifying Party")
in writing and the Indemnifying Party, upon request of the Indemnified Party,
shall retain counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party and any
16
<PAGE> 17
others the Indemnifying Party may reasonably designate in such proceeding and
shall pay the reasonable fees and expenses actually incurred of such counsel
relating to such proceeding; provided, however, that the failure to so notify
the Indemnifying Party shall not relieve it of any obligation or liability which
it may have thereunder or otherwise unless the Indemnifying Party has been
materially prejudiced by such failure. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
contrary, (ii) the Indemnifying Party shall have failed to retain within a
reasonable period of time counsel reasonably satisfactory to such Indemnified
Party or parties or (iii) the named parties to any such proceeding (including
any impleaded parties) include both such Indemnified Party or parties and the
Indemnifying Parties or any affiliate of the Indemnifying Parties or such
Indemnified Parties and counsel for the Indemnifying Parties or Indemnified
Parties shall have concluded such written opinion that representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between the Indemnifying Party or parties and the
Indemnified Party or parties. It is understood that the Indemnifying Parties
shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings in the same jurisdiction, arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm or attorneys (together with appropriate
local counsel) at any time for such Indemnified Party or parties and that all
such fees and expenses shall be reimbursed within reasonable time of the request
after the incurrence thereof. Any such separate firm for the Holders and such
control Persons of the Holders shall be designated in writing by Holders who
sold a majority in interest of Registrable Securities sold by all such Holders
and shall be reasonably acceptable to the Company and any such separate firm for
the Company, its directors, its officers and such control Persons of the Company
shall be designated in writing by the Company. The Indemnifying Party shall not
be liable for any settlement of any proceeding effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed)
but if settled with such consent or if there be a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify and hold harmless the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party (which consent shall not be unreasonably
withheld), effect any settlement or compliance of any pending or threatened
proceeding in respect of which any Indemnified Party is or could have been a
party, or indemnity could have been sought thereunder by such Indemnified Party,
unless such settlement or compliance involves only the payment of money damages
that are actually paid by the Indemnifying Party or includes an unconditional
written release of such Indemnified Party in form and substance reasonably
satisfactory to such Indemnified Party of such Indemnified Party from all
liability or claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for a paragraph (a) or (b)
of this Section 4 is unavailable to, or insufficient to hold harmless, an
Indemnified Party in respect of any losses, claims, damages or liabilities, then
each Indemnifying Party under such paragraph, in lieu of indemnifying such
Indemnified Party thereunder and in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such losses, claims, damages or liabilities in such losses,
claims, damages or liabilities in such
17
<PAGE> 18
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and the Holders on the other hand from the offering
of such Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, not only such relative benefits but
also the relative fault of the Company on the one hand and the Holders on the
other hand in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Holders on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of discounts and commissions but before
the deducting expenses) received by the Company bears to the total proceeds
received by such Holder from the sale of Registrable Securities, as the case may
be. The relative fault of the Company on the one hand and the Holders on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 4 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 4(d) above. The amount paid
or payable by an Indemnified Party is a result of the losses, claims, damages
and liabilities referred to in Section 4(d) above shall be deemed to include,
subject to the limitations set forth above, any reasonable legal or other
expense actually incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 4, in no event shall a Holder be required to
contribute any amount in excess of the amount by which proceeds received by such
Holder from sales of Registrable Securities exceeds the amount of any damages
that such Holder has otherwise been required to pay or has paid by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 4 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any Indemnified Party at law or in
equity.
(f) Any losses, claims, damages, liabilities or expenses for which an
Indemnified Party is entitled to indemnification or contribution under this
Section 4 shall be paid by the Indemnifying Party to the Indemnified Party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 4 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any Person who controls a
Holder, the Company, their respective directors or officers or any Person
controlling the Company and (ii) any termination of this Agreement.
18
<PAGE> 19
Section 5. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents and warrants to the
Holders that it has not entered into nor will the Company on or after the date
of this Agreement enter into, or cause or permit any of its Subsidiaries to
enter into, any agreement which conflicts with or limits or prohibits the
exercise of the rights granted to the Holders of Registrable Securities in this
Agreement. The rights granted to the Holders hereunder do not in any way
conflict with or limit or prohibit the exercise of any rights granted to the
holders of the Company's other issued and outstanding securities, if any, under
such agreements.
(b) Assumption of Rights.
(i) The rights of each Holder under this Agreement shall be assignable;
provided, however, that the Company is given written notice at the time of such
assignment stating the name and address of the assignee and identifying the
securities with respect to which the rights and benefits hereunder are being
assigned and such assignee expressly agrees in writing with the Company and
other Holders of Registrable Securities to be bound by and to comply with all
applicable provisions of this Agreement, whereupon such person or entity shall
have the benefits of, and shall be subject to the restrictions contained in,
this Agreement with respect to such securities. Any assignment pursuant to this
Section 5 shall not relieve, release or otherwise discharge the Holder effecting
such assignment from its obligations under this Agreement.
(ii) The Company may not assign this Agreement in whole or in part to
any other person without the prior written consent of a majority of the Holders
of then outstanding Warrants and Registrable Securities.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the consent of the Company and
the prior written consent of Holders of not less than a majority in number of
the then outstanding Warrants and Registrable Securities not resold to the
public for the purpose of adding any provision to or changing in any manner or
eliminating any of the provisions of the Agreement or modifying in any manner
the rights of the Holders of the outstanding Warrants; provided, however, that
Section 4 hereof and this Section 5(c) may not be amended, modified or
supplemented without the prior written consent of each Holder (including any
Person who was a Holder of Registrable Securities disposed of pursuant to any
Registration Statement) affected by such amendment, modification of supplement.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Securities may be
given the Company by the Holders of not less than a majority of the Registrable
Securities proposed to be sold by such Holders pursuant to such Registration
Statement.
(d) Notices to Holders and Company. All notices and other communications
provided herein (including, without limitation, any waivers or consents under
this Agreement) shall be given or made by telecopy, telegraph, cable or
otherwise in writing (each communication given by any such
19
<PAGE> 20
means to be deemed "in writing" for purposes of this Agreement) and telecopies,
telegraphed, cabled, mailed or delivered to the intended recipient at the
address for such party following hereafter or, as to any party, at such other
addresses as shall be designated by such party in a notice to the others. Except
as otherwise provided in this Agreement, all such communications shall be deemed
to have been duly given (i) when delivered to the telegraph or cable office or
personally delivered or, (ii) in the case of transmission by telecopy, when
telecopied (with confirmation) and mailed (with same day post-mark) certified
mail, return receipt requested or (iii) in the case of a mailed notice, three
days after deposit with the United States Post Office, by registered or
certified mail, return receipt requested, in each case given or addressed as
follows:
20
<PAGE> 21
(i) If to Nortel Networks:
Nortel Networks Inc.
GMS 911 15 A40
2221 Lakeside Boulevard
Richardson, Texas 75082-4399
Attn: Robert Beiter, Director, Customer Finance
Telecopy No.: (972) 684-3679
(ii) If to the Company:
Alamosa PCS Holdings, Inc.
4727 South Loop 289
Lubbock, Texas 79424
Attn: David E. Sharbutt, President
Telecopy No.: (806) 791-7711
(iii) If to the Holders other than Nortel Networks, to the
respective addresses of the Holders provided to the
Company from time to time.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
agreement, subsequent Holders. If any transferee of any Holder shall acquire
Warrants and/or Registrable Securities, whether by operation of law or
otherwise, such Warrants and/or Registrable Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such Warrants
and/or Registrable Securities such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The heading in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the
21
<PAGE> 22
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(j) Entire Agreement. This Agreement, together with the Warrant Agreement
and Credit Agreement, is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. This Agreement, together with the Warrant
Agreement and Credit Agreement, supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(k) Attorneys' Fees. As between the parties to this Agreement, in any
action or proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to its
costs and expenses and any other available remedy.
(l) Securities Held by the Company or its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Registrable Securities or
Warrants is required thereunder, Registrable Securities or Warrants held by the
Company or any of its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted (in either the numerator or the
denominator) in determining whether such consent or approval was given by the
Holders of such required percentage.
(m) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement.
The Holders are the third-party beneficiaries of this Agreement. Nothing in
this Agreement shall be construed to give to any Person other than the Company
and the Holders any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company and the Holders from time to time.
(n) Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ALAMOSA PCS HOLDINGS, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
NORTEL NETWORKS INC.
By:
------------------------------
Paul D. Day
Vice President Customer Finance
[Signature pages follow]
22
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ALAMOSA PCS HOLDINGS, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
NORTEL NETWORKS INC.
By:
------------------------------
Paul D. Day
Vice President Customer Finance
23
<PAGE> 1
EXHIBIT 10.28
FORM OF
WARRANT AGREEMENT
Dated as of January___, 2000
by and between
ALAMOSA PCS HOLDINGS, INC.
and
NORTEL NETWORKS INC.
This WARRANT AGREEMENT ("Agreement") is made and entered into as of January
__, 2000, by and between ALAMOSA PCS HOLDINGS, INC., a Delaware corporation (the
"Company"), NORTEL NETWORKS INC., a Delaware corporation ("Nortel Networks"),
and the Holders of the Warrants from time to time.
WHEREAS, in consideration for, among other things, the execution of the
Credit Agreement (as defined below), the Company agrees to issue Common Stock
warrants as hereinafter described (the "Warrants") to purchase shares Common
Stock (as defined below), in such number and at such price determined in
accordance with this Agreement. Each Warrant entitles the holder thereof to
purchase one share of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, and for the purpose of defining the respective rights and
obligations of the Company and Nortel Networks, the parties hereto agree as
follows:
Section 1. Certain Definitions. Capitalized defined terms used in this
Agreement and not otherwise defined herein shall have the meanings given to
those terms in the Credit Agreement. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission.
"Common Equity Securities" means Common Stock and securities convertible
into, or exercisable or exchangeable for, Common Stock or rights or options to
acquire Common Stock or such other securities, excluding the Warrants.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company, and any other capital stock of the Company into which such common stock
may be converted or reclassified or that may be issued in respect of, in
exchange for, or in substitution for, such common stock by reason of any stock
splits, stock dividends, distributions, mergers, consolidations or other like
events.
<PAGE> 2
"Credit Agreement" means the Amended and Restated Credit Agreement dated as
of January __, 2000, by and among ALAMOSA PCS, INC., a Delaware corporation (the
"Borrower"), the Company, certain subsidiaries of Borrower and the lenders named
therein or that may become a party thereto, and Nortel Networks Inc., as agent
(collectively, the "Lenders"), as the same may be amended, renewed, extended,
restated, replaced, substituted, supplemented or otherwise modified from time to
time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute, and the rules and regulations promulgated thereunder.
"Exercise Price" means the purchase price per share of Common Stock to be
paid upon the exercise of each Warrant in accordance with the terms hereof,
which price shall initially be [$____] [THE IPO PRICE], subject to adjustment
from time to time pursuant to Section 11 hereof; provided, however, in no event
shall the Exercise Price be less than the par value per share of the Common
Stock.
"Expiration Date" means January___, 2008, as the same may be extended
pursuant to Section 6 hereof.
"Holder" or "Warrant Holder" means a Person who is the owner as shown on
the Warrant register maintained by the Company.
"Issue Date" means the date of the initial issuance of the Warrants, which
shall be the Closing Date under the Credit Agreement.
"Registrable Securities" means any of (i) the Warrant Shares and (ii) any
other securities issued or issuable with respect to any Warrant Shares by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise,
unless, in each case, such Warrant Shares and securities, if any, have been
offered and sold to the Holders pursuant to an effective Registration Statement
under the Securities Act declared effective prior to the date of exercisability
of the Warrants or the date such Warrant Shares and securities, if any, may be
sold to the public pursuant to Rule 144 without any restriction on the amount of
securities which may be sold by such Holders or the satisfaction of any
condition. As to any particular Registrable Securities held by a Holder, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the exercise or offering of such securities by the
Holder thereof shall have been declared effective under the Securities Act and
such securities shall have been exercised and/or disposed of by such Holder
pursuant to such Registration Statement, (ii) such securities may at the time of
determination be sold to the public pursuant to Rule 144 without any restriction
on the amount of securities which may be sold by such Holder (or any similar
provision then in force, but not Rule 144A) without the lapse of any further
time or the satisfaction of any condition, (iii) such securities shall have been
otherwise transferred by such Holder and new certificates for such securities
not bearing a legend restricting further transfer shall have been delivered by
the Company or its transfer agent and subsequent disposition of such
2
<PAGE> 3
securities shall not require registration or qualification under the Securities
Act or any similar state law then in force or (iv) such securities shall have
ceased to be outstanding.
"Registration Rights Agreement" means the registration rights agreement,
dated as of the date hereof by and between the Company and Nortel Networks
relating to the Warrants and the Warrant Shares.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the Commission providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
"Rule 144A" shall mean Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute and the rules and regulations promulgated thereunder.
"Warrant Holder" or "Holder" means a Person who is the owner as shown on
the Warrant register maintained by the Company.
"Warrant Shares" means the shares of Common Stock issued or issuable upon
the exercise of the Warrants.
Section 2. Issuance of Warrants; Warrant Certificates.
(a) The Warrants will be issued in the form of definitive certificates,
substantially in the form of Exhibit A (the "Warrant Certificates"). Each
Warrant shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate.
(b) The Warrants shall be issued on the Issue Date in the aggregate amount
of [________] shares of Common Stock, subject to adjustment as herein provided,
and shall be issued under one Warrant Certificate.
Section 3. Execution of Warrant Certificates. Warrant Certificates shall be
signed on behalf of the Company by the Company's President or a Vice President
and by its Secretary or an Assistant Secretary under its corporate seal. Each
such signature upon the Warrant Certificates may be in the form of a facsimile
signature of the present or any future President, Vice President, Secretary or
Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant
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Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been President, Vice President, Secretary
or Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be countersigned and delivered or disposed of, such person
shall have ceased to hold such office. The seal of the Company may be in the
form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificates so
signed shall have been disposed of by the Company, such Warrant Certificates
nevertheless may be countersigned and delivered or disposed of as though such
person had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate, although at the date of
the execution of this Warrant Agreement any such person was not such officer.
Section 4. Registration. The Company shall number and register the Warrant
Certificates in a register as they are issued by the Company.
The Company may deem and treat the person in whose name any Warrant is
registered as the absolute owner(s) thereof, for all purposes, and the Company
shall not be affected by any notice to the contrary.
Section 5. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Warrants and Registrable Securities. When
Warrants or Registrable Securities are presented to the Company with a request
to register their transfer; or to exchange such Warrants for an equal number of
Warrants of other authorized denominations, the Company shall register the
transfer or make the exchange as requested if the following requirements are
met:
(i) Notwithstanding anything in this Agreement to the contrary, Nortel
Networks will not transfer or agree to transfer any rights under this
Agreement or under the Warrants until the first anniversary of the Issue
Date; provided, however, that any rights in the Warrants transferred after
the first anniversary of the Issue Date but prior to the second anniversary
of the Issue Date will be subject to all of the terms of this Agreement,
including without limitation Section 6 hereof;
(ii) the Warrants presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Company, duly executed
by the Holder thereof or by his attorney-in-fact, duly authorized in
writing; and
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(iii) in the case of Registrable Securities, such request shall be
accompanied by the following additional information and documents (all of
which may be submitted by facsimile), as applicable:
(A) if such Registrable Security is being delivered to the
Company by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
substantially the form of Exhibit B hereto);
(B) if such Registrable Security is being transferred (1) to a
"qualified institutional buyer" (as defined in Rule 144A) in
accordance with Rule 144A or (2) pursuant to an exemption from
registration in accordance with Rule 144 (and based on an opinion of
counsel if the Company so requests) or (3) pursuant to an effective
registration statement under the Securities Act, a certification to
that effect (in substantially the form of Exhibit B hereto);
(C) if such Registrable Security is being transferred pursuant to
an exemption from registration in accordance with Rule 904 under the
Securities Act (and based on an opinion of counsel if the Company so
requests), a certification to that effect (in substantially the form
of Exhibit B hereto); or
(D) if such Registrable Security is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so
requests), a certification to that effect (in substantially the form
of Exhibit B hereto).
(b) Legends.
(i) Except for any Registrable Security sold or transferred as
discussed in clause (ii) below, each Warrant Certificate (and all Warrants
issued in exchange therefor or substitution thereof) and each certificate
representing the Warrant Shares shall bear a legend in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY AND THE SECURITIES DELIVERED UPON EXERCISE
THEREOF MAY NOT BE EXERCISED, OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY AND THE SECURITIES DELIVERED
UPON THE EXERCISE THEREOF IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING
ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A. THE HOLDER
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OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT
SUCH SECURITY AND THE SECURITIES DELIVERED UPON EXERCISE HEREOF MAY BE
EXERCISED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN RULE 902 UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (IN THE CASE OF (b),
(c) or (d), UPON AN OPINION OF COUNSEL AND WRITTEN CERTIFICATION IF THE
ISSUER, REGISTRAR OR TRANSFER AGENT FOR THE SECURITIES SO REQUESTS), (2) TO
THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION."
(ii) Upon any sale or transfer of a Registrable Security pursuant to
an effective registration statement under the Securities Act, pursuant to
Rule 144 or pursuant to an opinion of counsel reasonably satisfactory to
the Company that no legend is required, the Holder thereof shall be
permitted to exchange such Registrable Security for a Warrant that does not
bear the legend set forth in clause (i) above and rescind any restriction
on the transfer of such Registrable Security.
(c) Obligations With Respect to Transfers and Exchanges of Warrants.
(i) To permit registrations of transfers and exchanges, the Company
shall execute in accordance with the provisions of Section 4 and this
Section 5, Warrants as required pursuant to the provisions of this Section
5. Notwithstanding anything to the contrary contained herein, the Company
shall refuse to register any transfer of the Warrants not made in
accordance with Regulation S, pursuant to registration under the Securities
Act or pursuant to an available exemption from the registration
requirements of the Securities Act; provided, however, that if a foreign
law prevents the Company from refusing to register securities transfers,
the Company shall implement other reasonable measures designed to prevent
transfers of the Warrants not made in accordance with Regulation S,
pursuant to registration under the Securities Act or pursuant to an
available exemption from the registration requirements of the Securities
Act.
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(ii) All Warrants issued upon any registration of transfer or exchange
of Warrants shall be the valid obligations of the Company, entitled to the
same benefits under this Warrant Agreement, as the Warrants surrendered
upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Company may deem and treat the person in whose name any
Warrant is registered as the absolute owner of such Warrant and the Company
shall not be affected by notice to the contrary.
(iv) No service charge shall be made to a Holder for any registration
of transfer or exchange.
Section 6. Terms of Warrants; Exercise of Warrants. Subject to the terms of
this Agreement and the last paragraph of this Section 6 in particular, each
Warrant Holder shall have the right, which may be exercised at any time and from
time to time, in whole or in part, commencing on the fifteenth (15th) day after
the second anniversary of the Issue Date and ending at 4:00 p.m., Dallas, Texas
time, on the Expiration Date, to receive from the Company the number of fully
paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to receive on exercise of such Warrants and payment of the Exercise
Price then in effect for such Warrant Shares. Subject to the provisions of the
following paragraph of this Section 6, each Warrant not exercised prior to 4:00
p.m., Dallas, Texas time, on the Expiration Date shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time.
A Warrant may be exercised upon surrender to the Company of the certificate
or certificates evidencing the Warrant to be exercised with the form of election
to purchase on the reverse thereof properly completed and signed, which
signature shall be guaranteed by a bank or trust company having an office or
correspondent in the United States or a broker or dealer which is a member of a
registered securities exchange or the National Association of Securities
Dealers, Inc., and upon payment to the Company of the Exercise Price as adjusted
as herein provided, for each of the Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price shall be
made in cash or by certified or official bank check, payable to the order of the
Company. In the alternative, each Holder may exercise its right to receive
Warrant Shares (i) on a net basis, such that without the exchange of any funds,
the Holder receives that number of Warrant Shares otherwise issuable upon
exercise of its Warrants less that number of Warrant Shares having a fair market
value equal to the aggregate Exercise Price that would otherwise have been paid
by the Holder for the Warrant Shares being issued, (ii) by any Holder to whom
the Company is indebted, by tendering indebtedness having an aggregate principal
amount, plus accrued but unpaid interest, if any, thereon, to the date of
exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the Holder for the Warrant Shares being issued, or (iii) by a
combination of the procedures in clauses (i) and (ii). For purposes of the
foregoing sentence, "fair market value" of the Warrant Shares shall be as
determined by the Board of Directors of the Company in good faith and evidenced
by a resolution thereof. The Company shall notify the Holders in writing of any
such determination of fair market value.
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Subject to the provisions of Section 7 hereof, upon surrender of Warrants
and payment of the Exercise Price as provided above, the Company shall promptly
transfer to the Holder of such Warrant a certificate or certificates for the
appropriate number of Warrant Shares 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, such name or names as may be directed in writing by
the Holder, and shall deliver such certificate or certificates representing the
Warrant Shares 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 Section 13. Any such
certificate or certificates representing the Warrant Shares shall be deemed to
have been issued and any Person so designated to be named therein shall be
deemed to have become a Holder of record of such Warrant Shares as of the later
of the date of the surrender of such Warrants and payment of the Exercise Price.
Subject to the last paragraph of this Section 6, the Warrants shall be
exercisable commencing on the Issue Date, at the election of the Holders
thereof, either in full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued and delivered pursuant to the provisions of this
Section and of Section 3 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled. Such canceled Warrant Certificates shall then be disposed of in
accordance with customary procedures.
Notwithstanding any of the provisions of this Section 6 or this Agreement,
each of the Warrants shall not be exercisable and shall become automatically
void, and all rights of the Holders thereunder and all rights of the Holders and
Nortel Networks arising under this Agreement shall terminate automatically, upon
the occurrence of any one of the events described below (all capitalized terms
not defined in the following shall have the meanings set forth in the Credit
Agreement):
(a) The contribution to the Borrower as equity by the Company of at least
U.S. $75 million of funds (not derived from the first U.S. $111 million of
proceeds from the Company's initial public offering of its Common Stock)
following the Issue Date and at least U.S. $75 million is paid to the Lenders as
prepayment of any outstanding loan amounts under the Credit Agreement before the
second anniversary of the Issue Date;
(b) Nortel Networks assigns at least U.S. $75 million of its Loans and
Commitments under the Credit Agreement to a Lender who is not affiliated with
Nortel Networks (excluding assignments to NTFC Capital Corporation and the
Export Development Corporation) prior to the second anniversary of the Issue
Date and such Lender does not require assignment and transfer to it of this
Warrant Agreement and the Warrants in connection with such assignment;
(c) A combination of (x) one or more equity contributions by the Company to
the Borrower and prepayments to the Lenders of such contributions in a manner
similar to clause (a) and
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(y) assignments of Loans and Commitments as contemplated under clause (b) above
takes place prior to the second anniversary of the Issue Date, and the total sum
of (i) the amounts of such equity contributions and prepayments to the Lenders
under clause (x) and (ii) the amounts of such assignments under clause (y)
equals at least U.S. $100 million; or
(d) As of the second anniversary of the Issue Date, the Borrower's ratio of
Senior Debt to Total Capitalization (assuming full funding of the Loans and
Commitments under the Credit Agreement) is 0.40 to 1.0 or less and has been so
as of the end of each of the two calendar quarters immediately preceding the
second anniversary of the Issue Date.
Section 7. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of the Warrant Certificates or the
initial issuance of Warrant Shares upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any
certificates for Warrant Shares in a name other than that of the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant.
Section 8. Mutilated or Missing Warrant Certificates. In case any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company
may in its discretion issue in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and, if
requested, indemnity reasonably satisfactory to them. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 9. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from any preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The transfer agent for the Common Stock and every subsequent transfer agent
("Transfer Agent") for any shares of the Company's capital stock issuable upon
the exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 13. The Company will furnish
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such Transfer Agent a copy of all notices of adjustments and certificates
related thereto, transmitted to each Holder of the Warrants pursuant to Section
14 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 11 hereof that would reduce the Exercise Price below the then par value
(if any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares at the
Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants in accordance with the terms of this Agreement (including
the payment of the Exercise Price) will, upon issue, be duly and validly issued,
fully paid, nonassessable, and free of preemptive rights and Liens.
Section 10. Obtaining Stock Exchange Listings. The Company will from time
to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets (including, without limitation,
the Nasdaq National or SmallCap Markets) within the United States of America, if
any, on which other shares of Common Stock are then listed. Upon the listing of
such Warrant Shares, the Company shall notify the Holders in writing. The
Company will obtain and keep all required permits and records in connection with
such listing.
Section 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The number and kind of shares purchasable upon the exercise of
Warrants and the Exercise Price shall be subject to adjustment from time to time
(as set forth in the notices required by Section 14 hereof) as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall hereafter
(A) pay a dividend or make a distribution on its Common Stock in shares of its
capital stock (whether shares of Common Stock or of capital stock of any other
class), (B) subdivide its outstanding shares of Common Stock, (C) combine its
outstanding shares of Common Stock into a smaller number of shares, or (D) issue
by reclassification of its shares of Common Stock any shares of capital stock of
the Company, the Exercise Price in effect and the number of Warrant Shares
issuable upon exercise of each Warrant immediately prior to such action shall be
adjusted so that the Holder of any Warrant thereafter exercised shall be
entitled to receive the number of shares of capital stock of the Company which
such Holder would have owned immediately following such action had such Warrant
been exercised immediately prior thereto. Any adjustment made pursuant to this
paragraph shall become effective immediately after the record date in the case
of a dividend and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this paragraph, the Holder of any Warrant
thereafter exercised shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors of the Company
shall in good faith determine the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock.
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(b) Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in paragraph (a) above and
other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of a subdivision or combination), or in
case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants) or in case of any sale or conveyance to another
corporation of all or substantially all of the assets of the Company, then, as a
condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company or such a successor or purchasing corporation, as the
case may be, shall forthwith make lawful and adequate provision whereby the
Holder of each Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a Holder of the number of shares of
Common Stock issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and enter
into a supplemental warrant agreement so providing. Such provisions shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 11. If the issuer of
securities deliverable upon exercise of Warrants under the supplemental warrant
agreement is an affiliate of the formed, surviving or transferee corporation,
that issuer shall join in the supplemental warrant agreement. The above
provisions of this paragraph (b) shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(c) Issuance of Additional Shares of Common Stock. In the event the Company
shall, at any time or from time to time after the date hereof, issue, sell,
distribute or otherwise grant in any manner (including by assumption) any
additional shares of Common Stock without consideration or for a price per share
less than the current market price per share of Common Stock on the date of the
issuance, sale, distribution or granting of such additional shares, then,
effective upon such issuance or sale, (I) the Exercise Price shall be reduced to
the price (calculated to the nearest 1/1,000 of one cent) determined by
multiplying the Exercise Price in effect immediately prior to such issuance or
sale by a fraction, the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding (exclusive of any treasury shares)
immediately prior to such issuance or sale multiplied by the current market
price per share of Common Stock on the date of such issuance or sale plus (ii)
the consideration, if any, received by the Company in respect of such issuance
or sale, and the denominator of which shall be the product of (A) the total
number of shares of Common Stock outstanding (exclusive of any treasury shares)
immediately after such issuance or sale multiplied by (B) the current market
price per share of Common Stock on the record date for such issuance or sale and
(II) the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock so purchasable immediately prior to the record date for
such issuance or sale by a fraction, the numerator of which shall be the
Exercise Price in effect immediately prior to the adjustment required by clause
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(I) of this sentence and the denominator of which shall be the Exercise Price in
effect immediately after such adjustment.
(d) Issuance of Options or Convertible Securities. In the event the Company
shall, at any time or from time to time after the date hereof, issue, sell,
distribute or otherwise grant in any manner (including by assumption) any rights
to subscribe for or to purchase, or any warrants or options for the purchase of,
Common Stock or any stock or securities convertible into or exchangeable for
Common Stock (any such rights, warrants or options being herein called "Options"
and any such convertible or exchangeable stock or securities being herein called
"Convertible Securities") or any Convertible Securities (other than upon
exercise of any Option), whether or not such Options or the rights to convert or
exchange such Convertible Securities are immediately exercisable, and if the
price per share at which Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the aggregate amount, if any, received or receivable
by the Company as consideration for the issuance, sale, distribution or granting
of such Options or any such Convertible Security, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
exercise of all such Options or upon conversion or exchange of all such
Convertible Securities, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the conversion or exchange of all such Convertible Securities, by
(ii) the total maximum number of shares of Common Stock issuable upon the
exercise of all such Options or upon the conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of all Convertible
Securities issuable upon the exercise of all such Options) shall be less than
the current market price per share of Common Stock on the date for the issuance,
sale, distribution or granting of such Options or Convertible Securities (any
such event being herein called a "Distribution"), then, effective upon such
Distribution, (I) the Exercise Price shall be reduced to the price (calculated
to the nearest 1/1,000 of one cent) determined by multiplying the Exercise Price
in effect immediately prior to such Distribution by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common Stock outstanding
(exclusive of any treasury shares) immediately prior to such Distribution
multiplied by the current market price per share of Common Stock on the date of
such Distribution plus (ii) the consideration, if any, received by the Company
in respect of such Distribution, and the denominator of which shall be the
product of (A) the total number of shares of Common Stock outstanding (exclusive
of any treasury shares) immediately after such Distribution multiplied by (B)
the current market price per share of Common Stock on the record date for such
Distribution and (II) the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock so purchasable immediately
prior to the record date for such Distribution by a fraction, the numerator of
which shall be the Exercise Price in effect immediately prior to the adjustment
required by clause (I) of this sentence and the denominator of which shall be
the Exercise Price in effect immediately after such adjustment. For purposes of
the foregoing, the total maximum number of shares of Common Stock issuable upon
exercise of all such Options or upon conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of the total maximum
amount of the Convertible Securities issuable upon the exercise of all such
Options shall be deemed to have been issued as of the date of such Distribution
and thereafter shall be deemed to
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be outstanding and the Company shall be deemed to have received as consideration
therefor such price per share, determined as provided above. Except as provided
in paragraphs (j) and (k) below, no additional adjustment of the Exercise Price
shall be made upon the actual exercise of such Options or upon conversion or
exchange of the Convertible Securities or upon the conversion or exchange of the
Convertible Securities issuable upon the exercise of such Options.
(e) Dividends and Distributions. In the event the Company shall, at any
time or from time to time after the date hereof, distribute to all the holders
of Common Stock any dividend or other distribution of cash, evidences of its
indebtedness, other securities or other properties or assets (in each case other
than (i) dividends payable in Common Stock, Options or Convertible Securities
and (ii) any cash dividend that, when added to all other cash dividends paid
with respect to Common Stock in the one year prior to the declaration date of
such dividend (excluding any such other dividend included in a previous
adjustment of the Exercise Price pursuant to this paragraph (e) and excluding
any cash dividends or other cash distributions from current or retained
earnings), does not exceed 5% of the current market price per share of Common
Stock on such declaration date), or any options, warrants or other rights to
subscribe for or purchase any of the foregoing, then (A) the Exercise Price
shall be decreased to a price determined by multiplying the Exercise Price then
in effect by a fraction, the numerator of which shall be the current market
price per share of Common Stock on the record date for such distribution less
the sum of (X) the cash portion, if any, of such distribution per share of
Common Stock outstanding (exclusive of any treasury shares) on the record date
for such distribution plus (Y) the then fair market value (as determined in good
faith by the Board of Directors of the Company) per share of Common Stock
outstanding (exclusive of any treasury shares) on the record date for such
distribution of that portion, if any, of such distribution consisting of
evidences of indebtedness, other securities, properties, assets, options,
warrants or subscription or purchase rights, and the denominator of which shall
be such current market price per share of Common Stock and (B) the number of
shares of Common Stock purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock so purchasable immediately prior to the record date for such distribution
by a fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (A) of this sentence and
the denominator of which shall be the Exercise Price in effect immediately after
such adjustment. The adjustments required by this paragraph (e) shall be made
whenever any such distribution occurs retroactive to the record date for the
determination of stockholders entitled to receive such distribution.
(f) Current Market Price. For the purpose of any computation of current
market price under this Section 11 and Section 13, the current market price per
share of Common Stock at any date shall be (x) for purposes of Section 13, the
closing price on the business day immediately prior to the exercise of the
applicable Warrant pursuant to Section 6 and (y) in all other cases, the average
of the daily closing prices for the shorter of (i) the 20 consecutive trading
days ending on the last full trading day on the exchange or market specified in
the second succeeding sentence prior to the Time of Determination (as defined
below) and (ii) the period commencing on the date next succeeding the first
public announcement of the issuance, sale, distribution or granting in question
through such last full trading day prior to the Time of Determination. The term
"Time of Determination" as used herein
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<PAGE> 14
shall be the time and date of the earlier to occur of (A) the date as of which
the current market price is to be computed and (B) the last full trading day on
such exchange or market before the commencement of "ex-dividend" trading in the
Common Stock relating to the event giving rise to the adjustment required by
paragraph (a), (b), (c), (d) or (e) above. The closing price for any day shall
be the last reported sale price regular way or, in case no such reported sale
takes place on such day, the average of the closing bid and asked prices regular
way for such day, in each case (1) on the principal national securities exchange
on which the shares of Common Stock are listed or to which such shares are
admitted to trading or (2) if the Common Stock is not listed or admitted to
trading on a national securities exchange, in the over-the-counter market as
reported by Nasdaq National or SmallCap Markets or any comparable system or (3)
if the Common Stock is not listed on Nasdaq National or SmallCap Markets or a
comparable system, as furnished by two members of the NASD selected from time to
time in good faith by the Board of Directors of the Company for that purpose. In
the absence of all of the foregoing, or if for any other reason the current
market price per share cannot be determined pursuant to the foregoing provisions
of this paragraph (f), the current market price per share shall be the fair
market value thereof as determined in good faith by the Board of Directors of
the Company and evidenced by a resolution of such Board, subject to the
following dispute resolution right of the Holders of the Warrants. In the event
that Holders of a majority of the Warrants dispute the determination of the
Board of Directors, such Holders shall notify the Company and the current market
price shall be determined in a reasonably prompt manner as follows:
(1) The Company and Holders of a majority of the Warrants shall each
appoint an independent, experienced appraiser who is a member of a
recognized professional association of business appraisers. The two
appraisers shall determine the value of shares of Common Stock at the
relevant date, assuming a sale between a willing buyer and a willing
seller, both of whom have full knowledge of the financial and other affairs
of the Company, and neither of whom is under any compulsion to sell or to
buy.
(2) If the higher of the two appraisals is not more than 20% more than
the lower of the appraisals, the current market price per share shall be
the average of the two appraisals. If the higher of the two appraisals is
20% or more than the lower of the two appraisals, then a third appraiser
shall be appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall appoint the
third appraiser. The third appraiser, regardless of who appoints him or
her, shall have the same qualifications as the first two appraisers.
(3) The current market price per share after the appointment of the
third appraiser shall be the average of the two appraisals that are closest
in value to each other.
(4) The fees and expenses of the appraisers shall be paid one-half by
the Company and one-half by the Holders.
(g) Certain Distributions. If the Company shall pay a dividend or make any
other distribution payable in Options or Convertible Securities, then, for
purposes of paragraph (d) above,
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<PAGE> 15
such Options or Convertible Securities shall be deemed to have been issued or
sold without consideration.
(h) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the then fair market value of
such consideration (as determined in good faith by the Board of Directors of the
Company and evidenced by a Board resolution). If any Options shall be issued in
connection with the issuance and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued without consideration; provided, however, that if
such Options have an exercise price equal to or greater than the current market
price of the Common Stock on the date of issuance of such Options, then such
Options shall be deemed to have been issued for consideration equal to such
exercise price.
(i) Deferral of Certain Adjustments. No adjustment to the Exercise Price
(including the related adjustment to the number of shares of Common Stock
purchasable upon the exercise of each Warrant) shall be required hereunder
unless such adjustment, together with other adjustments carried forward as
provided below, would result in an increase or decrease of at least one percent
of the Exercise Price; provided that any adjustments which by reason of this
paragraph (i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. No adjustment need be made for a
change in the par value of the Common Stock. All calculations under this Section
shall be made to the nearest 1/1,000 of one cent or to the nearest 1/1000 of a
share, as the case may be.
(j) Changes in Options and Convertible Securities. If the exercise price
provided for in any Options referred to in paragraph (d) above, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (d) or (e) above, or the rate at
which any Convertible Securities referred to in paragraph (d) or (e) above are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 11), the Exercise Price then in effect and the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall forthwith be
readjusted (effective only with respect to any exercise of any Warrant after
such readjustment) to the Exercise Price and number of shares of Common Stock so
purchasable that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
(k) Expiration of Options and Convertible Securities. If, at any time after
any adjustment to the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall have been made pursuant to paragraph (d), (e) or
(j) above or this paragraph (k), any Options or Convertible Securities shall
have expired unexercised, the number of such shares so purchasable shall,
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<PAGE> 16
upon such expiration, be readjusted and shall thereafter be such as they would
have been had they been originally adjusted (or had the original adjustment not
been required, as the case may be) as if (i) the only shares of Common Stock
deemed to have been issued in connection with such Options or Convertible
Securities were the shares of Common Stock, if any, actually issued or sold upon
the exercise of such Options or Convertible Securities and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate consideration, if
any, actually received by the Company for the issuance, sale, distribution or
granting of all such Options or Convertible Securities, whether or not
exercised; provided that no such readjustment shall have the effect of
decreasing the number of such shares so purchasable by an amount (calculated by
adjusting such decrease to account for all other adjustments made pursuant to
this Section 11 following the date of the original adjustment referred to above)
in excess of the amount of the adjustment initially made in respect of the
issuance, sale, distribution or granting of such Options or Convertible
Securities.
(l) Other Adjustments. In the event that at any time, as a result of an
adjustment made pursuant to this Section 11, the Holders shall become entitled
to receive any securities of the Company other than shares of Common Stock,
thereafter the number of such other securities so receivable upon exercise of
the Warrants and the Exercise Price applicable to such exercise shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Common Stock
contained in this Section 11.
(m) Employee Plans. No adjustment in the Exercise Price or the number and
kind of shares purchaseable upon exercise of the Warrants shall be made under
the provisions of Section 11 for shares of Common Stock and Common Equity
Securities issued or issuable as compensation to employees of the Company or its
subsidiaries but only to the extent that the total aggregate number of issued
and issuable shares of Common Stock in connection therewith does not exceed
_______________ shares [15% OF THE FULLY DILUTED OUTSTANDING SHARES OF COMMON
STOCK ON ISSUE DATE].
Section 12. Statement on Warrants. Irrespective of any adjustment in the
number or kind of shares issuable upon the exercise of the Warrants or the
Exercise Price, Warrants theretofore or thereafter issued may continue to
express the same number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
Section 13. Fractional Interest. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of shares
of Common Stock acquirable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 13, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall direct the Transfer Agent to pay an amount in cash
calculated by it equal to (i) the then current market price per share multiplied
by such fraction computed to the nearest whole cent, less (ii) an amount equal
to the
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<PAGE> 17
Exercise Price multiplied by such fraction computed to the nearest whole cent.
The Holders, by their acceptance of the Warrant Certificates, expressly waive
any and all rights to receive any fraction of a share of Common Stock or a stock
certificate representing a fraction of a share of Common Stock.
Section 14. Notices to Warrant Holders. Upon any adjustment of the Exercise
Price pursuant to Section 11, the Company shall promptly thereafter cause to be
given to each of the registered Holders by first-class mail, postage prepaid, a
certificate executed by the Chief Financial Officer of the Company setting forth
the Exercise Price after such adjustment and setting forth in reasonable detail
the method of calculation and the facts upon which such calculations are based
and setting forth the number of Warrant Shares (or portion thereof) issuable
after such adjustment in the Exercise Price, upon exercise of a Warrant and
payment of the adjusted Exercise Price, which certificate shall be conclusive
evidence, absent manifest error, of the correctness of the matters set forth
therein.
In case:
(a) the Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock
or distributions referred to in Section 11 hereof); or
(c) of any consolidation or merger to which the Company is a party for
which approval of any shareholders of the Company is required and following
which the shareholders of the Company before such consolidation or merger
no longer hold at least 75% of the outstanding capital stock of the Company
following the merger or consolidation, or of the conveyance or transfer of
all or substantially all of the properties and assets of the Company, or of
any reclassification or change of Common Stock issuable upon exercise of
the Warrants (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision
or combination), or a tender offer or exchange offer for shares of Common
Stock, or other transaction that would result in a change in control; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any other action that would require
an adjustment of the Exercise Price or the number of Warrant Shares
pursuant to Section 11; then the Company shall cause to be given to each of
the registered Holders of the Warrants at such Holder's address appearing
on the Warrant register, at least 20 days (or 10 days in any case specified
in clauses (a) or (b) above) prior to the applicable record date
hereinafter
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<PAGE> 18
specified, or promptly in the case of events for which there is no record
date, by first-class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are
to be determined, or (ii) the initial expiration date set forth in any
tender offer or exchange offer for shares of Common Stock, or (iii) the
date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up or change of control is expected to
become effective or consummated, and the date as of which it is expected
that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up or change of control. The failure to
give the notice required by this Section 14 or any defect therein shall not
affect the legality or validity of any distribution, right, option,
warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or change of control or the vote upon any
action. Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the
right to vote or to consent or to receive notice as shareholders in respect
of the meetings of shareholders or the election of Directors of the Company
or any other matter, or any rights whatsoever as shareholders of the
Company.
Section 15. Registration. The Company acknowledges that Holders of Warrants
shall have the registration rights set forth in the Registration Rights
Agreement.
Section 16. Reports. For each fiscal quarter and each fiscal year of the
Company, the Company will transmit by mail to all Warrant Holders, as their
names and addresses appear in the register, without cost to such Warrant
Holders, unaudited quarterly and audited annual financial statements of the
Company prepared in accordance with GAAP. Beginning with the initial public
offering of the Company and thereafter, whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto,
the Company shall prepare the annual and quarterly reports and other
information, and documents ("SEC Reports") as the Commission shall prescribe
pursuant to such Section 13(a) or 15(d) and which the Company is or would be (if
they were so subject) required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provision thereto (on or prior to the
respective dates (the "Required Filing Dates") by which the Company is or would
(if they were so subject) be required so to file such SEC Reports) and shall,
within 15 days of the Required Filing Date transmit by mail to all Warrant
Holders, as their names and addresses appear in the register, without cost to
such Warrant Holders, copies of such annual and quarterly reports.
Section 17. Rule 144A. The Company hereby agrees with each Holder, for so
long as any Registrable Securities remain outstanding and the Company is not
subject to Section 13(a) or 15(d) of the Exchange Act, to make available, upon
request of any Holder of Registrable Securities, to any Holder or beneficial
owner of Registrable Securities in connection with any sale thereof and any
prospective purchaser of such Registrable Securities designated by such Holder
or beneficial owner,
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<PAGE> 19
the information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Registrable Securities pursuant to Rule 144A.
Section 18. Notices to Holders and Company. All notices and other
communications provided herein (including, without limitation, any waivers or
consents under this Agreement) shall be given or made by telecopy, telegraph,
cable or otherwise in writing (each communication given by any such means to be
deemed "in writing" for purposes of this Agreement) and telecopies, telegraphed,
cabled, mailed or delivered to the intended recipient at the address for such
party following hereafter or, as to any party, at such other addresses as shall
be designated by such party in a notice to the others. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given (i) when delivered to the telegraph or cable office or personally
delivered or, (ii) in the case of transmission by telecopy, when telecopied
(with confirmation) and mailed (with same day post-mark) certified mail, return
receipt requested or (iii) in the case of a mailed notice, three days after
deposit with the United States Post Office, by registered or certified mail,
return receipt requested, in each case given or addressed as follows:
(a) If to Nortel Networks:
Nortel Networks Inc.
GMS 911 15 A40
2221 Lakeside Boulevard
Richardson, Texas 75082-4399
Attn: Robert Beiter, Director, Customer Finance
Telecopy No.: (972) 684-3679
(b) If to the Company:
Alamosa PCS Holdings, Inc..
4727 South Loop 289
Lubbock, Texas 79424
Attn: David E. Sharbutt, President
Telecopy No.: (806) 791-7711
(c) If to the Holders other than Nortel Networks, to the respective
addresses of the Holders provided to the Company from time to time.
Section 19. Supplements and Amendments. The Company and Nortel Networks may
from time to time supplement or amend this Agreement without the approval of any
Holders of Warrants in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and Nortel Networks may deem
necessary or desirable and which shall not in any way adversely affect the
interests of the Holders of Warrants. Any amendment or supplement to this
Agreement that has a material adverse effect on the
19
<PAGE> 20
interests of Holders shall require the written consent of Holders representing a
majority of the then outstanding Warrants (excluding Warrants held by the
Company or any of its Affiliates); provided, however, that the consent of each
Holder of a Warrant affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided for in Section 11 hereof). Nortel Networks shall be
entitled to receive and shall be fully protected in relying upon an officer's
certificate and opinion of counsel as conclusive evidence that any such
amendment or supplement is authorized or permitted hereunder, that it does or
does not, as the case may be, require the written consent of Holders to be
effective hereunder, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company in accordance with its terms.
Section 20. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 21. Termination. Subject to the last paragraph of Section 6, this
Agreement (other than any party's obligations with respect to Warrants
previously exercised and with respect to indemnification) shall terminate at
4:00 p.m., Dallas, Texas time on the Expiration Date.
Section 22. Governing Law. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF SAID STATE, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF.
Section 23. Benefits of This Agreement.
(a) The Holders are the third-party beneficiaries of this Agreement.
Nothing in this Agreement shall be construed to give to any Person other than
the Company, Nortel Networks and the Holders of the Warrants any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, Nortel Networks and the
Holders of the Warrants from time to time.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant, as such,
shall be entitled to any rights of a stockholder of a Company, including,
without limitation, the right to receive dividends or subscription rights, the
right to vote, to consent, to exercise any preemptive right, to receive any
notice of or to participate in meetings of stockholders for the election of
directors of the Company or any other matter or to receive any notice of any
proceedings of the Company, except as may be specifically and expressly provided
for herein. The Holders of the Warrants are not entitled to share in the assets
of the Company in the event of the liquidation, dissolution or winding up of the
Company's affairs.
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<PAGE> 21
(c) All rights of action in respect of this Agreement are vested in the
Holders of the Warrants, and any Holder of any Warrant, without the consent of
the Holder of any other Warrant, may, on such Holder's own behalf and for such
Holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company suitable to enforce, or otherwise in respect
of, such Holder's rights hereunder, including the right to exercise, exchange or
surrender for purchase such Holder's Warrants in the manner provided in this
Agreement.
Section 24. Representations and Warranties.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has the corporate power
and authority to conduct its business as currently conducted and as intended to
be conducted, has the corporate power and authority to execute and deliver this
Agreement and the Warrant Certificates, to issue the Warrants and to perform its
obligations under this Agreement and the Warrant Certificates, has the corporate
power and authority and legal right to own and lease its properties and is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which it owns or leases real property or in which the conduct of its business
requires such qualification, except where failure to be so qualified could not
be reasonably expected to have a material adverse effect on the business,
properties, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
(b) The execution, delivery and performance by the Company of this
Agreement and the Warrant Certificates, the issuance of the Warrants and the
issuance of the Warrant Shares upon exercise of the Warrants have been duly
authorized by all necessary corporate action and do not and will not violate, or
result in a breach of, or constitute a default under, or require any consent
under, or result in the creation of any lien, charge of encumbrance upon any of
the assets of the Company pursuant to, any law, statute, ordinance, rule,
regulation, order or decree of any court, governmental body or regulatory
authority or administrative agency having jurisdiction over the Company or its
subsidiaries or the Company's Articles of Incorporation or any contract,
mortgage, loan agreement, note, lease or other instrument binding upon the
Company or its subsidiaries or by which any of their respective properties are
bound.
(c) This Agreement and the Warrant Certificates executed and delivered on
the date hereof have been duly executed and delivered by the Company. This
Agreement, the Warrant Certificates and the Warrants constitute legal, valid,
binding and enforceable obligations of the Company. The Warrant Shares, when
issued upon exercise of the Warrants in accordance with the terms hereof, will
be duly authorized, validly issued, fully paid, nonassessable and free of any
lien or encumbrance not created by the Holder thereof. The Warrants and the
Warrant Shares are not subject to any preemptive right or right of first
refusal.
(d) The authorized capital stock of Company consists solely of (i)
[__________] shares of Common Stock, of which [__________] shares are currently
issued and outstanding, and (ii) [__________] shares of preferred stock (the
"Preferred Stock"), of which [_________] shares of [_________________]are
currently issued and outstanding (the Common Stock and the Preferred
21
<PAGE> 22
Stock being, collectively, the "Capital Stock"). Except for the Warrants, and
except as set forth on Schedule 1 attached hereto, there are outstanding on the
date hereof no options, warrants or other securities exercisable or exchangeable
for or convertible into shares of Capital Stock of the Company or any other
rights to acquire Capital Stock of the Company.
(e) The representations and warranties as to the financial statements of
the Company set forth in Section 7.2 of the Credit Agreement are true and
correct.
Section 25. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ALAMOSA PCS HOLDINGS, INC.
By:
Name:
------------------------------------
Title:
------------------------------------
NORTEL NETWORKS INC.
By:
------------------------------------
Paul D. Day
Vice President Customer Finance
23
<PAGE> 1
EXHIBIT 10.29
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this "Agreement") is
entered into this date by and between ALAMOSA PCS, LLC, a Texas Limited
Liability Company, having its principal executive office located at 4403
Brownfield Highway, Lubbock, Texas 79407 (the "Company"), and JERRY BRANTLEY, an
individual residing at Lubbock, Texas (the "Employee").
WITNESSETH:
WHEREAS, the parties entered into an employment agreement as of October
1, 1998; and
WHEREAS, the parties desire to amend and restate said employment
agreement to set forth and confirm their respective rights and obligations with
respect to the Employee's continued employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto mutually agree as follows:
1. EMPLOYMENT; TERM; DUTIES. The Company hereby continues to employ the
Employee as President and Chief Operating Officer ("COO") pursuant to this
Agreement, for the period from October 1, 1999, (the "Commencement Date") until
September 30, 2003, or the termination of this Agreement as described in Section
5 hereof, whichever shall occur first. The Employee hereby agrees to his
continued employment, and agrees to devote his full time and effort to the
business and affairs of the Company with such duties consistent with the
Employee's position as may be assigned to him from time to time by the Board of
Managers of the Company and/or the Chief Executive Officer ("CEO") of the
Company. Notwithstanding the foregoing, the Company acknowledges that the
Employee has other business interests and ownerships. Subject to the provisions
of Sections 7 through 10 hereof, the Company acknowledges and consents to the
continuation of these ownerships and relationships, provided they do not
interfere with the Employee's duties under this Agreement. Notwithstanding
anything to the contrary in this Agreement, nothing in this Agreement shall be
deemed to impose any obligation on the Company or any of its subsidiaries to
continue to employ the Employee, or on the Employee to remain in the employ of
the Company or any of its subsidiaries.
2. COMPENSATION. In consideration of all services rendered by the
Employee as President and COO during the term of his employment, pursuant to
this Agreement, the Company will provide the Employee with the following
compensation:
EMPLOYMENT AGREEMENT Page 1 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 2
(a) BASE SALARY. The Company will pay the Employee a base
salary at the annual rate of $175,000.00, payable periodically
but no less often than semi-monthly, in substantially equal
amounts, in accordance with the Company's payroll practices
from time to time in effect. The Company will review the
Employee's base salary at least once each year and may, in its
discretion, increase the Employee's base salary.
(b) BONUS. In addition to the Employee's base salary, the
Employee shall be eligible to receive a bonus (a "Quarterly
Bonus") for each calendar quarter in an amount, if any,
determined as follows: In each calendar quarter Employee's
Quarterly Bonus shall be equal to the sum of (1) plus (2) as
follows:
(1) $15,000.00 multiplied by the percentage set forth
opposite each Expected Milestone set forth in the
attached EXHIBIT "A", incorporated herein by
reference, which is achieved for that calender
quarter.
(2) $15,000.00 multiplied by the percentage set forth
opposite each Exceptional Milestone set forth in
EXHIBIT "A" which is achieved for that calendar
quarter.
If any particular Expected Milestone or Exceptional Milestone
is not achieved for any calendar quarter, that percentage
share of the dollar amount specified in (1) or (2) above, as
the case may be, shall not be payable as part of the Quarterly
Bonus. The Expected Milestones, Exceptional Milestones and
percentages set forth on EXHIBIT "A" may be changed by the
Company at any time and from time to time, but shall be
reasonable by wireless industry standards. Any such change
shall not apply earlier than the calendar quarter following
the calendar quarter in which such change is made by the
Company and communicated to the Employee.
Any Quarterly Bonus owing to the Employee shall be paid within
forty-five (45) days following the end of the applicable
calendar quarter.
(c) UNIT OPTIONS. Any options granted to the Employee under
his prior employment agreement shall be canceled, and the
Employee shall have no further rights with respect to those
options. It is the Company's intention to assign its rights
and obligations under this Agreement to Alamosa PCS Holdings,
Inc. ("Holdings") and become a wholly-owned subsidiary of
Holdings. If, on June 30, 2000, the Company or its successor
in a merger, consolidation or acquisition, has not become a
EMPLOYMENT AGREEMENT Page 2 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 3
wholly-owned subsidiary of Alamosa PCS Holdings, Inc., a
Delaware corporation ("Holdings"), then on said date the
Company will convert the membership interests in the Company
to forty-eight million five hundred thousand (48,500,000)
membership units, and shall grant to the Employee options to
purchase nonvoting membership units in the Company as follows:
(1) First Option. An option (the "First Option") to
purchase two hundred forty-two thousand five hundred
(242,500) membership units in the Company at a per
unit purchase price equal to One Dollar and Fifteen
Cents ($1.15), said First Option to be fully vested
and immediately exercisable by the Employee, and
thereafter be exercisable at any time until January 5,
2009, in accordance with the option agreement to be
entered into between the Company and the Employee as
of June 30, 2000, upon terms and conditions
substantially similar to the terms and conditions of
the Nonqualified Stock Option Agreement entered into
by the Employee pursuant to the Alamosa PCS Holdings,
Inc. 1999 Long-Term Incentive Plan.
(2) Second Option. An option (the "Second Option") to
purchase one million four hundred fifty-five thousand
(1,455,000) membership units in the Company at a per
unit purchase price equal to Fifteen Dollars ($15.00),
said Second Option, subject to Section 6 hereof, to
vest and be exercisable by the Employee in four (4)
equal installments of three hundred sixty-three
thousand seven hundred fifty (363,750) membership
units each on September 30, 2000, September 30, 2001,
September 30, 2002, and September 30, 2003,
respectively, and thereafter be exercisable at any
time until January 5, 2009, in accordance with the
option agreement to be entered into between the
Company and the Employee as of June 30, 2000, upon
terms and conditions substantially similar to the
terms and conditions of the Nonqualified Stock Option
Agreement entered into by the Employee pursuant to the
Alamosa PCS Holdings, Inc. 1999 Long-Term Incentive
Plan, including but not limited to full vesting of the
Second Option upon a Change of Control as defined in
Section 6(g)(2) hereof.
The Employee will receive no additional compensation for serving the Company in
any other capacity.
3. EMPLOYEE BENEFITS. The Employee will be entitled to participate in
all incentive, retirement, profit-sharing, life, medical, disability and other
benefit plans and programs (collectively "Benefit Plans") as are from time to
time generally available to other executives of the Company with comparable
responsibilities, subject to the
EMPLOYMENT AGREEMENT Page 3 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 4
provisions of those programs. Without limiting the generality of the foregoing,
the Company will provide the Employee with basic health and medical benefits on
the terms that such benefits are provided to other executives of the Company
with comparable responsibilities. The Employee will also be entitled to
holidays, sick leave and vacation in accordance with the Company's policies as
they may change from time to time, but in no event shall the Employee be
entitled to less than four (4) weeks paid vacation per year.
4. EXPENSES.
(a) Reimbursement for Expenses. The Company will promptly
reimburse the Employee, in accordance with the Company's
policies and practices in effect from time to time, for all
expenses reasonably incurred by the Employee in performance of
the Employee's duties under this Agreement, including
reimbursement for miles driven by the Employee in furtherance
of the Company's business ("Business Mileage").
(1) Reimbursement for Business Mileage shall be at
the standard mileage rate allowed by the Internal
Revenue Service ("IRS") for the taxable year and set
forth in the appropriate IRS publication.
(2) Business mileage does not include commuting from
Employee's residence to the Company's headquarters.
(3) Employee is responsible for proper substantiation
and reporting of Business Mileage and/or actual
expenses.
(4) Employee acknowledges that the payment to him of
a monthly vehicle allowance plus the standard mileage
rate may result in taxable income if the business
portion of actual automobile expenses is less than
the total amount paid to employee under this
subsection, or if employee does not maintain the
records required by the Internal Revenue Code and the
Regulations thereunder. Employee has been advised to
consult a tax advisor to determine the taxability of
payments under this subsection, and the record
keeping requirements associated with the travel and
expenses associated with such payments.
(b) Expense Allowance. In addition to reimbursed expenses,
Employee is entitled to $600.00 per month as a vehicle
allowance.
EMPLOYMENT AGREEMENT Page 4 of 22
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5. TERMINATION. The Employee's employment by the Company: (a) shall
terminate upon the Employee's death or disability (as defined below); (b) may be
terminated by the Company for any reason other than cause or non-performance at
any time; (c) may be terminated by the Company for cause (as defined below) at
any time; (d) may be terminated by the Employee, without cause at any time upon
forty-five (45) days' prior written notice delivered by the Employee to the
Company; (e) may be terminated by the Employee for cause (as defined below) at
any time upon forty-five (45) days' prior written notice delivered by the
Employee to the Company; and (f) may be terminated by the Company for
non-performance by the Employee at any time.
(a) The term "disability" means the determination under the
Company's Long-Term Disability Plan that the Employee is
eligible to receive a disability benefit.
(b) The term "cause" in the event of termination of the
Employee's employment by the Company means (i) any breach of
Sections 7 or 9 of this Agreement by Employee which has a
material adverse effect on the Company and which is not or
cannot be cured within thirty (30) days after notice from the
Board of Managers of the Company thereof; (ii) commission of
any act of fraud, embezzlement or dishonesty by the Employee
that is materially and demonstrably injurious to the Company;
(iii) any act or omission by Employee which constitutes a
uncured default or breach of that certain Sprint PCS
Management Agreement dated July 17, 1998 and as it may be
amended from time to time or any other similar Sprint
Management Agreement to which the Company or any of its
affiliates or subsidiaries may be a party ("the Sprint
Agreement"); or (iv) any other intentional misconduct by the
Employee adversely affecting the business or affairs of the
Company in a material manner. The term "intentional misconduct
by the Employee adversely affecting the business or affairs of
the Company" shall mean such misconduct that is detrimental to
the business or the reputation of the Company as it is
perceived both by the general public and the
telecommunications industry.
(c) The term "cause" in the event of termination of the
Employee's employment by the Employee means the change in job
responsibilities of the Employee resulting in the demotion,
removal or failure to elect Employee to the position of
President and COO or the job responsibilities of that
position, which demotion, removal or failure to elect is
caused by something other than cause for termination of the
Employee's employment by the Company under Section 5(b) hereof
and other than the non-performance of the Employee as defined
under Section 5(d) hereof.
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(d) The term "non-performance by the Employee" in the event of
termination of the Employee's employment by the Company means
the determination by a super-majority (greater than 75%) of
the members of the Board of Managers of the Company, in their
sole and absolute discretion, that the Employee is not
performing his duties under this Agreement after the Board of
Managers of the Company has delivered to the Employee written
notice which specifically identifies the manner in which the
Board believes he is not performing his duties and which is
not or cannot be cured within 15 days after such written
notice is delivered to the Employee.
6. CONSEQUENCES OF TERMINATION.
(a) CONSEQUENCES OF TERMINATION ON EMPLOYEE'S DEATH OR
DISABILITY. If the Employee's employment is terminated prior
to September 30, 2003, because of the Employee's death or
disability, (i) subject to Section 6(h) hereof, this Agreement
terminates immediately; (ii) Employee or his legal
representative or estate, as the case may be, shall be
eligible to exercise any options granted and vested pursuant
to Section 2(c) hereof at the time of such death or
disability, plus, if such death or disability does not occur
on September 30 of a given year, a fractional portion of those
options which would have vested and become exercisable
pursuant to Section 2(c) hereof on the September 30
immediately following such death or disability based on a
fraction whose numerator is the number of months (including
the month in which the date of death or disability occurs)
since the previous September 30 and whose denominator is
twelve (12), in accordance with the provisions of Section 2(c)
hereof and the option agreement referred to therein, and any
other options granted to the Employee shall be forfeited;
(iii) the Company will pay the Employee, or his legal
representative or estate, as the case may be, in full
satisfaction of all of its compensation (base salary and
bonus) obligations under this Agreement, an amount equal to
the sum of any base salary due to the Employee through the
last day of employment, plus any accrued bonus to which the
Employee may have been entitled on the last day of employment,
but had not yet been received; and (iv) the Employee's
benefits and rights under any Benefit Plan shall be paid,
retained or forfeited in accordance with the terms of such
plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for
Employee from and after termination.
EMPLOYMENT AGREEMENT Page 6 of 22
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<PAGE> 7
(b) CONSEQUENCES OF TERMINATION BY THE COMPANY FOR ANY REASON
OTHER THAN FOR CAUSE OR FOR NON-PERFORMANCE OF EMPLOYEE.
(1) If the Employee's employment is terminated by the
Company prior to September 30, 2003, for any reason
other than for cause or non-performance of Employee,
(i) subject to Section 6(h) hereof, this Agreement
terminates immediately; (ii) Employee or his legal
representative or estate, as the case may be, shall
be eligible to exercise any options granted but not
exercised pursuant to Section 2(c) hereof, all of
which options shall be deemed vested as of the date
of the Employee's termination of employment
regardless of whether or not they are in fact
otherwise vested pursuant to Section 2(c) hereof on
said date, in accordance with the provisions of
Section 2(c) hereof and the option agreement referred
to therein; (iii) the Company will pay the Employee,
in full satisfaction of all of its compensation (base
salary and bonus) obligations under this Agreement,
an amount equal to the sum of any base salary due to
the Employee through the last day of employment, plus
any accrued bonus to which the Employee may have been
entitled on the last day of employment, but had not
yet been received; (iv) the Company will pay the
Employee, within sixty (60) days of such termination,
a lump sum severance payment equal to one (1) year's
base salary as in effect at the date of employment
termination; and (v) the Employee's benefits and
rights under any Benefit Plan, other than any basic
health and medical benefit plan, shall be paid,
retained or forfeited in accordance with the terms of
such plan; provided, however, that Employer shall
have no obligation to make any payments toward these
benefits for Employee from and after termination.
(2) Any payment pursuant to clause (b)(1)(iv) above
(the "Termination Payment"):
a. will be subject to offset for any
advances, amounts receivable, and loans,
including accrued interest, outstanding on
the date of the employment termination; and
b. will not be subject to offset on account
of any remuneration paid or payable to the
Employee for any subsequent employment the
Employee may obtain, whether during or after
the period during which the Termination
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<PAGE> 8
Payment is made, and the Employee shall have
no obligation whatever to seek any
subsequent employment.
(c) CONSEQUENCES OF TERMINATION FOR CAUSE BY THE COMPANY. If
the Employee's employment is terminated by the Company prior
to September 30, 2003, for cause, (i) subject to Section 6(h)
hereof, this Agreement terminates immediately; (ii) Employee
shall not be eligible to exercise and shall forfeit any
options granted (whether or not vested) pursuant to Section
2(c) hereof at the time of such employment termination that
have not already been exercised by the Employee at the time of
such employment termination; (iii) the Company will pay the
Employee, in full satisfaction of all of its compensation
(base salary and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the Employee
through the last day of employment, plus any accrued bonus to
which the Employee may have been entitled on the last day of
employment, but had not yet been received; and(iv) the
Employee's benefits and rights under any Benefit Plan shall be
paid, retained or forfeited in accordance with the terms of
such plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for
Employee from and after termination.
(d) CONSEQUENCES OF TERMINATION BY THE EMPLOYEE FOR ANY REASON
OTHER THAN FOR CAUSE OR EMPLOYEE'S DEATH OR DISABILITY. If,
upon forty-five (45) days' prior written notice to the Company
by the Employee, the Employee's employment is terminated by
the Employee prior to September 30, 2003, for any reason other
than for cause or Employee's death or disability, (i) subject
to Section 6(h) hereof, this Agreement terminates immediately;
(ii) Employee or his legal representative or estate, as the
case may be, shall be eligible to exercise any options granted
and vested, but not exercised pursuant to Section 2(c) hereof
at the time of such employment termination, in accordance with
the provisions of Section 2(c) hereof and the option agreement
referred to therein, and any other options granted to the
Employee shall be forfeited; (iii) the Company will pay the
Employee, in full satisfaction of all of its compensation
(base salary and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the Employee
through the last day of employment, plus any accrued bonus to
which the Employee may have been entitled on the last day of
employment, but had not yet been received; and (iv) the
Employee's benefits and rights under any Benefit Plan, other
than any basic health and medical benefit plan, shall be
retained or forfeited in accordance with the terms of such
plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for
Employee from and after termination.
EMPLOYMENT AGREEMENT Page 8 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 9
(e) CONSEQUENCES OF TERMINATION BY THE EMPLOYEE FOR CAUSE.
(1) If, upon forty-five (45) days' prior written
notice to the Company by the Employee, the Employee's
employment is terminated by the Employee prior to
September 30, 2003, for cause (i) subject to Section
6(h) hereof, this Agreement terminates immediately;
(ii) Employee or his legal representative or estate,
as the case may be, shall be eligible to exercise any
options granted and vested pursuant to Section 2(c)
hereof at the time of such employment termination,
plus, if such employment termination does not occur
on September 30 of a given year, those options which
would have vested and become exercisable pursuant to
Section 2(c) hereof on the September 30 immediately
following such employment termination, in accordance
with the provisions of Section 2(c) hereof and the
option agreement referred to therein, and any other
options granted to the Employee shall be forfeited;
(iii) the Company will pay the Employee, in full
satisfaction of all of its compensation (base salary
and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the
Employee through the last day of employment, plus any
accrued bonus to which the Employee may have been
entitled on the last day of employment, but had not
yet been received; (iv) the Company will pay the
Employee, within sixty (60) days of such termination,
a lump sum severance payment equal to one (1) year's
base salary as in effect at the date of employment
termination or the unpaid balance of the annual base
salary which would have been payable to Employee
through September 30, 2003, whichever amount shall be
less; and (v) the Employee's benefits and rights
under any Benefit Plan, other than any basic health
and medical benefit plan, shall be paid, retained or
forfeited in accordance with the terms of such plan;
provided, however, that Employer shall have no
obligation to make any payments toward these benefits
for Employee from and after termination.
(2) Any payment pursuant to clause (e)(1)(iv) above
(the "Termination Payment"):
a. will be subject to offset for any
advances, amounts receivable, and loans,
including accrued interest, outstanding on
the date of the employment termination; and
EMPLOYMENT AGREEMENT Page 9 of 22
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<PAGE> 10
b. will not be subject to offset on account
of any remuneration paid or payable to the
Employee for any subsequent employment the
Employee may obtain, whether during or after
the period during which the Termination
Payment is made, and the Employee shall have
no obligation whatever to seek any
subsequent employment.
(f) CONSEQUENCES OF TERMINATION BY THE COMPANY FOR
NON-PERFORMANCE BY THE EMPLOYEE. If the Employee's employment
is terminated by the Company prior to September 30, 2003, for
non-performance by the Employee (i) subject to Section 6(h)
hereof, this Agreement terminates immediately; (ii) Employee
or his legal representative or estate, as the case may be,
shall be eligible to exercise any options granted and vested
but not exercised pursuant to Section 2(c) hereof at the time
of such employment termination, in accordance with the
provisions of Section 2(c) hereof and the option agreement
referred to therein, and any other options granted to the
Employee shall be forfeited; (iii) the Company will pay the
Employee, in full satisfaction of all of its compensation
(base salary and bonus) obligations under this Agreement, an
amount equal to the sum of any base salary due to the Employee
through the last day of employment, plus any accrued bonus to
which the Employee may have been entitled on the last day of
employment, but had not yet been received; and (iv) the
Employee's benefits and rights under any Benefit Plan, other
than any basic health and medical benefit plan, shall be paid,
retained or forfeited in accordance with the terms of such
plan; provided, however, that Employer shall have no
obligation to make any payments toward these benefits for
Employee from and after termination.
EMPLOYMENT AGREEMENT Page 10 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 11
(g) CONSEQUENCES OF TERMINATION BY THE COMPANY FOLLOWING A
CHANGE OF CONTROL.
(1) If the Employee's employment is terminated by the
Company prior to September 30, 2003, for any reason
other than for cause (as defined in Section 5(b)
hereof) within one (1) year following a Change of
Control, (i) subject to Section 6(h) hereof, this
Agreement terminates immediately; (ii) Employee or
his legal representative or estate, as the case may
be, shall be eligible to exercise any options granted
but not exercised pursuant to Section 2(c) hereof all
of which options shall be deemed vested as of the
date of the Employee's termination of employment
regardless of whether or not they are in fact
otherwise vested pursuant to Section 2(c) hereof on
said date, in accordance with the provisions of
Section 2(c) hereof and the option agreement referred
to therein; (iii) the Company will pay the Employee,
in full satisfaction of all of its compensation (base
salary and bonus) obligations under this Agreement,
an amount equal to the sum of any base salary due to
the Employee through the last day of employment, plus
any accrued bonus to which the Employee may have been
entitled on the last day of employment, but had not
yet been received; (iv) the Company will pay the
Employee, within sixty (60) days of such termination,
a lump sum severance payment equal to the unpaid
balance of the base salary which would have been
payable to Employee through September 30, 2003; and
(v) the Employee's benefits and rights under any
Benefit Plan, other than any basic health and medical
benefit plan, shall be paid, retained or forfeited in
accordance with the terms of such plan; provided,
however, that Employer shall have no obligation to
make any payments toward these benefits for Employee
from and after termination.
(2) The term "Change of Control" shall have the same
meaning as defined in the Alamosa PCS Holdings, Inc.
1999 Long-Term Incentive Plan.
(3) Any payment pursuant to clause (g)(1)(iv) above
(the "Termination Payment"):
a. will be subject to offset for any
advances, amounts receivable, and loans,
including accrued interest outstanding on
the date of the employment termination; and
EMPLOYMENT AGREEMENT Page 11 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 12
b. will not be subject to offset on account
of any remuneration paid or payable to the
Employee for any subsequent employment the
Employee may obtain, whether during or after
the period during which the Termination
Payment is made, and the Employee shall have
no obligation whatever to seek any
subsequent employment.
(h) PRESERVATION OF CERTAIN PROVISIONS. Notwithstanding any
provisions of this Agreement to the contrary, the provisions
of Sections 7 through 12 hereof shall survive the expiration
or termination of this Agreement as necessary to give full
effect to all of the provisions of this Agreement.
7. NON-COMPETITION BY EMPLOYEE. During the term of this Agreement, the
Employee shall not, directly or indirectly, either as an Employee, Employer,
Consultant, Agent, Principal, Partner, Corporate Officer, Director, Shareholder,
Member, Investor or in any other individual or representative capacity, engage
or participate in any business that is in competition in any manner whatever
with the business of the Company. For these purposes, the business of the
Company is establishing and providing mobile wireless communications services
(the "Business"), including all aspects of the Business, within the Service Area
as that term is defined in the Schedule of Definitions referred to in and
incorporated by reference into the Sprint Agreement. Furthermore, upon the
expiration of this Agreement or the termination of this Agreement prior to
September 30, 2002, for any reason, the Employee expressly agrees not to engage
or participate, directly or indirectly, either as an Employee, Employer,
Consultant, Agent, Principal, Partner, Stockholder, Corporate Officer, Director,
Shareholder, Member, Investor or in any other individual or representative
capacity, for a period of two (2) years in any business that is in competition
with the Business and that is located within and/or doing business within the
Service Area as defined above as in existence during the term of the Employee's
employment with the Company. The parties agree that the Company has a legitimate
interest in protecting the Business and goodwill of the Company that has
developed in the areas of the Company's Business and in the geographical areas
of this Covenant Not To Compete as a result of the operations of the Company.
The parties agree that the Company is entitled to protection of its interests in
these areas. The parties further agree that the limitations as to time,
geographical area, and scope of activity to be restrained do not impose a
greater restraint upon Employee than is necessary to protect the goodwill or
other business interest of the Company. The parties further agree that in the
event of a violation of this Covenant Not To Compete, that the Company shall be
entitled to the recovery of damages from Employee and/or an injunction against
Employee for the breach or violation or continued breach or violation of this
Covenant. The Employee agrees that if a court of competent jurisdiction
determines that the length of time or any other restriction, or portion thereof,
set forth in this Section 7 is overly restrictive and
EMPLOYMENT AGREEMENT Page 12 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 13
unenforceable, the court may reduce or modify such restrictions to those which
it deems reasonable and enforceable under the circumstances, and as so reduced
or modified, the parties hereto agree that the restrictions of this Section 7
shall remain in full force and effect. The Employee further agrees that if a
court of competent jurisdiction determines that any provision of this Section 7
is invalid or against public policy, the remaining provisions of this Section 7
and the remainder of this Agreement shall not be affected thereby, and shall
remain in full force and effect.
8. EXCEPTIONS TO NON-COMPETITION COVENANTS. Notwithstanding anything
herein to the contrary or apparently to the contrary, the following shall not be
a violation or breach of the non-competition covenants contained in this
Agreement. Employee may invest in the securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if (a) such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934 and
(b) the Employee does not beneficially own (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) in excess of 5% of the outstanding
capital stock of such enterprise. In addition, employee's investment in any
company or entity in which Employer is an owner or stockholder at the time of
entering into this Amended and Restated Employment Agreement shall also be an
exception to the non-competition covenants. The names of these companies or
entities are shown on the attached Exhibit B, which is incorporated herein by
this reference as if copied at length. Notwithstanding the foregoing, the
Employee's relationship with other entities or business interests of Employee
shall in no way interfere with or detract from the duties of the Employee to the
Company as called for in this Agreement.
9. CONFIDENTIAL INFORMATION. The Employee recognizes and acknowledges
that he will have access to certain information of members of the Company Group
(as defined below) and that such information is confidential and constitutes
valuable, special and unique property of such members of the Company Group. The
parties agree that the Company has a legitimate interest in protecting the
Confidential Information, as defined below. The parties agree that the Company
is entitled to protection of its interests in the Confidential Information. The
Employee shall not at any time, either during or subsequent to the term of this
Agreement, disclose to others, use, copy or permit to be copied, except in
pursuance of his duties for an on behalf of the Company, it successors, assigns
or nominees, any Confidential Information of any member of the Company Group
(regardless of whether developed by the Employee) without the prior written
consent of the Company. Employee acknowledges that the use or disclosure of the
Confidential Information to anyone or any third party could cause monetary loss
and damages to the Company. The parties further agree that in the event of a
violation of this covenant against non-use and non-disclosure of Confidential
Information, that the Company shall be entitled to a recovery of damages from
Employee and/or an injunction against Employee for the breach or violation or
continued breach or violation of this covenant.
EMPLOYMENT AGREEMENT Page 13 of 22
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<PAGE> 14
As used herein, "Company Group" means the Company, and any entity that
directly or indirectly controls, is controlled by, or is under common control
with, the Company, and for purposes of this definition "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities, by contract or otherwise.
The term "Confidential Information" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, financial and operating information, customers,
supplier arrangements, contracts, costs, prices, uses, and applications of
products and services, results of investigations, studies or experiments owned
or used by such person, and all apparatus, products, processes, compositions,
samples, formulas, computer programs, computer hardware designs, computer
firmware designs, and servicing, marketing or manufacturing methods and
techniques at any time used, developed, investigated, made or sold by such
person, before or during the term of this Agreement, that are not readily
available to the public or that are maintained as confidential by such person.
The Employee shall maintain in confidence any Confidential Information of third
parties received as a result of his employment with the Company in accordance
with the Company's obligations to such third parties and the policies
established by the Company.
10. DELIVERY OF DOCUMENTS UPON TERMINATION. The Employee shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Employee, solely or jointly with others, that are in
the Employee's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company Group. In this regard, the Employee hereby grants and
conveys to the Company all right, title and interest in and to, including
without limitation, the right to possess, print, copy, and sell or otherwise
dispose of, any reports, records, papers, summaries, photographs, drawings or
other documents, and writings, and copies, abstracts or summaries thereof, that
may be prepared by the Employee or under his direction or that may come into his
possession in any way during the term of his employment with the Company that
relate in any manner to the past, present or anticipated business of any member
of the Company Group.
11. DISPUTES. The Company and Employee agree to the following in regard
to any disputes between them arising under any of the provisions of this
Agreement other than the provisions of Sections 7 through 10 hereof. Nothing in
this Section 11 applies to or governs disputes arising under Sections 7 through
10 of this Agreement.
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<PAGE> 15
(a) MEDIATION. The Company and Employee agree to mediate any
dispute arising under the applicable provisions of this
Agreement. In the event of any such dispute, the parties,
within thirty (30) days of a written request for mediation,
shall attend, in good faith, a mediation in order to make a
good faith reasonable effort to resolve such dispute arising
under this Agreement. The parties shall attempt, in good
faith, to agree to a mediator. If unable to so agree, the
parties, in that event, will move to arbitration as provided
in this Agreement and there will be no mediation. If this good
faith mediation effort fails to resolve any dispute arising
under this Agreement, the Company and Employee agree to
arbitrate any dispute arising under this Agreement. This
arbitration shall occur only after the mediation process
described herein.
(b) ARBITRATION. The Company and Employee agree, as concluded
by the parties to this Agreement on the advice of their
counsel, and as evidenced by the signatures of the parties and
of their respective attorneys, that all questions as to rights
and obligations arising under the terms of this Agreement are
subject to arbitration and such arbitration shall be governed
by the provisions of the Texas General Arbitration Act (Texas
Civil Practice and Remedies Code Section 171.001 et seq as it
may be amended from time to time).
(c) DEMAND FOR ARBITRATION. If a dispute should arise under
this Agreement, either party may within thirty (30) days make
a demand for arbitration by filing a demand in writing with
the other.
(d) APPOINTMENT OF ARBITRATORS. The parties to this Agreement
may agree on one arbitrator, but in the event that they cannot
so agree, there shall be three arbitrators, one named in
writing by each of the parties within thirty (30) days after
demand for arbitration is made, and a third to be chosen by
the two so named. The arbitrators among themselves shall
appoint a presiding arbitrator. Should either party fail to
timely join in the appointment of the arbitrators, the
arbitrators shall be appointed in accordance with the
provisions of Texas Civil Practice and Remedies Code Section
171.041.
(e) HEARING. All arbitration hearings conducted under the
terms of this Agreement, and all judicial proceedings to
enforce any of the provisions of this Agreement, shall take
place in Lubbock County, Texas. The hearing before the
arbitrators of the matter to be arbitrated shall be at the
time and place within that County selected by the arbitrators
or if deemed by the arbitrators to be more convenient for the
parties or more economically
EMPLOYMENT AGREEMENT Page 15 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 16
feasible, may be conducted in any city within the Service Area
as referred to in Section 7 hereof or within the State of
Texas.
(f) ARBITRATION AWARD. If there is only one arbitrator, his or
her decision shall be binding and conclusive. The submission
of a dispute to the arbitrators and the rendering of their
decision shall be a condition precedent to any right of legal
action on the dispute. A judgment confirming the award of the
arbitrators may be rendered by any court having jurisdiction;
or the court may vacate, modify, or correct the award in
accordance with the provisions of the Texas General
Arbitration Act (Texas Civil Practice and Remedies Code
Section 171.087 et seq as it may be amended from time to
time).
(g) COSTS OF ARBITRATION. The costs and expenses of
arbitration, including the fees of the arbitrators but
excluding any attorneys' fees, shall be advanced by the
Company, but will ultimately be borne by the losing party or
in such proportions as the arbitrators shall determine.
(h) CONDUCT OF ARBITRATION. Any arbitration brought under the
terms of this Agreement shall be conducted in the following
manner:
(1) Time Limitations. The parties agree that the
following time limitations shall govern the
arbitration proceedings conducted under the terms of
this Agreement:
(a) Any demand for arbitration must be filed
within thirty (30) days of the date the
mediation is deemed unsuccessful, or thirty
(30) days after the date of the written
request for mediation, whichever is later.
(b) Each party must select an arbitrator
within thirty (30) days of receipt of notice
that an arbitration proceeding has
commenced. In the event that no such
selection is made, the arbitrator selected
by the other party may conduct the
arbitration proceeding without selecting any
other arbitrator.
(c) The hearing must be held within sixty
(60) days of the date on which the third
arbitrator is selected.
(d) Hearing briefs must be submitted no
later than ten (10) days after the hearing.
EMPLOYMENT AGREEMENT Page 16 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 17
(e) The arbitration award must be made
within thirty (30) days of the receipt of
hearing briefs.
(2) Discovery in Arbitration Proceedings. The parties
agree that discovery may be conducted in the course
of the arbitration proceeding in accordance with the
following provisions:
(a) Each party may notice no more than three
(3) depositions in total, including both
witnesses adherent to the adverse party and
third-party witnesses.
(b) Each party may serve no more than
twenty-five (25) requests for admission on
the other party. No requests may be served
within ten (10) days of the date of hearing,
unless the parties otherwise stipulate. All
requests for admission shall be responded to
within ten (10) days of service of the
requests, unless the parties otherwise
stipulate.
(c) Each party may serve no more than fifty
(50) interrogatories on the other party. No
interrogatory shall contain subparts, or
concern more than one topic or subject of
inquiry. Interrogatories may not be phrased
so as to circumvent the effect of this
clause. No interrogatories may be served
within ten (10) days of the date of hearing,
unless the parties otherwise stipulate. All
interrogatories shall be responded to within
ten (10) days of service of the
interrogatories, unless the parties
otherwise stipulate.
(d) Each party may serve no more than ten
(10) requests for production of documents on
the other party. No request for production
of documents shall contain subparts, or seek
more than one type of document. Requests for
production of documents may not be phrased
so as to circumvent the effect of this
clause. Unless the parties otherwise
stipulate, requests for production of
documents may not be served within ten (10)
day of the date of hearing, and all requests
for production of documents shall be
responded to within ten (10) days of service
of the requests.
(e) If any party contends that the other
party has served discovery requests in a
manner not permitted by this Section, or
that the other party's response to a
discovery request is unsatisfactory, the
party may request the
EMPLOYMENT AGREEMENT Page 17 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 18
presiding arbitrator to resolve such
discovery disputes. The presiding arbitrator
shall prescribe the procedure by which such
disputes are resolved. Any discovery dispute
may be handled by telephone conference among
the parties and the presiding arbitrator.
12. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT. The Company shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree in writing to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place, provided that the
Employee must be given the position as the President and Chief Operating Officer
("COO") of such successor with the same authority, powers and responsibilities
set forth in Section 1 hereof with respect to the subsidiary or subdivision
which operates the business of the Company as it exists on the date of such
business combination. Upon the First Option Exercise Date (as defined in that
certain Nonqualified Stock Option Agreement between Employee and Holdings
executed contemporaneously with this Agreement), the Company shall be required
to assign all of its rights and obligations hereunder to Holdings and Holdings
shall expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it,
provided that the Employee must be given the position as President and Chief
Operating Officer of Holdings with the same authority, powers and
responsibilities set forth in Section 1 hereof. Failure of the Company to obtain
such express assumption and agreement at or prior to the effectiveness of any
such succession or event shall be a breach of this Agreement and shall entitle
the Employee to compensation and benefits from the Company in the same amount
and on the same terms to which the Employee would be entitled hereunder if the
Company terminated the Employee's employment without Cause, except that all
options will be immediately vested. For purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the date
of termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise. The Company may not assign this Agreement, (i) except in connection
with, and to the acquiror of, all or substantially all of the business or assets
of the Company, provided such acquiror expressly assumes and agrees in writing
to perform this Agreement as provided in this Section, and (ii) except in
connection with the Company becoming a wholly-owned subsidiary of Holdings, in
which event the Company may assign this Agreement and all of the Company's
rights and obligations hereunder to Holdings. The Employee may not assign his
rights or delegate his duties or obligations under this Agreement.
EMPLOYMENT AGREEMENT Page 18 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 19
13. NOTICE. Any notices or other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
made or given when hand delivered, one (1) business day after being transmitted
by telecopier (confirmed by mail) or sent by overnight courier against receipt,
or five (5) days after being mailed by registered or certified mail, postage
prepaid, return receipt requested, to the party to whom such communication is
given at the address set forth below, which address may be changed by notice
given in accordance with this Section:
If to the Company: Alamosa PCS LLC
4403 Brownfield Highway
Lubbock, Texas 79407
Attn: David E. Sharbutt, Chairman
With Copy to: Jack McCutchin, Jr.
Crenshaw, Dupree & Milam, L.L.P.
P. O. Box 1499
Lubbock, Texas 79408-1499
If to the Employee: Jerry Brantley
----------------------------
----------------------------
With Copy to: Carol Bavousett Mattick
International Bank of Commerce Centre
130 East Travis, Suite 330
San Antonio, Texas 78205
14. MISCELLANEOUS.
(a) SEVERABILITY. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the
remaining provisions hereof which shall remain in full force
and effect.
(b) NO ORAL MODIFICATION, WAIVER OR DISCHARGE. No provisions
of this Agreement may be modified, waived or discharged
orally, but only by a waiver, modification or discharge in
writing signed by the Employee and such officer as may be
designated by the Board of Managers of the Company to execute
such a waiver, modification or discharge. No waiver by either
party hereto at any time of any breach by the other party
hereto of, or failure to be in compliance with, any condition
or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the time or at any prior or
EMPLOYMENT AGREEMENT Page 19 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 20
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not
expressly set forth in this Agreement or in the documents
attached as Exhibits to this Agreement.
(c) INVALID PROVISIONS. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such
holding shall not have the effect of invalidating or voiding
the remainder of this Agreement and the parties hereby agree
that the portion so held invalid, unenforceable or void shall,
if possible, be deemed amended or reduced in scope, or
otherwise be stricken from this Agreement to the extent
required for the purposes of validity and enforcement thereof.
(d) ENTIRE AGREEMENT. This Agreement and the Exhibits attached
hereto represent the entire agreement of the parties and shall
supersede any and all previous contracts, arrangements or
understandings, express or implied, between the Employee and
the Company with respect to the subject matter hereof.
(e) SECTION HEADINGS FOR CONVENIENCE ONLY. The section
headings herein are for the purpose of convenience only and
are not intended to define or limit the contents of any
section.
(f) EXECUTION IN COUNTERPARTS. The parties may sign this
Agreement in counterparts, all of which shall be considered
one and the same instrument.
(g) GOVERNING LAW AND PERFORMANCE. This Agreement shall be
governed by the laws of the State of Texas and shall be deemed
to be executed in and performance called for in Lubbock,
Lubbock County, Texas, or at the Company's sole option, by the
laws of the state or states where this Agreement may be at
issue in any litigation involving the Company.
DATED this 18th day of January, 2000, to be effective October 1, 1999.
EMPLOYMENT AGREEMENT Page 20 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 21
COMPANY
ALAMOSA PCS LLC
By: /s/ DAVID SHARBUTT
-----------------------------------
Name: David E. Sharbutt
---------------------------------
Title: Chief Executive Officer
--------------------------------
EMPLOYEE
/s/ JERRY BRANTLEY
--------------------------------------
JERRY BRANTLEY
EMPLOYMENT AGREEMENT Page 21 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 22
Approved as to the mediation and arbitration provisions in Paragraph 12 above.
CRENSHAW, DUPREE & MILAM, L.L.P.
By /s/ JACK McCUTCHIN, JR.
------------------------------------
JACK McCUTCHIN, JR.
Attorneys for Alamosa PCS LLC
/s/ CAROL BAVOUSETT MATTICK
--------------------------------------
Carol Bavousett Mattick
Attorney for Employee
Attachment: Exhibit "A" - The Minimum, Expected and Exceptional Milestones for
the Third Quarter and Fourth Quarter of 1999 as
adopted by the Board of Managers of the Company
Exhibit "B" - List of Companies or Entities Excepted from Covenants
EMPLOYMENT AGREEMENT Page 22 of 22
ALAMOSA PCS LLC and Jerry Brantley
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this second amendment to the Registration
Statement on Form S-1 (File No. 333-89995) of our report dated December 5, 1999,
except as to Note 11 which is as of December 31, 1999, relating to the financial
statements of Alamosa PCS LLC (a development stage enterprise), which appear in
such Registration Statement. We also consent to the references to us under the
headings "Experts," "Summary Financial and Operating Data" and "Selected
Financial Data" in such Registration Statement.
PricewaterhouseCoopers LLP
Dallas, Texas
January 19, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD FROM JULY 16, 1998 (INCEPTION)
TO DECEMBER 31, 1998 AND FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 9-MOS
<FISCAL-YEAR-END> JUL-16-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 13,529,077 7,454,309
<SECURITIES> 0 0
<RECEIVABLES> 0 957,182
<ALLOWANCES> 0 24,355
<INVENTORY> 0 4,989,500
<CURRENT-ASSETS> 13,581,123 13,981,993
<PP&E> 116,055 37,825,883
<DEPRECIATION> 2,063 896,075
<TOTAL-ASSETS> 15,673,885 88,411,727
<CURRENT-LIABILITIES> 889,633 14,481,661
<BONDS> 23,637 60,031,276
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 14,076,178 13,209,796
<TOTAL-LIABILITY-AND-EQUITY> 15,673,885 88,411,727
<SALES> 0 813,052
<TOTAL-REVENUES> 0 2,000,060
<CGS> 0 794,963
<TOTAL-COSTS> 0 1,613,641
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (17) (885,868)
<INCOME-PRETAX> (958,394) (17,247,297)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (923,822) (17,688,419)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (923,822) (17,688,419)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
