<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
UBIQUITEL INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4812 23-3017909
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Industrial Identification No.)
Classification Code Number)
</TABLE>
1 BALA PLAZA, SUITE 402
BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-9510
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
--------------------------
DONALD A. HARRIS
UBIQUITEL INC.
1 BALA PLAZA, SUITE 402
BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-9510
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C> <C>
REBECCA R. ORAND, ESQ. LEE R. MARKS, ESQ. MICHAEL A. SASLAW, ESQ.
GREENBERG TRAURIG, P.A. ERIC W. COWAN, ESQ. WEIL, GOTSHAL & MANGES LLP
1221 BRICKELL AVENUE GREENBERG TRAURIG, LLP 100 CRESCENT COURT, SUITE
MIAMI, FLORIDA 33131 1750 TYSONS BOULEVARD 1300
TELEPHONE NO.: (305) TYSONS CORNER, VIRGINIA DALLAS, TEXAS 75201
579-0500 22102 TELEPHONE NO.: (214)
FACSIMILE NO.: (305) TELEPHONE NO.: (703) 746-7700
579-0717 749-1300 FACSIMILE NO.: (214)
FACSIMILE NO.: (703) 746-7777
749-1301
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, 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, please 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,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE(1)
<S> <C> <C>
Common Stock, par value $0.001.............................. $150,000,000 $39,600
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN
DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR
OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
SUBJECT TO COMPLETION -- DATED MARCH , 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 2000
[LOGO] UBIQUITEL INC.
SHARES OF COMMON STOCK
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
UBIQUITEL INC.:
- - We are the exclusive provider of Sprint PCS
digital personal communication services to
midsize and smaller markets in the western
and midwestern United States covering
approximately 7.7 million residents.
- - UbiquiTel Inc.
1 Bala Plaza, Suite 402
Bala Cynwyd, Pennsylvania 19004
(610) 660-9510
PROPOSED SYMBOL & MARKET:
- - We will apply for listing on the Nasdaq
National Market under the symbol "UPCS."
THE OFFERING:
- - We are offering shares of our common
stock.
- - We have granted the underwriters an option
to purchase an additional shares from
us to cover over-allotments.
- - This is our initial public offering, and we
anticipate that the initial public offering
price will be between $ and
$ per share.
- - Closing: , 2000.
</TABLE>
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------
Per Share Total
--------------------------------------------------------------------------------
Public offering price: $ $
Underwriting fees:
Proceeds to UbiquiTel Inc.:
--------------------------------------------------------------------------------
</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
DLJDIRECT INC.
<PAGE>
(Pictures)
[MAP OF UNITED STATES SHOWING THE REGISTRANT'S SPRINT PCS MARKETS]
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................ 2
Risk Factors...................... 7
Forward-Looking Statements........ 21
Use of Proceeds................... 22
Dividend Policy................... 23
Capitalization.................... 24
Dilution.......................... 25
Unaudited Pro Forma Condensed
Consolidated Financial Data..... 26
Selected Financial Data........... 29
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 31
Business.......................... 38
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Sprint PCS Agreements......... 63
Description of Certain
Indebtedness.................... 76
Management........................ 79
Principal Stockholders............ 88
Certain Transactions.............. 90
Regulation of the Wireless
Telecommunications Industry..... 91
Description of Capital Stock...... 95
Shares Eligible for Future Sale... 100
Underwriting...................... 102
Legal Matters..................... 105
Experts........................... 105
Available Information............. 106
Index to Financial Statements..... F-1
</TABLE>
------------------------
In this prospectus, unless indicated otherwise, "UbiquiTel," "we," "us" and
"our" refer to UbiquiTel Inc., and its subsidiaries. "UbiquiTel Operating
Company" refers to UbiquiTel's wholly owned operating subsidiary through which
it will provide digital personal communications services. "Sprint PCS" refers to
Sprint Communications Company, L.P., Sprint Spectrum L.P. and WirelessCo, L.P.
"Sprint" refers to Sprint Corporation and its affiliates other than Sprint PCS.
Statements in this prospectus regarding Sprint or Sprint PCS are derived from
information contained in our agreements with Sprint PCS, periodic reports and
other documents filed by Sprint and Sprint Spectrum L.P. with the Securities and
Exchange Commission, or press releases issued by Sprint or Sprint PCS.
All references to shares of our common stock in this prospectus reflect a
for-one split of our common stock which was effective as of ,
2000, and the conversion of shares of our preferred stock into shares of
our common stock upon consummation of this offering.
We were organized on September 29, 1999 as a corporation under the laws of
Delaware.
This prospectus also contains product names, tradenames and trademarks of
other companies.
iii
<PAGE>
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.
THE COMPANY
OVERVIEW
We are the exclusive provider of Sprint PCS digital personal communications
services, generally known as PCS, to midsize and smaller markets in the western
and midwestern United States. Through our management agreement with Sprint PCS,
we have the exclusive right to provide 100% digital, 100% PCS products and
services under the Sprint and Sprint PCS brand names in markets which include a
total population of approximately 7.7 million residents. Sprint PCS, together
with its affiliates including us, operates the largest all-digital, all-PCS
nationwide wireless network in the United States, already covering more than
190 million residents in more than 330 metropolitan markets. Sprint PCS has PCS
licenses to cover more than 270 million people across all 50 states, Puerto Rico
and the U.S. Virgin Islands. We believe that our strategic relationship with
Sprint PCS provides us with a significant competitive advantage because of its
strong brand name recognition, quality products and services, established
distribution channels, long-standing equipment vendor relationships and all
digital nationwide coverage. We further believe that our relationship with
Sprint PCS will allow 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.
We have commenced limited operations in one of our markets, which together
with our pending acquisition of the Spokane, Washington market from Sprint PCS,
cover approximately 500,000 residents. We expect to cover approximately 55% of
the resident population in our markets by the end of 2001. We anticipate that
the net proceeds of this offering, when combined with the proceeds from our
recent sale of preferred stock, UbiquiTel Operating Company's proposed senior
subordinated debt financing and the availability of borrowings under UbiquiTel
Operating Company's proposed new senior credit facility, will be adequate to
fund our anticipated network build-out plan, capital expenditures, working
capital requirements, operating losses and other cash needs through anticipated
break-even cash flow from operations in 2003.
We have assembled an experienced management team to execute our network
build-out and business strategy. Our senior management team has an average of
over ten years of experience in the wireless communications industry with
companies such as Comcast Cellular Communications, PacTel Cellular and Frontier
Cellular Communications. Donald A. Harris, our President and Chief Executive
Officer, previously was president of Comcast Cellular Communications and managed
much of its network build-out in Pennsylvania, New Jersey and Delaware with a
covered population of over 8 million residents. Upon completion of this
offering, our senior management will own approximately % of our common stock
assuming conversion of all of our outstanding warrants and options to purchase
our common stock.
2
<PAGE>
OUR MARKETS
The majority of our network will cover portions of California, Nevada,
Washington, Idaho, Montana, Utah, Indiana and Kentucky for a combined population
of approximately 7.7 million residents. These markets are attractive for the
following reasons:
- FEWER COMPETITORS/UNTAPPED MARKET PENETRATION. Because the national
wireless providers have primarily focused on the larger metropolitan
markets, we believe that our markets have lower wireless penetration rates
as compared to the national average of 32% as of year end 1999. We further
believe that offering a high quality, all digital nationwide product in
our markets will allow us to achieve greater market penetration with less
pricing competition than in larger markets.
- CONTIGUOUS TO MAJOR EXISTING SPRINT PCS MARKETS. Our markets are
contiguous to major existing Sprint PCS markets with a combined licensed
population of over 22 million. We anticipate that the proximity of our
markets to a large established base of Sprint PCS customers will
facilitate brand awareness, create an extended seamless coverage area and
generate Sprint PCS travel revenue as existing Sprint PCS customers travel
into our markets.
- IMPORTANT TRANSPORTATION CORRIDORS. Our markets include major and, in some
cases, the only transportation corridors that link the population centers
within and adjacent to our markets. Over 45 million vehicle miles are
traveled daily on the 2,200 miles of major highways we expect to cover in
our markets. We anticipate this will generate significant Sprint PCS
travel and other roaming revenue as wireless subscribers based out of our
markets use our portion of the Sprint PCS Network.
- POPULAR VACATION AND TOURIST DESTINATIONS. Our markets contain several
popular vacation and tourist destinations which draw over 20 million
visitors annually, including Yellowstone National Park and Glacier
National Park, and Lake Tahoe and Sun Valley resorts. We anticipate these
destinations will generate significant Sprint PCS travel and other roaming
revenue from tourists.
- FAVORABLE DEMOGRAPHICS. Our markets have attractive demographic
characteristics for PCS, including an overall average population growth
rate that is over 60% higher than the national average. In addition, there
are also 12 major colleges and universities, each with student populations
greater than 10,000, located within our markets, which we believe will
favorably impact our penetration rates.
3
<PAGE>
The table below provides estimated information about our markets. ADVM
refers to the average daily vehicle miles for all of our covered miles based on
information sourced from Geographic Data Technology, Inc.
<TABLE>
<CAPTION>
PERCENT SELECTED
SIGNIFICANT RESIDENTS CONTIGUOUS COVERED
LAUNCH TOTAL COVERED SPRINT PCS HIGHWAY
DESCRIPTION DATES RESIDENTS AT BUILD-OUT MARKETS MILES/ADVM
- --------------------- ------------- ---------- ------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
Reno/Tahoe/ Northern September-00/ 1.7 mm 72% Sacramento, San 300 miles/
California......... Feb-01 Francisco, Stockton, 13 mm ADVM
Fresno, Central, CA;
Portland, Eugene, OR
Spokane/Montana...... Apr-00/ 1.8 mm 65% Seattle, Tacoma, 350 miles/
Jan-02 Olympia, WA; 6 mm ADVM
Portland, OR;
Eastern, WA
Southern Idaho/ Utah/ Jan-01/ 1.4 mm 72% Salt Lake City, 790 miles/
Nevada............. Apr-01 Ogden, Provo, UT; 14 mm ADVM
Las Vegas, NV
Southern Indiana/ Apr-01 2.7 mm 50% Indianapolis, IN; 840 miles/
Kentucky........... Columbus, 12 mm ADVM
Cincinnati, OH;
Louisville, KY;
Nashville, TN;
St. Louis, MO
<CAPTION>
SELECTED
DISTINGUISHING
MARKET
DESCRIPTION CHARACTERISTICS
- --------------------- --------------------------
<S> <C>
Reno/Tahoe/ Northern - Tahoe resorts, casinos
California......... (6.0 mm tourists/year)
- 2 major colleges
(25,000 students)
Spokane/Montana...... - Resorts, national parks
(5.9 mm tourists/year)
- 4 major colleges
(52,000 students)
Southern Idaho/ Utah/ - Resorts, national parks
Nevada............. (8.5 mm tourists/year)
- 3 major colleges
(42,000 students)
Southern Indiana/ - Industrial economy
Kentucky........... with major employers
- 3 major colleges
(61,000 students)
</TABLE>
BUSINESS STRATEGY
We are the exclusive provider of 100% digital, 100% Sprint PCS services in
our markets. 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 as a low cost provider in our markets.
- 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 Sprint and Sprint PCS' brands, quality products
and services, established distribution system, long-standing vendor
equipment relationships and nationwide digital coverage. We also plan to
emphasize the traveling and bundled long distance aspects of Sprint's
"Free and Clear" calling plans, particularly in those markets where
competitors are not offering bundled plans for nationwide digital service.
- EXECUTE OPTIMAL NETWORK BUILD-OUT PLAN. We utilize a rigorous financial
model to analyze every aspect of our 100% digital, 100% PCS network
build-out. Accordingly, we have targeted the more densely populated areas
within our markets for network build-out as well as areas expected to
generate significant Sprint PCS travel and other roaming revenue such as
the major transportation corridors and tourist destinations.
- UTILIZE OTHER STRATEGIC THIRD PARTY RELATIONSHIPS IN NETWORK BUILD-OUT. We
have entered into outsourcing or other relationships with Lucent
Technologies, LCC International and SpectraSite Communications to benefit
from their specialized expertise and economies of
4
<PAGE>
scale in order to build-out our portion of the Sprint PCS Network more
quickly and with lower initial capital and staffing requirements than
would otherwise be possible.
- IMPLEMENT EFFECTIVE OPERATING STRUCTURE WITH A FOCUS ON CUSTOMER SERVICE.
Our organization and management structure is based on a decentralized,
local market-focused model. We will rely on Sprint PCS to provide the
majority of our back-office support, including customer activation,
billing and customer care, while focusing our resources on the management
of each market. We will place experienced management teams at the local
level with the authority to tailor operations and sales and marketing
programs to each market. We will also place particular emphasis on
customer service provided through company-owned stores located throughout
our markets to ensure high customer satisfaction and low customer
turnover.
- FOCUS ON MIDSIZE AND SMALLER MARKETS. We believe that midsize and smaller
markets receive a lower level of attention from the major wireless
providers as they focus on the larger markets. We believe that an
opportunity currently exists for us to provide a high quality, nationwide
digital product to markets with less competition than frequently seen in
the larger markets. We will capitalize on this opportunity through our own
internal build-out as well as through the pursuit of future acquisitions
or affiliations.
SOURCES AND USES OF FUNDS
The following table highlights our projected sources and uses of capital for
this offering, our recent sale of preferred stock and UbiquiTel Operating
Company's proposed senior subordinated debt financing and its proposed new
senior credit facility from December 31, 1999 through December 31, 2003.
<TABLE>
<CAPTION>
AMOUNT
(IN MILLIONS)
<S> <C>
SOURCES:
Gross proceeds from this offering......................... $
Gross proceeds from the preferred stock investment........
Gross proceeds from UbiquiTel Operating Company's proposed
senior subordinated debt financing......................
Proposed senior credit facility...........................
--------
Total sources........................................... $
========
USES:
Capital expenditures...................................... $
Acquisition of Spokane PCS assets.........................
Debt repayment............................................
Fees and expenses.........................................
Cash on hand..............................................
--------
Total uses.............................................. $
========
</TABLE>
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered........................................ shares
Common Stock to be Outstanding After the Offering........... shares
Proposed Nasdaq National Market Symbol...................... "UPCS"
Risk Factors................................................ See "Risk Factors" beginning
on page 7 for a discussion of
the material factors that you
should consider before
purchasing shares of common
stock.
</TABLE>
Unless otherwise indicated, all information in this prospectus:
- reflects the conversion of all outstanding shares of preferred stock into
shares of common stock upon the closing of this offering;
- gives effect to a -for-one stock split effective as of
, 2000;
- assumes no exercise of the underwriters' over-allotment option;
- excludes shares of common stock reserved for issuance under our 2000
Equity Incentive Plan including options outstanding to purchase
shares of our common stock at a weighted average exercise price of
$ per share;
- excludes shares of common stock issuable upon the exercise of
outstanding options at an exercise price of $ per share; and
- excludes shares of common stock issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $ per
share.
6
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING THE COMMON
STOCK WE ARE OFFERING. THE CAUTIONARY STATEMENTS SET FORTH BELOW AND ELSEWHERE
IN THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH ACCOMPANYING
FORWARD-LOOKING STATEMENTS INCLUDED UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" AND ELSEWHERE
HEREIN.
RISKS PARTICULAR TO OUR RELATIONSHIP WITH SPRINT PCS
IF WE FAIL TO COMPLETE THE BUILD-OUT OF OUR PCS NETWORK BY THE DATES OR
PURSUANT TO THE TECHNICAL STANDARDS DESCRIBED IN OUR MANAGEMENT AGREEMENT,
SPRINT MAY TERMINATE THE AGREEMENT, AND WE WOULD NO LONGER BE ABLE TO OFFER
SPRINT PCS SERVICES
Our agreements with Sprint PCS require us to build our PCS network in
accordance with Sprint PCS' technical and coverage requirements. The agreements
require that we provide network coverage to a minimum network coverage area
within specified time frames. A failure to meet our build-out requirements for
any one of the individual markets, or to meet Sprint PCS' technical
requirements, would constitute a breach of our management agreement with Sprint
PCS that could lead to a termination. If the management agreement is terminated,
we will no longer be able to offer Sprint PCS products and services.
WE MAY ENCOUNTER DIFFICULTIES IN COMPLETING THE BUILD-OUT OF OUR NETWORK,
WHICH COULD INCREASE COSTS AND DELAY COMPLETION OF OUR BUILD-OUT
As part of our build-out, we must successfully lease or otherwise retain
rights to a sufficient number of cell and switch sites, complete the purchase
and installation of equipment, build out the physical infrastructure and test
the network. Some of the cell sites are likely to require us to obtain zoning
variances or other local governmental or third party approvals or permits. We
may also have to make changes to our radio frequency design as a result of
difficulties in the site acquisition process. Additionally, the Federal
Communications Commission, commonly referred to as the FCC, requires that our
PCS network must not interfere with the operations of microwave radio systems,
and Sprint PCS may be required to relocate incumbent microwave operations to
enable us to complete our build-out. Any failure to construct our portion of the
Sprint PCS Network on a timely basis may affect our ability to provide services
in our markets on a schedule consistent with our current business plan, and any
significant delays could have a material adverse effect on our business.
THE TERMINATION OF OUR MANAGEMENT AGREEMENT WITH SPRINT PCS OR SPRINT PCS'
FAILURE TO PERFORM ITS OBLIGATIONS UNDER OUR AGREEMENT WOULD SEVERELY RESTRICT
OUR ABILITY TO CONDUCT OUR BUSINESS
Since we do not own any licenses to operate a wireless network, our ability
to offer Sprint PCS products and services and our PCS network's operation are
dependent on our agreements with Sprint PCS not being terminated. Our agreements
with Sprint can be terminated for breach of any material terms. We are also
dependent on Sprint PCS' ability to perform its obligations under our
agreements. The termination of our management agreement
7
<PAGE>
with Sprint PCS, or the failure of Sprint PCS to perform its obligations under
our management agreement, would severely restrict our ability to conduct our
business.
WE MAY NOT RECEIVE AS MUCH SPRINT PCS TRAVEL REVENUE AS WE ANTICIPATE BECAUSE
SPRINT PCS CAN CHANGE THE RATE WE RECEIVE OR LESS PEOPLE MAY TRAVEL ON OUR
NETWORK
We are paid a fee from Sprint PCS for every minute that a Sprint PCS
subscriber based outside of our markets uses the Sprint PCS Network in our
markets, which we refer to as travel revenue. Similarly, we pay a fee to Sprint
PCS for every minute that a Sprint PCS subscriber based in our markets uses the
Sprint PCS Network outside our markets, which we refer to as travel fees. We
anticipate that travel revenue will represent approximately 10% of our projected
revenue in 2000, and will continue to represent a substantial portion of our
revenue in the future. Under our agreements with Sprint PCS, in October 2000,
Sprint PCS can change the current fee we receive or pay for each Sprint PCS
travel minute. The unilateral change by Sprint PCS in the fee we are paid for
travel minutes by Sprint PCS could substantially decrease our revenues and net
income. In addition, Sprint PCS customers from our markets may spend more time
in other Sprint PCS coverage areas than we anticipate and Sprint PCS customers
from outside our markets may spend less time in our markets or may use our
services less than we anticipate, which will reduce our travel revenue. As a
result, we may receive less Sprint PCS travel income than we anticipate or we
may have to pay more Sprint PCS travel fees than we collect. For more
information, see "Business--Travel and Roaming."
THE INABILITY TO USE SPRINT PCS' BACK-OFFICE SERVICES COULD DISRUPT OUR
BUSINESS AND INCREASE OUR OPERATING COSTS
We rely on Sprint PCS' internal support systems, including customer care,
customer activation, billing and back-office support. Our operations could be
disrupted if Sprint PCS is unable to maintain and expand these office services,
or to efficiently outsource those services and systems through third party
vendors.
The rapid expansion of Sprint PCS' business is expected to require that
Sprint PCS continue to enhance its internal support systems. Sprint PCS' ability
to provide adequate capacity for billing and other systems is dependent on a
number of factors, including forecasts of customer growth, customer usage
pattern and software releases from third-party vendors. We cannot assure 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'
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;
- a loss of Sprint PCS customers; and
- an increase in the costs of those services.
Our services agreement with Sprint PCS provides that, upon nine months'
prior written notice, Sprint PCS may terminate any service that we purchase from
Sprint PCS. If Sprint
8
<PAGE>
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.
IF SPRINT PCS DOES NOT COMPLETE THE CONSTRUCTION OF ITS NATIONWIDE PCS
NETWORK, WE MAY NOT BE ABLE TO ATTRACT AND RETAIN CUSTOMERS
Sprint PCS currently intends to cover a significant portion of the
population of the United States, Puerto Rico and the U.S. Virgin Islands by
creating a nationwide PCS network through its own construction efforts and those
of its affiliates. Sprint PCS is still constructing its nationwide network and
does not offer PCS services, either on its own network or through its roaming
agreements, in every city in the United States. Sprint PCS has entered into, and
anticipates entering into, management agreements similar to ours with companies
in other markets under its nationwide PCS build-out strategy. Our results of
operations are dependent on Sprint PCS' national network and, to a lesser
extent, on the networks of its other affiliates. Sprint PCS' Network may not
provide nationwide coverage to the same extent as its competitors which could
adversely affect our ability to attract and retain customers.
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 the Sprint
PCS Network;
- 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
- 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.
SPRINT PCS MAY MAKE BUSINESS DECISIONS THAT WOULD NOT BE IN OUR BEST INTEREST
Under our management agreement, Sprint PCS has a substantial amount of
control over the conduct of our business. Conflicts between us and Sprint PCS
may arise, and because Sprint PCS owes us no duties except as set forth in the
management agreement, these
9
<PAGE>
conflicts may not be resolved in our favor. 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 travel fees it
must pay to us, the per minute rate we must pay to Sprint PCS for travel
fees, and the costs for Sprint PCS to perform back-office services;
- we must obtain Sprint PCS' consent to sell non-Sprint PCS approved
equipment, which consent could be withheld;
- Sprint PCS may alter its network and technical requirements, which could
result in increased equipment and build-out costs;
- Sprint PCS may request that we build-out additional areas within our
markets, which if undertaken, could result in less return on investment or
a reduction of our license population if we decline to build the requested
area; and
- Sprint or Sprint PCS could make other business decisions which could
adversely affect the Sprint and Sprint PCS brand names, products or
services.
PROVISIONS OF OUR MANAGEMENT AGREEMENT WITH SPRINT PCS MAY DIMINISH OUR VALUE
AND RESTRICT THE SALE OF OUR BUSINESS
Under certain circumstances and without further stockholder approval, Sprint
PCS may purchase our operating assets or capital stock for a percentage of our
"entire business value," which includes the value of the spectrum licenses,
business operations and other assets more fully described in "The Sprint PCS
Agreements--The Management Agreement--Rights on Termination." In addition,
Sprint PCS must approve any change of control of our ownership and consent to
any assignment of our management agreement 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 us or our operating assets to
competitors of Sprint or Sprint PCS. These restrictions and other restrictions
in our management agreement 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 operate to reduce
our "entire business value."
IF SPRINT PCS DOES NOT MAINTAIN CONTROL OVER ITS LICENSED SPECTRUM, OUR
MANAGEMENT AGREEMENT WITH SPRINT PCS MAY BE TERMINATED
Sprint PCS, not UbiquiTel, owns the licenses necessary to provide wireless
services in our markets. 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 us. Although our
management agreement with Sprint PCS reflects 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
10
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Communications Commission will agree with us. If the Federal Communications
Commission were to determine that our management agreement 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 it would be extremely difficult to conduct
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 wireless networks. We are dependent on
Sprint PCS' licenses, which are subject to renewal and revocation. Sprint PCS'
licenses in our markets will expire in 2004 through 2007, but may be renewed for
additional 10-year terms. The Federal Communications Commission has adopted
specific standards that apply to wireless personal communications services
license renewals which, in the event of a comparative proceeding with competing
applications, includes the award of a renewal expectancy to Sprint PCS upon its
showing of "substantial service" during the past license term. Any failure by
Sprint PCS or us to comply with these standards could cause nonrenewal of the
Sprint PCS licenses for our markets. Additionally, if Sprint PCS does not
demonstrate to the Federal Communications Commission that Sprint PCS has met the
5-year and 10-year construction requirements for each of its wireless personal
communications services licenses, it can lose the affected licenses and be
ineligible to regain them.
OUR RELATIONSHIP WITH SPRINT OR ITS SUCCESSOR MAY BE ADVERSELY AFFECTED BY THE
PROPOSED MERGER OF SPRINT AND MCI WORLDCOM
Sprint and MCI WorldCom have announced that the boards of directors of both
companies have approved a definitive merger agreement whereby the two companies
would merge to form a new company called WorldCom. Although the companies have
approved the merger, the completion of the merger is still subject to various
conditions, including the approvals of the shareholders of both companies, the
Federal Communications Commission, the Justice Department, various state
governmental bodies and foreign antitrust authorities. We cannot be sure that
the merger will not have a negative impact on us as an affiliate of Sprint PCS.
IF SPRINT PCS DOES NOT RENEW OUR MANAGEMENT AGREEMENT WITH IT OUR ABILITY TO
CONDUCT OUR BUSINESS WOULD BE SEVERELY RESTRICTED
Our management agreement with Sprint PCS is not perpetual. Sprint PCS can
choose not to renew the agreement at the expiration of the 20-year initial term
or any ten-year renewal term. Our agreement with Sprint PCS terminates in all
events in 50 years. If Sprint PCS decides not to renew our management agreement
or our management agreement with Sprint PCS terminates in accordance with its
terms, we would no longer be a part of the Sprint PCS Network and it would
severely restrict our ability to conduct our business.
11
<PAGE>
OTHER RISKS PARTICULAR TO US
WE HAVE A LIMITED OPERATING HISTORY AND IF WE DO NOT SUCCESSFULLY MANAGE OUR
ANTICIPATED RAPID GROWTH, WE MAY NOT BE ABLE TO COMPLETE OUR ENTIRE PCS NETWORK
BY OUR TARGET DATE, IF AT ALL
As of the date of this prospectus, we have commenced limited operations. Our
performance as a PCS provider will depend on our ability to manage successfully
the network build-out process, implement operational and administrative systems,
expand our base of employees, and train and manage our employees, including
engineering, marketing and sales personnel. We will require expenditures of
significant funds for the development, construction, testing and deployment of
our PCS network before expanding commercial PCS operations. These activities are
expected to place significant demands on our managerial, operational and
financial resources.
The management of our anticipated 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 achieve profitability and expand the coverage in our
markets.
WE MAY NEED MORE CAPITAL THAN WE CURRENTLY PROJECT TO BUILD-OUT OUR PORTION OF
THE SPRINT PCS NETWORK
The build-out of our portion of the Sprint PCS Network will require
substantial capital. Additional funds could be required for a variety of
reasons, including unanticipated expenses or operating losses. 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 the covenants for the new senior credit facility or the
covenants with respect to the senior subordinated debt. Failure to obtain
additional funds, should the need for them develop, could result in the delay or
abandonment of our development and expansion plans. If we do not have sufficient
funds to complete our build-out, we may be in breach of our management agreement
with Sprint PCS and our secured bank debt.
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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 station sites;
- install T-1 lines; and
- deploy our wireless personal communications services network systems.
We lease a portion of the base station sites for our wireless systems
through master lease agreements with communication site management companies
such as SpectraSite. SpectraSite, in turn, has separate leasing arrangements
with each of the owners of the sites. If SpectraSite or other similar firms were
to become insolvent or 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. We have retained LCC International and other
consultants and contractors to assist in the design and engineering of our
systems, construct cell sites, switch facilities and towers, lease cell sites
and deploy our PCS network systems and we will be significantly dependent upon
them in order to fulfill our build-out obligations. 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.
WE WILL HAVE SUBSTANTIAL DEBT WHICH WE MAY NOT BE ABLE TO SERVICE AND WHICH
MAY RESULT IN OUR LENDERS CONTROLLING OUR ASSETS IN AN EVENT OF DEFAULT
After UbiquiTel Operating Company completes its proposed senior subordinated
debt financing and its new senior credit facility, we will have a substantial
amount of long-term debt. As of December 31, 1999, after giving effect to these
financings, our outstanding long-term debt would have consisted of (1) $75.0
million under our senior credit facility, and (2) $125.0 million of senior
subordinated debt. See "Description of Certain Indebtedness" and "Use of
Proceeds."
The substantial amount of our debt will have a number of important
consequences for our operations, 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;
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- we may not be able to obtain additional financing for currently
unanticipated capital requirements, capital expenditures, working capital
requirements and other corporate purposes;
- some of our debt, including borrowings under our new senior credit
facility, will be at variable rates of interest, which could result in
higher interest expense in the event of increases in market interest
rates;
- due to the liens on substantially all of the assets and the assets of our
subsidiaries that secure our senior secured debt, lenders may control our
assets or subsidiaries upon a default; and
- we may be more highly leveraged than some of our competitors, which may
put us at a competitive disadvantage.
Our ability to make payments on our debt depends upon our future operating
performance which is subject to general economic and competitive conditions and
to financial, business and other factors, many of which we cannot control. If
the cash flow from our operating activities is insufficient, we may take
actions, such as delaying or reducing capital expenditures, attempting to
restructure or refinance our debt, selling assets or operations or seeking
additional equity capital. Any or all of these actions may not be sufficient to
allow us to service our debt obligations. Further, we may be unable to take any
of these actions on satisfactory terms, in a timely manner or at all. The debt
agreements for the new senior credit facility and senior subordinated debt
financing are expected to limit our ability to take several of these actions.
OUR NEW INDEBTEDNESS WILL PLACE RESTRICTIONS ON US WHICH MAY LIMIT OUR
OPERATING FLEXIBILITY AND OUR ABILITY TO PAY DIVIDENDS
The agreements related to the senior subordinated debt and the new senior
credit facility of UbiquiTel Operating Company are both expected to 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:
- 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
- transactions with affiliates.
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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.
WE MAY HAVE DIFFICULTY IN OBTAINING HANDSETS AND EQUIPMENT, WHICH ARE IN SHORT
SUPPLY, WHICH COULD CAUSE DELAYS AND INCREASED COSTS IN THE BUILD-OUT OF OUR
NETWORK
We currently purchase all handsets and equipment through Sprint PCS. 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 or 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' 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 could 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.
THE TECHNOLOGY WE USE HAS LIMITATIONS AND COULD BECOME OBSOLETE
We intend to employ digital wireless communications technology selected by
Sprint PCS for its nationwide network. Code division multiple access, known as
CDMA, technology is a relatively new technology. CDMA may not provide the
advantages expected by Sprint PCS. If another technology becomes the preferred
industry standard, we may be at a competitive disadvantage and competitive
pressures may require Sprint PCS to change its digital technology which, in
turn, may require us to make changes at substantially increased costs. We may
not be able to respond to such pressures and implement new technology on a
timely basis, or at an acceptable cost. We also expect to face competition from
other existing communications technologies such as specialized mobile radio,
known as SMR, and enhanced specialized mobile radio, known as ESMR, and domestic
and global mobile satellite service. SMR and ESMR systems can provide services
that may be competitive with those offered by PCS and are often less expensive
to build than PCS systems. In addition, we expect that in the future providers
of wireless communications services will compete more directly with providers of
traditional landline telephone services, energy companies, utility companies and
cable operators who expand their services to offer communications services.
Potential users of PCS 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 subscribers who do not need to speak to
the caller. See "Business--Technology."
WE MAY NOT BE ABLE TO COMPETE WITH LARGER, MORE ESTABLISHED BUSINESSES
OFFERING SIMILAR PRODUCTS AND SERVICES
Our ability to compete will depend, in part, on our ability to anticipate
and respond to various competitive factors affecting the telecommunications
industry, including new services
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<PAGE>
that may be introduced, changes in consumer preferences, demographic trends,
economic conditions and discount pricing strategies by competitors. We will
compete in our markets with more than three wireless providers, most of which
have an infrastructure in place and have been operational for a number of years.
They have significantly greater financial and technical resources than we do,
could offer attractive pricing options and may have a wider variety of handset
options. We expect that existing cellular providers will upgrade their systems
and provide expanded, digital services to compete with the Sprint PCS products
and services that we intend to offer. These wireless providers require their
customers to enter into long-term contracts, which may make it more difficult
for us to attract customers away from them. Sprint PCS generally does not
require its customers to enter into long-term contracts, which may make it
easier for other wireless providers to attract Sprint PCS customers away from
Sprint PCS. We will also compete with several PCS providers in our markets and
other existing communications companies in our markets.
OUR SERVICES MAY NOT BE BROADLY USED AND ACCEPTED BY CONSUMERS
PCS systems have a limited operating history in the United States. The
extent of potential demand for PCS in our markets cannot be estimated with any
degree of certainty. Our inability to establish and successfully market PCS
services could have a material adverse effect on our financial condition and
results of operations.
THE LOSS OF OUR KEY OFFICERS AND SKILLED EMPLOYEES THAT WE DEPEND UPON TO
OPERATE OUR BUSINESS COULD REDUCE OUR ABILITY TO OFFER SPRINT PCS PRODUCTS AND
SERVICES
Our business is managed by a small number of executive officers. The loss of
our President and Chief Executive Officer, Donald A. Harris, or one or more
other key officers, could impair our ability to conduct our business. We believe
that our future success will also depend in large part on our continued ability
to attract and retain highly qualified technical and management personnel. We
believe that there is and will continue to be intense competition for qualified
personnel in the PCS equipment and services industry as the PCS market continues
to develop. We may not be successful in retaining our key personnel or in
attracting and retaining other highly qualified technical and management
personnel. We do not currently maintain "key man" life insurance for our
executive officers or other employees.
WE MAY NOT ACHIEVE OR SUSTAIN OPERATING PROFITABILITY OR POSITIVE CASH FLOW
FROM OPERATING ACTIVITIES
We expect to incur significant operating losses and to generate significant
negative cash flow from operating activities until at least 2003 while we
develop and construct our PCS network and build our customer base. Our operating
profitability will depend upon many factors, including, among others, our
ability to market our services successfully, achieve our projected market
penetration and manage customer turnover rates effectively. If we do not achieve
and maintain operating profitability and positive cash flow from operating
activities on a timely basis, we may not be able to meet our debt service
requirements.
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UNAUTHORIZED USE OF OUR PCS NETWORK COULD DISRUPT OUR BUSINESS
Although CDMA technology reduces some risks associated with fraud and
cloning, we will likely incur costs associated with the unauthorized use of our
PCS network, including administrative and capital costs associated with
detecting, monitoring and reducing the incidence of fraud. Fraud impacts
interconnection costs, capacity costs, administrative costs, fraud prevention
costs and payments to other carriers for unbillable fraudulent roaming.
OUR CERTIFICATE OF INCORPORATION AND BY-LAWS INCLUDE PROVISIONS THAT MAY
DISCOURAGE A CHANGE OF CONTROL TRANSACTION AND WHICH MAY AFFECT THE RIGHTS OF
HOLDERS OF OUR COMMON STOCK
Some provisions of our certificate of incorporation and bylaws and the
provisions of Delaware law could have the effect of delaying, deferring or
preventing an acquisition of us. For example, upon completion of this offering,
we will have a staggered board of directors, the members of which may only be
removed for cause, authorized but unissued shares of preferred stock which could
be used to fend off a takeover attempt, our stockholders may not take actions by
written consent and our stockholders are limited in their ability to make
proposals at stockholder meetings.
OUR PLAN OF COVERAGE FOR OUR MARKETS MAY BE INADEQUATE TO PROFITABLY OPERATE
OUR BUSINESS
Our projected build-out plan for our markets does not cover all areas of our
markets. As a result, our plan may not adequately serve the needs of the
potential customers in our markets or attract enough subscribers to operate our
business successfully. To correct this potential problem, we may have to cover a
greater percentage of our markets than we anticipate, which we may be unable to
do profitably.
WE MAY FACE SERVICE INTERRUPTIONS ASSOCIATED WITH INCLEMENT WEATHER CONDITIONS
OR NATURAL DISASTERS
We may face service interruptions as a result of inclement weather
conditions or natural disasters, including earthquakes, tornadoes and excessive
rain, which could result in service interruptions for indefinite periods in one
or more of our markets.
RISKS PARTICULAR TO OUR INDUSTRY
WE MAY EXPERIENCE A HIGH RATE OF CUSTOMER TURNOVER WHICH WOULD INCREASE OUR
COSTS OF OPERATIONS AND REDUCE OUR REVENUE
Our strategy to reduce customer turnover may not be successful. The rate of
customer turnover may be the result of several factors, including network
coverage, reliability issues such as blocked calls, dropped calls, handset
problems, non-use of phones, change of employment, the non-use of customer
contracts, affordability, customer care concerns and other competitive factors.
Price competition and other competitive factors could also cause increased
customer turnover. 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.
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USE OF HAND-HELD PHONES MAY POSE HEALTH RISKS
Media reports have suggested that certain radio frequency emissions from
wireless handsets may be linked to various health concerns, including cancer,
and may interfere with various electronic medical devices, including hearing
aids and pacemakers. The actual or perceived risk of radio frequency emissions
from portable telephones could adversely affect us through a reduced subscriber
growth rate, a reduction in subscribers, reduced network usage per subscriber,
reduced financing available to the mobile communications industry and increased
exposure to potential litigation.
REGULATION BY GOVERNMENT AGENCIES AND TAXING AUTHORITIES MAY INCREASE OUR
COSTS OF PROVIDING SERVICE OR REQUIRE US TO CHANGE OUR SERVICES
The licensing, construction, use, operation, sale and interconnection
arrangements of wireless telecommunication systems are regulated to varying
degrees by the Federal Communications Commission, the Federal Trade Commission,
the Federal Aviation Administration, the Environmental Protection Agency, the
Occupational Safety and Health Administration and, depending on the
jurisdiction, state and local regulatory agencies and legislative bodies.
Adverse decisions regarding these regulatory requirements could negatively
impact Sprint PCS' 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 relationship with
Sprint PCS.
OUR BUSINESS IS SUBJECT TO SEASONALITY AND 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 we have a worse than expected
fourth quarter for any reason, including the following:
- our inability to match or beat pricing plans offered by competitors;
- the failure to adequately promote Sprint PCS' products, services and
pricing plans;
- our inability to obtain an adequate supply or selection of handsets;
- a downturn in the economy of some or all of our markets; or
- a poor holiday shopping season.
WE MAY NOT BE ABLE TO RESPOND EFFECTIVELY TO THE SIGNIFICANT COMPETITION IN
THE WIRELESS COMMUNICATIONS SERVICES INDUSTRY
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
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and respond to various competitive factors affecting the telecommunications
industry. Several of these factors include:
- the introduction of new services;
- changes in consumer preferences, demographic trends or economic
conditions; and
- discount pricing strategies by competitors.
Our dependence on Sprint PCS to develop competitive products and services
and the requirement that we obtain Sprint PCS' consent to sell non-Sprint PCS
approved equipment may limit our ability to keep pace with our competitors in
the introduction of new products, services and equipment. Some of our
competitors: (1) have substantially greater financial, technological, marketing
and sales and distribution resources than us; (2) have more extensive coverage
in specific areas of our markets and have broader regional coverage than us; and
(3) may market other services, such as traditional landline telephone service,
cable television access and access to the Internet, with their wireless
communications services.
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. Several large competitors already exist, such as
AT&T Wireless with over 11 million subscribers and the recent partnership of
Bell Atlantic-GTE and Vodafone AirTouch with over 19 million total subscribers.
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."
There is also uncertainty as to the extent of customer demand as well as the
extent to which airtime and monthly recurring charges may continue to decline.
As a result, our future prospects and those of the industry, and the success of
PCS and other competitive services, remain uncertain.
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 markets 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 may have
difficulty in obtaining tower sites in some areas of our markets on a timely
basis.
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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 % of our
outstanding common stock on a diluted basis, depending on how many shares our
existing stockholders purchase in this offering, or approximately % if the
underwriters' over-allotment option is exercised in full, depending on how many
shares our existing stockholders purchase in this offering. 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. For more
information on this subject, please refer to "Management" and "Principal
Stockholders."
THE PRICE OF OUR COMMON STOCK MAY BE VOLATILE
Since we are a development stage company, the market price of our common
stock could be subject to significant fluctuations due to a variety of factors.
Those factors include:
- variations in quarterly operating results and financial performance;
- announcements of technological innovations or new products and services by
Sprint PCS, us or our competitors;
- our failure to achieve operating results consistent with securities
analysts' projections;
- the operating and stock price performance of, or rumors related to, Sprint
PCS, our competitors or other companies that investors may deem comparable
to us;
- announcements of the introduction of new or enhanced services or related
products by Sprint PCS, us or our competitors;
- announcements of joint development efforts, mergers or corporate
partnerships in the wireless telecommunications market; and
- market conditions in the technology, telecommunications and other emerging
growth sectors.
The stock market has recently experienced extreme price volatility. Under
these market conditions, stock prices of many emerging growth and development
stage companies like us have often fluctuated in a manner unrelated or
disproportionate to the operating performance of those companies.
POSSIBLE SALES OF OUR COMMON STOCK COULD CAUSE THE MARKET PRICE OF OUR COMMON
STOCK TO DECREASE
Many of our current stockholders hold large portions of our common stock.
The occurrence of sales of a large number of shares of our common stock, 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.
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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 statements include:
- estimates of current and future population for our markets;
- forecasts of growth in the number of consumers using PCS services;
- statements regarding our plans for and costs of the build-out of our PCS
network;
- statements regarding our anticipated revenues, expense levels, liquidity
and capital resources and projection of when we will launch commercial PCS
service and achieve break-even operating cash flow; and
- other statements, including statements containing words such as
"anticipate," "believe," "plan," "estimate," "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 which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. For a
discussion of some of these factors, see "Risk Factors" beginning on page 7.
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USE OF PROCEEDS
The net proceeds to be received from the sale of the common stock we are
offering, after deducting underwriting discounts and commissions and estimated
offering expenses, are expected to be approximately $ , or approximately
$ if the underwriter's over-allotment option is exercised in full, assuming
an initial public offering price of $ per share (the midpoint of the
range shown on the cover page of this prospectus). We intend to use the net
proceeds from this offering, our recent sale of preferred stock, UbiquiTel
Operating Company's proposed senior subordinated debt financing and borrowings
under its proposed new senior credit facility as presented below in the
following table:
<TABLE>
<CAPTION>
AMOUNT
(IN MILLIONS)
<S> <C>
SOURCES:
Gross proceeds from this offering......................... $
Gross proceeds from the preferred stock investment(1).....
Gross proceeds from UbiquiTel Operating Company's proposed
senior subordinated debt financing(2)...................
Proposed senior credit facility(3)........................
----
Total sources........................................... $
====
USES:
Capital expenditures...................................... $
Acquisition of Spokane PCS assets.........................
Debt repayment(4).........................................
Fees and expenses(5)......................................
Cash on hand..............................................
----
Total uses.............................................. $
====
</TABLE>
- --------------------------
(1) On February 25, 2000, we issued in a private placement to DLJ Merchant
Banking Partners II, L.P., $25.0 million of our Series B preferred stock
which is convertible automatically into shares of our common stock upon the
completion of this offering.
(2) UbiquiTel Operating Company has received a commitment from an affiliate of
Donaldson, Lufkin & Jenrette to provide senior subordinated debt financing
that will be sufficient to generate gross proceeds of approximately $125.0
million.
(3) UbiquiTel Operating Company has received a committment from Paribas to
provide a new senior credit facility for up to $250.0 million of borrowings
which will replace its existing $25.0 million credit facility. As of the
date of this prospectus, Ubiquitel Operating Company had no outstanding
borrowings under its existing credit facility.
22
<PAGE>
(4) Debt repayments are composed of:
<TABLE>
<CAPTION>
AMOUNT
(IN MILLIONS)
<S> <C>
Cash interest payments...................................... $
Repayment of subordinated debt.............................. 8.0
Repayment of existing bank credit facility..................
----
Total..................................................... $
</TABLE>
(5) Fees and expenses include estimated offering expenses and underwriting
discounts and commissions for this offering, expenses associated with the
preferred stock investment, fees and expenses associated with UbiquiTel
Operating Company's proposed senior subordinated debt financing and
origination and other fees and expenses related to its proposed new senior
credit facility.
The foregoing represents our best estimate of the allocation of the net
proceeds of this offering, the proposed senior subordinated debt financing and
borrowings under the proposed credit facility 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 from these sources
within the above-described categories or to use portions thereof for other
purposes.
We intend to use the balance of the net proceeds of this offering for
general corporate purposes. Pending such 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.
DIVIDEND POLICY
We intend to retain our future earnings, if any, to fund the development and
growth of our business and, therefore, do not anticipate paying any cash
dividends in the foreseeable future. Our future decisions concerning the payment
of dividends on the common stock will depend upon our results of operations,
financial condition and capital expenditure plans, as well as such other factors
as the board of directors, in its sole discretion, may consider relevant. In
addition, our existing indebtedness restricts, and we anticipate our future
indebtedness may restrict, our ability to pay dividends.
23
<PAGE>
CAPITALIZATION
The following table shows the cash and cash equivalents position and our
total capitalization:
- as of December 31, 1999; and
- as adjusted to reflect the conversion of shares of preferred stock into
shares of common stock upon the completion of this offering,
the sale in this offering of shares of common stock at an initial offering
price of $ per share (the midpoint of the range shown on the
cover of this prospectus) less underwriting discounts and commissions and
estimated offering expenses of $ and the receipt by UbiquiTel
Operating Company of $ proceeds from its proposed senior credit
facility, less estimated fees and expenses of $ , and $ proceeds
from its proposed senior subordinated debt financing, less estimated fees
and expenses of $ .
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1999
----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $23,959 $
======= ========
Short-term debt:
Notes payable............................................. $ -- $ --
Long-term debt:
Senior credit facility.................................... $ -- $ --
Senior subordinated debt(1)............................... 5,812
Other long-term debt...................................... --
------- --------
Total long-term debt.................................... 5,812
Stockholders' equity (deficit):
Preferred stock, par value $0.001, 125,000,000 shares
authorized, including:
Series A convertible preferred stock, par value $0.001 per
share; 17,008,500 shares issued and outstanding, actual;
no shares outstanding, as adjusted(2)................... 17 --
Series B convertible preferred stock, par value $0.001 per
share, no shares issued and outstanding, actual; no
shares outstanding, as adjusted(3)...................... -- --
Voting common stock, par value $0.001 per share,
150,000,000 shares authorized; shares outstanding,
actual; shares outstanding, as adjusted(4)........ 3
Non-voting common stock, par value $0.001 per share,
16,000,000 shares authorized; 16,000,000 shares
outstanding, actual; no shares outstanding, as
adjusted(5)............................................. 16 --
Additional paid-in capital................................ 20,187
Accumulated deficit....................................... (1,987)
------- --------
Total stockholders' equity.............................. 18,236
------- --------
Total capitalization.................................... $24,048 $
======= ========
</TABLE>
- --------------------------
(1) Actual reflects the $5.8 million of the BET note allocated to debt.
(2) As adjusted reflects the conversion of Series A preferred stock into
shares of common stock upon the completion of this offering.
(3) On February 25, 2000 we issued 2,110,347 shares of Series B preferred stock
for $25.0 million. These shares convert automatically to shares of
common stock upon the completion of this offering.
(4) Shares of common stock reflect a -for- stock split effective
2000, and the issue of shares to existing stockholders.
(5) As adjusted reflects the cancellation of these shares upon the completion of
this offering.
24
<PAGE>
DILUTION
Our net tangible book value at December 31, 1999, was $16.1 million or
$ per share of common stock. Net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares outstanding. After giving effect to:
- the sale in this offering of shares of common stock at an assumed
initial public offering price of $ per share (the midpoint of the range
shown on the cover of this prospectus) and the receipt of net proceeds
therefrom;
- the receipt by UbiquiTel Operating Company of approximately $ of net
proceeds from its senior subordinated debt financing;
- the effect of the conversion of shares of preferred stock into
shares of common stock upon the closing of this offering;
our as adjusted net tangible book value as of December 31, 1999, would have been
approximately $ or $ per share. This represents an immediate dilution
of $ per share to new purchasers of common stock in the offering and an
immediate increase in net tangible book value to existing stockholders of $ per
share. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share as of December 31, 1999... $
Increase in net tangible book value per share attributable
to the offering and the conversion of preferred stock into
common stock..............................................
--------
As adjusted net tangible book value per share after the
offering and the conversion of preferred stock into common
stock.....................................................
--------
Dilution per share to new purchasers of common stock........ $
========
</TABLE>
The following table summarizes, on an as adjusted basis as of December 31,
1999, the number of shares of common stock purchased, the total consideration
paid for the common stock and the average price per share paid by our existing
stockholders and by the new purchasers of common stock in the offering, assuming
an offering price of $ per share (the midpoint of the range shown on the cover
page of this prospectus), before the deduction of underwriting discounts and
commissions and estimated offering expenses of $ payable by us:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... % $ % $
New purchasers of common stock............
------ ----- ------- ----- -------
Total...................................
====== ===== ======= ===== =======
</TABLE>
Except as indicated above, the foregoing tables assume no exercise of the
underwriter's over-allotment option and no exercise of outstanding stock options
or warrants to purchase an aggregate of shares of common stock at prices
ranging from $ to $ per share. See "Management--2000 Equity Incentive
Plan" and "Description of Capital Stock--Warrants." The conversion of these
stock options and warrants would result in additional dilution to the new
purchasers of common stock in the offering.
25
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
We derived summary unaudited pro forma consolidated financial and operating
data as of and for the year ended December 31, 1999 from our historical
consolidated financial statements and from other financial data included
elsewhere in this prospectus. Our financial results have been adjusted based on
currently available information and assumptions that we believe are reasonable
to give effect to the following transactions as if each transaction had occurred
as of January 1, 1999:
- our pending acquisition of the Spokane, Washington PCS network and related
assets from Sprint PCS;
- the issuance of shares of our common stock in this offering with
total proceeds of $ million;
- the issuance of Series B preferred stock;
- receipt of proceeds of $ million from our proposed senior subordinated
debt financing; and
- receipt of proceeds of $ million from our proposed senior credit
facility.
We provide the following unaudited pro forma condensed consolidated
financial statements and related notes for informational purposes only. The
accompanying data do not purport to represent what our results of operations
would have been if the pro forma transactions had been completed on the dates
indicated, nor do they purport to indicate our future financial position or
results of operations.
The data shown below should be read in conjunction with "Capitalization,"
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the consolidated financial statements
and accompanying notes included elsewhere in this prospectus.
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING
ADJUSTMENTS OF STOCK
UBIQUITEL INC. FOR ACQUISITION AND DEBT, PRO FORMA
HISTORICAL OF SPOKANE PRO FORMA AND OTHER AS ADJUSTED
-------------- --------------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues.................... $ -- $5,625 $ 5,625 $ $5,625
Costs of service and
equipment............... -- 5,046 5,046 5,046
------------ ------ ------- ------ ------
Gross profit................ -- 579 579 579
Operating expenses........
Selling, general and
administrative
expense................. 554 5,419 5,973
Equity participation
compensation expense.... 1,395 1,395
Depreciation and
amortization............ 3,471 3,471 (1)
Operating loss.............. 1,949 8,311 10,260
Interest expense.......... 29 -- 29 (2)
------------ ------ ------- ------ ------
Net loss.................... 1,978 8,311 10,289
Less: preferred stock
dividends............... 9 -- 9 (3)
------------ ------ ------- ------ ------
Loss........................ $ 1,987 $8,311 $10,298 $ $
============ ====== ======= ====== ======
Basic and diluted loss per
common share..............
Weighted-average outstanding
common shares.............
</TABLE>
- --------------------------
The following notes are provided for purposes of determining pro forma effects
of the transactions described on the historical statement of operations of
Ubiquitel Inc. Assumptions are required to present this pro forma data. The
Ubiquitel Inc. stock offering price represents the midpoint of the range shown
on the cover of this prospectus:
(1) Represents increased depreciation based on our cost of the Spokane fixed
assets and amortization of intangible assets of $300,000.
(2) Interest expense is based on . Represents an increase in interest
expense calculated as follows:
(3) Preferred stock dividends are calculated as follows:
27
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
ADJUSTMENTS FOR OFFERING
FOR OF STOCK
UBIQUITEL INC. ACQUISITION AND DEBT, PRO FORMA
HISTORICAL OF SPOKANE PRO FORMA AND OTHER AS ADJUSTED
-------------- ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............ $23,959 $ $ (1) $ $
Prepaid expenses..................... 36 87 123
------- ------- ------ ------- -------
Total current assets............... 23,995 87
Construction in progress............. 4,086 211 4,297
Property and equipment, less
accumulated depreciation........... 19,486 9,216 (2) 28,702
Deferred financing costs, less
accumulated amortization........... 2,110
Other................................ 6,000 (2) 6,000
------- ------- ------ ------- -------
Total assets....................... $30,191 $19,784 $ $ $
======= ======= ====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
expenses........................... $ 6,143 $ $ $ $ 6,143
Senior credit facility............... (3)
Senior subordinated debt............. 5,812 (4)
------- ------- ------ ------- -------
Total liabilities.................... 11,955
Stockholders' equity
Convertible preferred stock.......... 17 (17)(5) --
Voting common stock.................. 3 20
Non-voting common stock.............. 16 (16)(6) --
Additional paid-in-capital........... 20,187 (7)
Accumulated deficit.................. (1,987)
------- ------- ------ ------- -------
Total stockholders' equity......... 18,236
------- ------- ------ ------- -------
Total liabilities and stockholders'
equity............................... $30,191 $ $ $ $
======= ======= ====== ======= =======
</TABLE>
- --------------------------
(1) Represents proceeds from the Series B preferred stock offering, common stock
offering, and senior subordinated debt financing in excess of amounts used
to reduce other debt.
(2) Represents the acquisition of the Spokane, Washington PCS network and
related assets from Sprint PCS.
(3) Represents borrowings under our proposed senior credit facility.
(4) Represent proceeds of our proposed senior subordinated debt financing.
(5) Represents conversion of our Series A and Series B preferred stock into
common stock.
(6) Represents the cancellation of shares of non-voting common stock upon
the completion of this offering pursuant to an agreement between
Ubiquitel Inc. and such stockholders.
(7) Represents the additional paid-in-capital resulting from the proceeds of
this offering.
28
<PAGE>
SELECTED FINANCIAL DATA
UBIQUITEL INC.
The selected financial data presented below under the caption "Statement of
Operations Data" and "Balance Sheet Data" for, and as of the end of period from
September 29, 1999 (inception) through December 31, 1999, are derived from the
consolidated financial statements of UbiquiTel Inc. and subsidiaries, which
consolidated financial statements have been audited by Arthur Andersen LLP,
independent certified public accountants. The data set forth below should be
read in conjunction with Ubiquitel Inc.'s consolidated financial statements and
accompanying notes included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
FROM
SEPTEMBER 29,
1999 (INCEPTION)
TO DECEMBER 31,
1999,
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
----------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Operating expenses:
Equity participation compensation expense................. $(1,395)
Finance and administrative expense........................ (554)
-------
Operating loss.............................................. (1,949)
Interest expense.......................................... (29)
-------
Net loss.................................................... (1,978)
=======
Basic and diluted net loss per share of common stock
(1)..................................................... ($ 0.10)
=======
BALANCE SHEET DATA:
Cash and cash equivalents................................. $23,959
Total assets.............................................. 30,191
Long-term debt............................................ 5,812
Stockholders' equity...................................... 18,236
</TABLE>
- --------------------------
(1) Basic and diluted net loss per share of common stock is computed by dividing
net loss by the weighted average number of common shares outstanding.
29
<PAGE>
SELECTED FINANCIAL DATA
SPOKANE DISTRICT (WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
The selected financial data presented below under the caption "Statement of
Operations Data" for each of the three years in the period ended December 31,
1999, and under the caption "Balance Sheet Data" as of December 31, 1999 and
1998, are derived from the condensed financial statements of the Spokane
District (wholly owned by Sprint Spectrum L.P.), the predecessor of Ubiquitel
Inc. and subsidiaries, which financial statements have been audited by Ernst &
Young LLP, independent auditors. The data set forth below should be read in
conjunction with the Spokane District's financial statements and accompanying
notes included elsewhere in this prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................ $ 1,246 $ 3,281 $ 5,625
------- ------- -------
Operating expenses:
Cost of service and equipment............................. 2,903 3,970 5,046
Selling, general and administrative expense............... 8,168 4,470 5,419
Depreciation.............................................. 2,968 3,112 3,471
------- ------- -------
Expenses in excess of net revenues.......................... $12,793 $ 8,272 $ 8,311
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
1998 1999
----------- --------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets to be sold................................... $19,551 $19,784
</TABLE>
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the related notes included elsewhere 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 elsewhere in this
prospectus. We are a development stage company and intend to significantly
expand our operations. Accordingly, we do not believe the discussion and
analysis of our historical financial condition and results of operations
provided below are indicative nor should they be relied upon as an indicator of
our future performance.
OVERVIEW
In October 1998, UbiquiTel, LLC (an affiliate of The Walter Group) entered
into a management agreement with Sprint PCS whereby it became the Sprint PCS
affiliate with the exclusive right to provide 100% digital, 100% PCS services
under the Sprint and Sprint PCS brand names in the Reno/Tahoe markets. In
November 1999, UbiquiTel, LLC assigned the management agreement and related
agreements to us and we then subsequently assigned the management agreement to
our operating subsidiary, UbiquiTel Operating Company. In December 1999, we
amended UbiquiTel Operating Company's management agreement with Sprint PCS to
expand our markets to include a total of approximately 7.7 million residents in
the western and midwestern United States. We are a development stage company and
have not generated significant revenues to date. Since our inception, we have
incurred significant costs to negotiate our contracts with Sprint PCS and to
begin construction of our PCS network in some of our markets for which we have
the exclusive right to provide Sprint PCS services.
In April 2000, we intend to complete the pending acquisition of Sprint PCS'
Spokane, Washington market's PCS network and related assets excluding customer
related assets and liabilities. As of December 31, 1999, the Spokane, Washington
market was the only one of our markets with an operating Sprint PCS Network. The
purchase price for the assets is approximately $35.0 million.
We have commenced limited operations in one of our markets, which together
with our pending acquisition of the Spokane, Washington market, cover
approximately 500,000 residents. We expect to cover approximately 55% of the
resident population in our markets by the end of 2001. We anticipate that the
net proceeds of this offering, when combined with the proceeds from our recent
sale of preferred stock, UbiquiTel Operating Company's proposed senior
subordinated debt financing and the availability of borrowings under its
proposed new senior credit facility, will be adequate to fund our network
build-out plan, anticipated capital expenditures, working capital requirements,
operating losses and other cash needs through anticipated break-even cash flow
from operations in 2003.
As a Sprint PCS affiliate, we are responsible for building, owning and
managing the portion of the Sprint PCS Network located in our markets under the
Sprint and Sprint PCS
31
<PAGE>
brand names. We believe that our markets are important to Sprint PCS' strategy
of providing PCS service nationwide. Sprint PCS paid approximately $90.0 million
for the PCS licenses in our markets and will incur additional expenses for
microwave clearing. Under our long-term management agreement with Sprint PCS, we
expect to purchase our network and subscriber equipment under Sprint PCS' vendor
contracts that reflect its volume discounts. In addition, we will have access to
Sprint PCS' national marketing support and will be able to take advantage of
Sprint PCS' retail distribution agreements with national retailers such as
Circuit City, Kmart and OfficeMax and an exclusive PCS distribution agreement
with RadioShack. We intend to offer national plans designed by Sprint PCS as
well as specialized local plans tailored to our markets' demographics. As part
of our marketing process, we may offer our handsets at a price less than our
cost. We expect to continue to employ these discounts in an effort to grow our
subscriber base. For the forseeable future, we expect that the cost of handsets
will exceed our handset revenues.
As a Sprint PCS affiliate, we will purchase a full suite of back-office
services from Sprint PCS. Initially, the charges for these services will be
lower than if we provided these services ourselves. In addition, we expect that,
by using these established services, our capital expenditures and demands on our
management's time in connection with back-office services will be lower than if
we developed and provided the services ourselves. We will have access to these
services during the term of our Sprint PCS management agreement unless Sprint
PCS provides us at least nine months advance notice of its intention to
terminate any particular service. Because of the economic benefits to us, we
will initially purchase: customer billing and collections; customer care;
subscriber activation including credit verification; handset logistics; network
operations control center monitoring; national platform interconnectivity; voice
mail; directory assistance and operator services; long distance; and roaming
clearinghouse services.
RESULTS OF OPERATIONS
PROSPECTIVE INCOME
REVENUES. We will derive our revenues from four general sources that are
described in order of their significance:
- SUBSCRIBER REVENUE. Subscriber revenue consists of monthly recurring
access and feature charges and monthly non-recurring charges for local,
long distance, travel and roaming airtime usage in excess of the
pre-subscribed usage plan. Our customers' charges are dependent on their
rate plans, based on the number of minutes included in their plan.
Subscriber revenue also consists of non-recurring activation and
de-activation service charges.
- SPRINT PCS TRAVEL REVENUE. Sprint PCS travel revenue is generated when a
Sprint PCS subscriber based outside our markets uses our portion of the
Sprint PCS Network.
- NON-SPRINT PCS ROAMING REVENUE. Non-Sprint PCS roaming revenue is
generated when a non-Sprint PCS subscriber uses our portion of the Sprint
PCS Network. We must
32
<PAGE>
have roaming arrangements with other wireless providers in order to permit
roaming for our subscribers and for the non-Sprint PCS subscribers.
- PRODUCT SALES REVENUE. Product sales revenue is generated from the sale of
handsets and accessories. We record and retain 100% of the revenue from
the sale of handsets and accessories, net of an allowance for returns, as
product sales revenue.
We recognize 100% of revenues from Sprint PCS' subscribers based in our
markets, proceeds from the sale of handsets and accessories and fees from Sprint
PCS and other wireless service providers when their customers roam into our
portion of the Sprint PCS Network. Under our management agreement with Sprint
PCS, Sprint PCS receives 8% of all collected revenue from Sprint PCS subscribers
based in our markets and fees from wireless service providers other than Sprint
PCS when their subscribers roam into our portion of the Sprint PCS Network. We
report the amount retained by Sprint PCS as an operating expense.
OPERATING EXPENSES. We expect that our operating expenses will principally
include network operations and selling, general and administrative expenses,
some of which will be incurred through our management and services agreements
with Sprint and others of which we will incur directly.
- NETWORK OPERATIONS EXPENSES. Network operations expenses include cell site
lease costs, utilities, switch maintenance, switch site leases,
engineering personnel, backhaul, interconnect charges and handset and
equipment costs. We will also be charged travel fees by Sprint PCS and
roaming fees by other wireless carriers when our customers make a wireless
call on networks outside our markets. We also include as an expense the 8%
of all collected revenue to which Sprint PCS is entitled.
- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling expenses relate to
our distribution channels, sales representatives, sales support personnel,
our retail stores, advertising programs and residual commissions. General
and administrative expenses include our corporate executive payroll,
compensation and benefits, insurance and facilities, receivable related
bad debt, and local market finance and administration expenses. The fees
we pay to Sprint PCS for the use of their back-office services, including
billing and collections services, customer care and subscriber activation
are also included in this expense category.
HISTORICAL INCOME STATEMENTS
UBIQUITEL
FROM SEPTEMBER 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
From September 29, 1999 (inception) through December 31, 1999, our operating
activities were focused primarily on developing a PCS business in portions of
Nevada, including Reno, Carson City, Lake Tahoe and the transportation corridor
west along I-80 to Auburn, California. During this period we did not generate
any revenues and, as a result, have incurred operating losses since inception.
During this period, total cumulative expenses of approximately $2.0 million were
incurred. These expenses related to equity participation
33
<PAGE>
compensation expense, salaries and benefits, professional fees and interest
expense. The operating results during this period are not indicative of the
anticipated results of operations which we expect to achieve, following
commencement of commercial operations, as a Sprint PCS affiliate.
Equity participation compensation expense totaled approximately
$1.4 million for the period. This expense was determined using the provisions of
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" and was based on the fair market value of the common stock issued on
November 1, 1999.
SPOKANE DISTRICT
FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1998
Net revenues increased by $2.3 million or 71.5% to $5.6 million in 1999
compared to 1998. The increase is primarily attributable to an increased number
of subscribers.
Costs of services and equipment increased by $1.1 million or 27.1% to
$5.0 million in 1999 compared to 1998. As a percentage of revenues, these costs
represented approximately 90% of revenue in 1999 compared to approximately 121%
of revenue in 1998. The increase in costs is primarily attributable to the
increase in revenue somewhat offset by increased efficiencies.
Selling, general and administrative expenses increased by $0.9 million or
21.2% to $5.4 million in 1999 compared to 1998. As a percentage of revenues,
these expenses represented approximately 96% of revenues in 1999 compared to
approximately 136% in 1998. The increase is primarily attributable to increased
activity offset somewhat by increased efficiencies.
Expenses in excess of net revenues increased by approximately $40 thousand
or 0.5% to $8.3 million in 1999 compared to 1998. This increase is a result of
increased costs and expenses offset by increased revenue.
Management notes the 1999 operations reflect the operation of the Spokane
District by Sprint PCS. Historic results are not necessarily indicative of
future operations that we will manage.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997
Net revenues increased by $2.0 million or 163.3% to $3.3 million in 1998
compared to 1997. The increase is primarily attributable to an increased number
of subscribers.
Costs of services and equipment increased by $1.1 million or 36.8% to
$4.0 million in 1998 compared to 1997. As a percentage of revenues, these costs
represented approximately 121% of revenue in 1998 compared to approximately 233%
of revenue in 1997. The increase in costs is primarily attributable to the
increase in revenue somewhat offset by increased efficiencies.
34
<PAGE>
Selling, general and administrative expenses decreased by $3.7 million or
45.3% to $4.5 million in 1998 compared to 1997. As a percentage of revenues,
these expenses represented approximately 136% of revenues in 1998 compared to
approximately 655% in 1997. The decrease is primarily attributable to the end of
start-up activities offset somewhat by increased revenue generating activity.
Expenses in excess of net revenues decreased by $4.5 million or 35.3% to
$8.3 million in 1998 compared to 1997. This decrease is a result of increased
revenues and decreased selling, general and administrative expenses somewhat
offset by increased costs of services and equipment.
Management notes the 1998 operations reflect the operation of the Spokane
District by Sprint PCS. Historic results are not necessarily indicative of
future operations that we will manage.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, our activities have consisted principally of raising
capital, consummating and supporting our agreements with Sprint PCS, developing
the initial design of our PCS network and adding to our management team. We have
relied on the proceeds from equity and debt financing, rather than revenues, as
our primary sources of capital. Specifically, operations during this development
phase have been funded through equity infusions of $42.0 million in the form of
preferred stock, the incurrence of subordinated indebtedness of $8.0 million as
well as borrowings under UbiquiTel Operating Company's existing $25.0 million
credit facility that will be replaced by its new $250.0 million senior credit
facility. See "Description of Certain Indebtedness." All of our preferred stock
will automatically convert into common stock upon the completion of this
offering.
Completion of our PCS network will require substantial capital. Our
build-out plan includes the installation of three switches and over 500 cell
sites by the end of 2001. In addition, we will develop approximately 20
company-owned Sprint PCS stores and associated administrative systems within the
same time period. We have commenced limited operations in one of our markets,
which together with our pending acquisition of the Spokane, Washington market
from Sprint PCS, cover approximately 500,000 residents. We expect to cover
approximately 55% of the resident population in our markets by the end of 2001.
We anticipate that the net proceeds of this offering, when combined with the
proceeds from our recent sale of preferred stock, UbiquiTel Operating Company's
proposed senior subordinated debt financing and the availability of borrowings
under UbiquiTel Operating Company's proposed new senior credit facility, will be
adequate to fund our network build-out plan, anticipated capital expenditures,
working capital requirements, operating losses and other cash needs through
anticipated break-even cash flow from operations in 2003. The actual funds
required to build-out our PCS network and fund operating losses and working
capital needs may vary materially from these estimates, and additional funds
could be required in the event of unforeseen delays, cost overruns,
unanticipated expenses, engineering design changes and other technological
risks. If we expand more rapidly than currently anticipated, or if our working
capital needs exceed our current expectations, we will need to raise additional
capital
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from equity or debt sources. We cannot be sure that we will be able to obtain
the additional financing to satisfy our cash requirements or to implement our
growth strategy on acceptable terms or at all. If we cannot obtain such
financing on terms acceptable to us, we may be forced to curtail our planned
business expansion and may be unable to fund our ongoing operations.
Net cash used by operating activities was approximately $217,000 for the
inception period through December 31, 1999. Cash used in operating activities
for the period was attributable to operating losses and working capital needs.
Net cash used in investing activities was approximately $10,000 for the
inception period through December 31, 1999. The expenditures were related
primarily to the purchase of equipment needed to begin construction on our
portion of the Sprint PCS Network. Net cash provided by financing activities was
approximately $24.2 million, consisting primarily of the preferred stock and
senior subordinated debt for the inception period through December 31, 1999.
Currently, we have limited sources of revenue to meet our anticipated
capital requirements. We expect the primary sources of funding to be the
proceeds provided by this offering, our recent sale of preferred stock and the
proposed senior subordinated debt financing together with borrowings available
under the proposed new senior credit facility. Our wholly-owned subsidiary,
UbiquiTel Operating Company, has received a commitment from an affiliate of
Donaldson Lufkin & Jenrette to provide senior subordinated debt financing which
will be sufficient to generate gross proceeds at issuance of approximately
$125.0 million. The new senior credit facility is expected to consist of a
revolving loan of up to $55.0 million, a term loan A of $120.0 million and a
term loan B of $75.0 million. The new senior credit facility is expected to
contain financial and other covenants customary for the wireless industry. The
new senior credit facility is expected to be secured by a first priority lien
over all of the assets of our subsidiaries and a pledge of the capital stock of
our subsidiaries. The term loan under the new senior credit facility is expected
to begin scheduled amortization payments of principal beginning in , 200 .
See "Description of Certain Indebtedness."
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to certain market risks which are inherent in our financial
instruments. These instruments arise from transactions entered into in the
normal course of business. We are currently subject to interest rate risk on our
existing credit facility. Our fixed rate debt will consist primarily of the
accreted balance of the senior subordinated indebtedness. Our variable rate debt
will consist of borrowings made under the proposed new senior credit facility.
Our primary market risk exposure will relate to (1) the interest rate risk
on long-term and short-term borrowings, (2) our ability to refinance the senior
subordinated indebtedness at maturity at market rates and (3) the impact of
interest rate movements on our ability to meet interest expense requirements and
meet financial covenants. We may decide, from time to time, to manage the
interest rate risk on our outstanding long-term and short-term debt
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through the use of fixed and variable rate debt and interest rate swaps, but are
not obligated to do so.
At December 31, 1999, as adjusted to give effect to this offering, our
recent sale of preferred stock, the proposed senior subordinated debt financing
by our wholly-owned subsidiary, its proposed new senior credit facility and
expected borrowings thereunder, only the borrowings expected under the new
senior credit facility, will bear interest at variable rates. Assuming
$75.0 million of borrowings at variable rates and assuming a two percentage
point increase in the average interest rate under these borrowings, it is
estimated that our interest expense for the year ended December 31, 1999, would
have increased by approximately $1.5 million. In the event of an adverse change
in interest rates, management would likely take actions that would mitigate our
exposure to interest rate risk, through interest rate swaps or otherwise;
however, due to the uncertainty of the actions that would be taken and their
possible effects, this analysis assumes no such action. Further, this analysis
does not consider the effects of the change in the level of overall economic
activity that could exist in such an environment.
INFLATION
Management believes that inflation has not had, and will not have, a
material adverse effect on our results of operations.
SEASONALITY
Our business is seasonal 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. The factors contributing to this
trend include the increasing use of retail distribution, which is dependent on
year-end holiday shopping, the timing of new product and service offerings,
competitive pricing pressures and aggressive marketing and promotions during the
holiday season.
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BUSINESS
OVERVIEW
We are the exclusive provider of Sprint PCS digital personal communications
services, generally known as PCS, to midsize and smaller markets in the western
and midwestern United States. Through our management agreement with Sprint PCS,
we have the exclusive right to provide 100% digital, 100% PCS products and
services under the Sprint and Sprint PCS brand names in our markets which
include a total population of approximately 7.7 million residents. Sprint PCS,
together with its affiliates including us, operates the largest all-digital,
all-PCS nationwide wireless network in the United States based on covered
population, already covering more than 190 million residents in more than 330
metropolitan markets. Sprint PCS has PCS licenses to cover more than
270 million people across all 50 states, Puerto Rico and the U.S. Virgin
Islands. We believe that our strategic relationship with Sprint PCS provides us
with a significant competitive advantage because of its strong brand name
recognition, quality products and services, established distribution channels,
long-standing equipment vendor relationships and all digital nationwide
coverage. We further believe that our relationship with Sprint PCS will allow 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.
We have commenced limited operations in one of our markets, which together
with our pending acquisition of the Spokane, Washington market from Sprint PCS,
cover approximately 500,000 residents. We expect to cover approximately 55% of
the resident population in our markets by the end of 2001. We anticipate that
the net proceeds of this offering, when combined with the proceeds from our
recent sale of preferred stock, UbiquiTel Operating Company's proposed senior
subordinated debt financing and the availability of borrowings under UbiquiTel
Operating Company's proposed new senior credit facility, will be adequate to
fund our anticipated network build-out plan, capital expenditures, working
capital requirements, operating losses and other cash needs through anticipated
break-even cash flow from operations in 2003.
We have assembled an experienced management team to execute our network
build-out and business strategy. Our senior management team has an average of
over ten years of experience in the wireless communications industry with
companies such as Comcast Cellular Communications, PacTel Cellular and Frontier
Cellular Communications. Donald A. Harris, our President and Chief Executive
Officer, previously was president of Comcast Cellular Communications and managed
much of its' network build-out in Pennsylvania, New Jersey and Delaware with a
covered population of over 8 million residents. Upon completion of this
offering, our senior management will own approximately % of our common stock
assuming conversion of all of our outstanding warrants and options to purchase
our common stock.
WIRELESS INDUSTRY GROWTH
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
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mobile radio service has increased from an estimated 340,213 at the end of 1985
to an estimated 69.2 million as of December 31, 1998, 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
<S> <C> <C> <C> <C> <C>
WIRELESS INDUSTRY STATISTICS(1)
Total service revenues (in billions)......... $14.2 $19.1 $23.6 $27.5 $33.1
Wireless subscribers at end of period
(in millions).............................. 24.1 33.8 44.0 55.3 69.2
Subscriber growth............................ 50.8% 40.0% 30.4% 25.6% 25.1%
Average local monthly bill(2)................ $56.21 $51.00 $47.70 $42.78 $39.43
</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 INDUSTRY
PROJECTIONS--January 14, 2000, that the number of domestic wireless users will
increase to approximately 107 million by the end of 2000 and 202 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 21% of total wireless users in 2000 and
41% in 2005, representing a significant increase from approximately 10% as of
the end of 1998. Paul Kagan Associates 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 38% in 2000 to 69%
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 service and pricing 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 laptop 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 telephony
products and services, product
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distribution and directory publishing activities, and other telecommunications
activities, investments and alliances. Sprint PCS, a wholly-owned subsidiary of
Sprint, operates the only 100% digital, 100% PCS wireless network in the United
States with licenses to provide service nationwide using a single frequency and
a single technology. The Sprint PCS Network uses code division multiple access
or CDMA technology nationwide.
Sprint launched the first commercial PCS service in the United States in
November 1995. Since then, Sprint PCS has experienced rapid subscriber growth,
providing service to more than 5.7 million customers as of December 31, 1999. In
the fourth quarter of 1999, Sprint PCS added more than one million new
subscribers, representing the largest single quarter of customer growth ever
recorded by a wireless provider in the United States. During 1999, Sprint PCS
added more than approximately 3.1 million new subscribers. Sprint PCS, together
with its affiliates, operates the largest all-digital, all-PCS nationwide
wireless network in the United States, already serving more than 330
metropolitan markets including more than 4,000 cities and communities across the
country. Sprint PCS has licensed PCS coverage of more than 270 million people
across all 50 states, Puerto Rico and the U.S. Virgin Islands. The graph below
illustrates Sprint PCS' subscriber growth from the beginning of 1997 through the
end of 1999.
SPRINT PCS HISTORICAL SUBSCRIBERS
(IN THOUSANDS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Q1 97 192
<S> <C>
Q2 97 347
Q3 97 570
Q4 97 887
Q1 98 1,114
Q2 98 1,365
Q3 98 1,751
Q4 98 2,587
Q1 99 3,350
Q2 99 3,967
Q3 99 4,687
Q4 99 5,723
</TABLE>
Sprint PCS currently provides nationwide service through:
- operation of its own digital network;
- strategic affiliations with other companies, such as UbiquiTel, primarily
in and around smaller metropolitan areas;
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- roaming on analog cellular networks of other providers using
dual-band/dual-mode handsets; and
- roaming on digital PCS networks of other CDMA-based providers.
Sprint PCS has adopted a strategy to rapidly extend its 100% digital, 100%
PCS network by entering into agreements with independent wireless companies,
such as UbiquiTel, to construct and manage Sprint PCS markets and market Sprint
PCS services. Through these affiliations, Sprint PCS services will be available
in key cities contiguous to current and future Sprint PCS markets. Sprint PCS'
affiliates are an integral part of its plan to provide nationwide seamless
coverage.
OUR MARKETS
Our network will cover portions of California, Nevada, Washington, Idaho,
Montana, Wyoming, Utah, Oregon, Arizona, Indiana, Kentucky, Illinois and
Tennessee for a combined population of approximately 7.7 million residents.
These markets are attractive for the following reasons:
- FEWER COMPETITORS/UNTAPPED MARKET PENETRATION. Because the national
wireless providers have focused on the largest metropolitan markets, we
believe that our markets have lower wireless penetration rates as compared
to the national average of 32% as of year end 1999. As of December 31,
1999, three or fewer wireless service providers, other than us, operated
in areas that comprise over 75% of the residents in our markets. 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. We further believe that offering a high
quality, all digital nationwide product in our markets will allow us to
achieve greater market penetration with less pricing competition than in
larger markets.
- CONTIGUOUS TO MAJOR EXISTING SPRINT PCS MARKETS. Our markets are
contiguous to major Sprint PCS markets with a combined license population
of over 22 million. Some of the major contiguous markets include San
Francisco and Sacramento, California; Seattle and Tacoma, Washington; Salt
Lake City and Provo, Utah; Las Vegas, Nevada; Indianapolis, Indiana; St.
Louis, Missouri; Nashville, Tennessee; Louisville, Kentucky; and
Cincinnati and Dayton, Ohio. We believe that having a large established
base of Sprint PCS customers in close proximity to our markets will
facilitate brand awareness, create an extended seamless coverage area and
generate Sprint PCS travel revenue as existing Sprint PCS customers travel
into our markets.
- IMPORTANT TRANSPORTATION CORRIDORS. Our markets include the most important
and, in come cases, the only transportation corridors that link the
population centers within a particular market. Our network will cover over
2,200 highway miles, including major interstates such as I-80 and I-90.
Over 45 million vehicle miles are traveled daily on the major highway
miles we expect to cover in our markets. We anticipate that our coverage
of important transportation corridors will further increase our travel and
roaming revenue.
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- POPULAR VACATION AND TOURIST DESTINATIONS. Our markets contain popular
vacation and tourist destinations, including various national parks and
ski resorts such as Yellowstone National Park, and Glacier National Park,
and Lake Tahoe and Sun Valley resorts with over 20 million visitors per
year. As a result, we anticipate that we will receive significant Sprint
PCS travel and roaming revenue from tourists.
- FAVORABLE DEMOGRAPHICS. Our markets have attractive demographic
characteristics for PCS, including an overall average population growth
rate that is over 60% higher than the national average. In addition, there
are at least 20 colleges and universities located within our markets,
including 12 schools with student populations greater than 10,000 each
such as Utah State University (Logan), Indiana University (Bloomington),
and the University of Nevada.
RENO/TAHOE/NORTHERN CALIFORNIA
This market has a resident population of approximately 1.7 million. Limited
commercial service was launched in areas directly adjacent to Sacramento in
February 2000, and we expect to launch Reno/Lake Tahoe by the third quarter of
2000. We expect to complete the majority of the network build-out of this market
by the end of 2001 at which time we will cover approximately 72% of the resident
population in our license area. Distinguishing characteristics with respect to
this market include:
- Contiguous to major Sprint PCS markets including:
- Sacramento, San Francisco, the San Francisco Bay Area, California;
- Stockton, Fresno, and Central, California;
- Portland, Eugene and Salem, Oregon; and
- Planned coverage in Medford and Klamath Falls, Oregon.
- Licensed area includes over 750 (300 under expected coverage) highway
miles along important corridors such as I-5 and I-80.
- Over 13.3 million vehicle miles are traveled daily on the major highways
within our expected coverage area.
- Over 6.0 million tourists visit the Reno/Lake Tahoe area annually.
- Largest concentration of ski areas in North America (15 alpine and 13
cross-country ski areas), including Heavenly Valley and Squaw Valley.
- Several Lake Tahoe casino, recreation and resort destinations.
- Two major universities in the coverage area with a combined student
population of over 25,000 including:
- University of Nevada, Reno (12,000 students); and
- California State University, Chico (13,470 students).
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SPOKANE/MONTANA
This market includes a total resident population of approximately
1.8 million residents. In April 2000, we intend to complete our pending
acquisition of the Spokane market from Sprint PCS for $35.0 million. This market
is operational in the greater Spokane, Washington and Coeur d' Alene, Idaho
metropolitan areas. We are implementing plans to rapidly expand the Spokane
coverage area to include the important communities of Pullman, Washington,
Moscow and Lewiston, Idaho and the I-90 corridor west towards Seattle by the
first quarter of 2001. We will complete our network build-out requirements by
selectively expanding our coverage to include markets in Montana and Wyoming. At
the completion of our build-out, we expect to cover approximately 65% of the
resident population in our licensed area. Distinguishing characteristics with
respect to this market include:
- Contiguous to major Sprint PCS markets including:
- Seattle, Tacoma and Olympia, Washington and Portland, Oregon; and
- Planned coverage in the eastern Washington cities of Yakima, Tri-Cities
(Kennewick, Pasco and Richland) and Walla Walla.
- Licensed area includes over 1,400 (350 under expected coverage) highway
miles along important corridors such as I-90 and I-15.
- Over 6.1 million vehicle miles are traveled daily on the major highways
within our expected coverage area.
- Approximately 5.9 million tourists visit the national parks and resorts in
this market.
- Popular ski and summer resort areas include Big Sky, Big Mountain and
Schweitzer.
- Home to the National Parks of Yellowstone and Glacier.
- Four major universities in the coverage area with a combined student
population of over 52,000 including:
- University of Montana, Missoula (12,200 students);
- Montana State University, Bozeman (11,750 students);
- Washington State University, Pullman (16,700 students); and
- University of Idaho, Moscow (12,000 students).
SOUTHERN IDAHO/UTAH/NEVADA
This market includes a total resident population of approximately
1.4 million residents. We expect to launch commercial services in the Logan and
Brigham City, Utah market by the first quarter of 2001 and in the Boise, Idaho
and St. George, Utah market by the second quarter of 2001. We expect to complete
the majority of the build-out of this market by the end of 2001. Upon completion
of our build-out in this market, we expect to cover
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approximately 72% of the resident population in our licensed area.
Distinguishing characteristics with respect to this market include:
- Contiguous to major Sprint PCS markets including:
- Salt Lake City, Ogden and Provo, Utah; and
- Las Vegas, Nevada.
- Licensed area includes approximately 1,070 (790 under expected coverage)
highway miles along important corridors such as I-15 and I-84.
- Approximately 14.0 million vehicle miles are traveled daily on the major
highways within our expected coverage area.
- Approximately 8.5 million tourists visit the national parks and resorts in
this market.
- Home to national parks such as Zion, Bryce and Grand Teton.
- Popular ski areas include Sun Valley, Jackson Hole and Snowbasin (2002
Winter Olympics site).
- Rapidly growing metropolitan area of Boise, home to many high tech
employers such as Micron.
- Three major universities in the coverage area with a combined student
population of over 42,000 including:
- Utah State University, Logan (14,400 students);
- Idaho State University, Pocatello (12,700 students); and
- Boise State University, Boise (15,400 students).
SOUTHERN INDIANA/KENTUCKY
This market includes a total resident population of approximately
2.7 million residents. We expect to launch commercial services in the
Evansville, Terre Haute, and Bloomington, Indiana markets by the second quarter
of 2001. Over the next two quarters, we expect to continue the expansion of our
coverage area along major highways and thoroughfares throughout our license
areas in southern Indiana and Kentucky. We expect to complete the majority of
the build-out of this market by the end of 2001. Upon completion of our
build-out in this market, we expect to cover approximately 50% of the resident
population in our licensed area. Distinguishing characteristics with respect to
this market include:
- Contiguous to major Sprint PCS markets including:
- Indianapolis, Indiana;
- Dayton, Columbus and Cincinnati, Ohio;
- Louisville and Lexington, Kentucky;
- Nashville, Tennessee; and
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- St. Louis, Missouri.
- Licensed area includes over 850 (840 under expected coverage) highway
miles along important corridors such as I-70, I-64, I-24, I-65 and I-74 as
well as state routes 150, 41, 50 and 60.
- Over 12.3 million vehicle units are traveled daily on the major highways
within our expected coverage area.
- Strong industrial economy with major employers including General Electric,
General Motors, International Paper, Toyota Motor, ALCOA, Whirlpool and AK
Steel.
- Three major universities in the coverage area with a combined student
population of over 61,000 including:
- Indiana University, Bloomington (35,600 students);
- Indiana State University, Terre Haute (11,000 students); and
- Western Kentucky University (14,700 students).
BUSINESS STRATEGY
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. This affiliation includes the following benefits:
EXCLUSIVE PROVIDER OF SPRINT PCS PRODUCTS AND SERVICES. We are the
exclusive provider of Sprint PCS' 100% digital, 100% PCS products and services
in our markets and we will provide these products and services exclusively under
the Sprint and Sprint PCS brand names.
STRONG BRAND RECOGNITION AND NATIONAL ADVERTISING SUPPORT. We will benefit
from the strength and the reputation of the Sprint and Sprint PCS brands. Sprint
PCS' national advertising campaigns and developed marketing programs will be
provided to us at no additional cost under our agreements with Sprint PCS. We
will offer the same strategic pricing plans, promotional campaigns and handset
and accessory promotions that we believe have made Sprint PCS the fastest
growing wireless service provider in the United States.
ESTABLISHED DISTRIBUTION CHANNELS. We will have use of all the national
distribution channels used by Sprint, including over 350 retail outlets in our
markets. These channels include:
- exclusive PCS offering in RadioShack (over 150 outlets);
- other major national third-party retailers such as Best Buy, Circuit City,
OfficeMax and Kmart (over 200 outlets);
- Sprint PCS' national inbound telemarketing sales force;
- Sprint PCS' national accounts sales team; and
- Sprint PCS' electronic commerce sales platform.
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NATIONWIDE COVERAGE. We plan to operate our PCS network seamlessly with the
Sprint PCS national network. This will provide customers in our markets with
immediate nationwide traveling coverage using the Sprint PCS Network and other
wireless networks with which Sprint PCS has roaming agreements. Sprint PCS,
together with its affiliates, operates the largest all-digital, all-PCS
nationwide wireless network in the United States, already serving more than
190 million residents in more than 330 metropolitan markets. Sprint PCS has PCS
licenses to serve more than 270 million people across all 50 states, Puerto Rico
and the U.S. Virgin Islands.
COST-EFFECTIVE BACK-OFFICE SERVICES FROM SPRINT PCS. Our affiliation with
Sprint PCS provides us with the option to use Sprint PCS' established
back-office services, including customer activation, billing and customer care.
Using this option, we can accelerate the launch of our commercial PCS operations
and reduce our capital expenditures and operating costs compared to establishing
and operating our own systems. Sprint PCS has indicated it intends to provide
these services to us at its internal costs which reflect Sprint PCS' economies
of scale. We may elect to develop our own internal capabilities to handle these
functions or outsource them to a third party if doing so proves to be more cost
effective.
APPROVED SPRINT PCS NETWORK DESIGN. We will leverage Sprint PCS' extensive
experience with designing and implementing a digital PCS network build-out.
Sprint PCS sets our network standards, reviews our network build-out plans, and
certifies our systems before we commence operations. As a result, the risk of a
poor network design is dramatically reduced.
PURCHASING ECONOMIES OF SCALE OF A NATIONWIDE NETWORK. We will purchase our
network and subscriber equipment under Sprint PCS' vendor contracts that provide
for volume discounts. Sprint PCS' purchasing power also influences new
technology development by its vendors and provides Sprint PCS and it affiliates,
like us, with preferential access to handsets and other equipment.
SPRINT PCS LICENSES AND LONG-TERM COMMITMENT. Sprint PCS has funded the
purchase of the licenses covering our markets at a cost of approximately $90
million and will incur additional expenses for microwave clearing. As a Sprint
PCS affiliate, we did not have to fund the acquisition of the licenses thereby
reducing our start-up costs. Moreover, our affiliation with Sprint PCS is for a
50-year term, including an initial 20-year term with three 10-year automatic
renewal periods unless either party provides two years' prior notice to the
other party of its intent to terminate the agreement.
EXECUTE OPTIMAL NETWORK BUILD-OUT PLAN
We utilize a rigorous financial model to analyze every aspect of our 100%
digital, 100% PCS network build-out. Accordingly, we have targeted the more
densely populated areas within our markets for network build-out as well as
areas expected to generate significant Sprint PCS travel and other roaming
revenue such as the major transportation corridors and tourist destinations.
Through our strategic relationships, we are constructing a state-of-the-art,
high quality, all-digital PCS network, which includes a high density of cell
sites. We believe that our high
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quality network will allow our system to handle more customers with fewer
dropped calls and better clarity than our competitors. By leasing cell sites on
facilities shared with one or more other wireless providers, we expect to
rapidly deploy a cost effective PCS network. We estimate that over 75% of our
sites will be collocated.
UTILIZE OTHER STRATEGIC THIRD PARTY RELATIONSHIPS IN NETWORK BUILD-OUT
We have entered into other strategic relationships with various third
parties to benefit from their specialized expertise and economies of scale in
order to build-out our portion of the Sprint PCS Network more quickly and with
lower initial capital and staffing requirements than would otherwise be
possible. Specifically, we have relationships with:
- LUCENT TECHNOLOGIES. Lucent Technologies is an international equipment
supplier well-known for its leadership in the development and deployment
of CDMA technology networks. We have selected Lucent as the equipment
supply vendor as well as the overall program manager for network
deployment in each of our four markets.
- LCC INTERNATIONAL. LCC International is an engineering and site
development firm well-known for pioneering the use of radio frequency
design techniques and software tools in the deployment of cellular and PCS
networks worldwide. We have contracted with LCC International to perform
network design, site acquisition including leasing, zoning, permitting and
regulatory compliance; fixed network design service and switch design and
operational services in the Reno/Tahoe/Northern California market. We are
currently negotiating an agreement with LCC International to perform
similar services in our other markets.
- SPECTRASITE COMMUNICATIONS. SpectraSite Communications is a leading
telecommunications site development and management firm. The company
designs, builds, owns, operates and maintains towers for sending and
receiving microwave, cellular, PCS, paging and specialized mobile radio
technologies for broadcast, telephone, communications and utility
companies in the United States and Canada. We are negotiating the final
terms of a new "Build to Suit Master Site Agreement" and a "Master Site
Agreement" for existing SpectraSite Communications towers with SpectraSite
Communications, and will work cooperatively to develop new tower locations
under a sale-leaseback arrangement.
IMPLEMENT EFFECTIVE OPERATING STRUCTURE WITH A FOCUS ON CUSTOMER SERVICE
Our organization and management structure is based on a decentralized, local
market-focused model. We will rely on Sprint PCS to provide the majority of our
back-office support, including customer activation, billing and customer care,
while focusing our resources on the management of each market rather than the
development of these ancillary services. We will place experienced management
teams at the local level with the authority to tailor operations and sales and
marketing programs to each market.
We place particular emphasis on customer service to ensure high customer
satisfaction. Our local sales force will actively seek feedback from existing
customers from the day of
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activation through the life of that customer in order to respond effectively and
expeditiously to that customer's needs. The Sprint PCS customer care platform
located in each of our retail stores will enable our sales and customer care
representatives to provide an additional level of customer service by rapidly
diagnosing and resolving any problems a customer may experience with their
equipment or service. By providing extensive and frequent interaction with our
customers, we expect to reduce customer turnover and overall customer
acquisition costs. Our local sales and customer service associates will be
measured and compensated by their ability to provide superior customer service.
FOCUS ON MIDSIZE AND SMALLER MARKETS
We believe that midsize and smaller markets receive a lower level of
attention from the major wireless providers as they focus on the larger markets.
We believe that an opportunity exists for us to provide a high quality,
nationwide digital product to these markets with less competition than
frequently seen in the larger markets. We will capitalize on this opportunity
through our own internal build-out as well as through the pursuit of future
acquisitions or affiliations.
NETWORK BUILD-OUT
Pursuant to our management agreement with Sprint PCS, we have agreed upon a
minimum build-out plan which includes specific coverage and deployment schedules
for the network planned within our markets. We plan to meet or exceed the
minimum build-out requirements by focusing on achievable objectives.
Our strategy is to provide service to the population centers in our markets
and the interstates and primary roads connecting these areas. We plan to
initiate service only in areas that provide financial returns that meet
stringent internal requirements and where we are capable of providing coverage
which meets the needs of our target markets.
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The following table lists the location, the basic trading areas ("BTAs"),
megahertz of spectrum, estimated total residents and percent coverage for each
of our markets under our Sprint PCS management agreement:
<TABLE>
<CAPTION>
ESTIMATED
TOTAL
MEGAHERTZ RESIDENTS PERCENT
OF SPECTRUM (000'S) COVERAGE
BTA NO.(1) (2) (3) (4)
LOCATION ----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
RENO/TAHOE/NORTHERN CALIFORNIA
Chico-Oroville, CA................................ 79 30 225
Eureka, CA........................................ 134 30 148
Redding, CA....................................... 371 30 284
Reno, NV.......................................... 372 30 584
Sacramento, CA.................................... 389* 30 313
Yuba City-Marysville, CA.......................... 485* 30 142
--- -- ----- --
Subtotal.......................................... 1,696 72%
SPOKANE/MONTANA
Billings, MT...................................... 41 30 316
Bozeman, MT....................................... 53 30 81
Butte, MT......................................... 64 30 68
Great Falls, MT................................... 171 30 167
Helena, MT........................................ 188 30 70
Kalispell, MT..................................... 224 30 76
Lewiston-Moscow, ID............................... 250 30 127
Missoula, MT...................................... 300 30 172
Spokane, WA....................................... 425 30 754
--- -- ----- --
Subtotal.......................................... 1,830 65%
SOUTHERN IDAHO/UTAH/NEVADA
Boise-Nampa, ID................................... 50 30 562
Idaho Falls, ID................................... 202 30 219
Las Vegas, NV..................................... 245* 30 22
Logan, UT......................................... 258 30 104
Pocatello, ID..................................... 353 30 106
Provo-Orem, UT.................................... 365* 30 12
St. George, UT.................................... 392 30 137
Salt Lake City-Ogden, UT.......................... 399* 30 105
Twin Falls, ID.................................... 451 30 164
--- -- ----- --
Subtotal.......................................... 1,430 72%
SOUTHERN INDIANA/KENTUCKY
Anderson, IN...................................... 15* 30 44
Bloomington-Bedford, IN........................... 47 30 241
Bowling Green-Glasgow, KY......................... 52 30 249
Cincinnati, OH.................................... 81* 10 17
Clarksville, Hopkinsville, TN/KY.................. 83 30 254
Columbus, IN...................................... 93 30 157
Evansville, IN.................................... 135 30 518
Indianapolis, IN.................................. 204* 30 86
Louisville, KY.................................... 263* 30 252
Madisonville, KY.................................. 273 30 47
Owensboro, KY..................................... 338 30 165
Paducah-Murray-Mayfield, KY....................... 339 30 234
Richmond, IN...................................... 373 30 105
Terre Haute, IN................................... 442* 30 246
Vincennes-Washington, IN.......................... 457 30 96
----- --
Subtotal.......................................... 2,711 50%
----- --
TOTAL............................................... 7,667 63%
===== ==
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
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(FOOTNOTES FOR PRECEDING PAGE)
- --------------------------
* Denotes partial portion of BTA.
(1) The BTA No. is assigned to that market by the Federal Communications
Commission for the purposes of issuing licenses for wireless services.
(2) Spectrum licensed to Sprint PCS or related parties of which we have
exclusive access.
(3) Estimated total residents is based on 1990 Census data for each BTA within a
given market extrapolated through the first quarter of 2000 based on
estimated population growth rates. Estimated BTA residents may not add-up
due to rounding.
(4) Percent coverage is the ratio of estimated covered residents (based on our
actual or projected network coverage in markets upon completion of our
network build-out) to estimated total residents.
To achieve our build-out as rapidly and efficiently as possible, we have
entered into outsourcing or other relationships with the following:
- LUCENT TECHNOLOGIES. Lucent Technologies has been engaged by the Company
to perform overall program management. As program manager, Lucent is
responsible for the coordination, scheduling, tracking and controlling of
the network build-out, including oversight of radio frequency engineering,
site acquisition, construction, base station equipment installation,
integration and optimization. The agreement with Lucent calls for service
tenure of approximately 24 months. During these 24 months, or such shorter
or longer period to complete the build-out, we will pay Lucent a monthly
fee for each of the two program managers assigned to us.
- LCC INTERNATIONAL. LCC International has been engaged to provide radio
frequency design and optimization, site acquisition including leasing,
zoning, permitting and regulatory compliance, fixed network design service
and switch design and operation services in the Reno/Tahoe/Northern
California market. LCC International has also been engaged to provide
initial design services for network deployment in our other three markets
and has made available experienced resources to assist in our network
deployment on an as-needed basis. We are currently negotiating an
agreement with LCC International to expand the services provided in our
other three markets to include the same services currently provided to the
Reno/Tahoe/Northern California market.
- SPECTRASITE COMMUNICATIONS. We are negotiating the final terms of a new
"Build to Suit Master Site Agreement" and a "Master Site Agreement" for
existing SpectraSite Communications towers with SpectraSite
Communications. SpectraSite Communications has preferential access to more
than 2,400 existing towers throughout the United States. We will evaluate
the available inventory for possible collocation sites for our network
equipment. In addition to the tower access agreement, SpectraSite
Communications will be responsible for all leasing, zoning, permitting,
architecture and engineering and construction of all new tower locations
under a sale leaseback agreement at a pre-determined price.
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More than 75% of our cell sites will be collocated on existing structures,
which will result in higher cell site lease expenses. These higher lease
expenses will be offset in part by certain operating expense savings resulting
from collocation. Collocation will also substantially reduce our capital
expenditures and time to market.
Wireless providers that have offered poor or spotty coverage, inferior voice
quality, unresponsive customer care or confusing billing formats suffer higher
than average customer turnover rates. Accordingly, we will only launch service
after comprehensive and reliable coverage and service can be maintained in a
particular market. In addition, we will use the Sprint PCS billing platform and
rate plans which are designed to offer simple and understandable options.
Specifically, the Sprint PCS "Free and Clear" calling plans offer bundled minute
options that include local, long distance and traveling on the entire Sprint PCS
Network.
PRODUCTS AND SERVICES
We will offer established products and services throughout our markets 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 product offering includes the following features:
100% DIGITAL WIRELESS NETWORK WITH NATIONWIDE SERVICE
We are part of the largest 100% digital wireless personal communications
services network in the country. Sprint PCS and its affiliates, cover more than
190 million people in more than 330 metropolitan areas across the country. This
provides an extended coverage area for our customers, allowing access to Sprint
PCS services throughout the Sprint PCS Network. Dual-band/dual-mode handsets
allow roaming on wireless networks where Sprint PCS has roaming agreements.
SPRINT PCS WIRELESS WEB
We will 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 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 also 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.com,
Amazon.com, FOXSports.com, GetThere.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" calling plans
or a bundle of minutes for a set price that can be used for either data or
voice.
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ADVANCED HANDSETS
We will offer two types of handsets, a single band/single mode and a
dual-band/dual mode, with various advanced features and technology. Our 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. Our dual-band/ dual-mode handsets allow
customers to make and receive calls on both PCS 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. All
handsets are co-branded with the vendor and 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.
PRIVACY AND SECURITY
Sprint PCS provides voice transmissions encoded into a digital format with a
significantly lower risk of cloning and eavesdropping than on other analog or
digital based systems. Sprint PCS customers using dual-band/dual-mode handsets
in analog mode do not have the benefit of digital security.
IMPROVED VOICE QUALITY
We believe the Sprint PCS code division multiple access technology offers
significantly improved voice quality, more powerful error correction, less
susceptibility to call fading and enhanced interference rejection, all of which
results in fewer dropped calls.
CUSTOMER SERVICE
Sprint PCS provides toll free customer care services to customers based in
our markets under our Sprint PCS services agreement. Sprint PCS offers customer
care 24 hours a day, seven days a week. All Sprint PCS handsets are
preprogrammed with a speed dial feature that allows customers to easily reach
customer care at any time. In addition to these services provided through our
agreement with Sprint PCS, we will also provide local customer service at each
of our retail stores.
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.
OTHER SERVICES
Sprint PCS' research and development lab is continuously working with
technology and equipment providers to develop new products and services. We will
work with Sprint PCS to develop and adopt complimentary service offerings to
introduce in our markets.
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TRAVELING AND ROAMING
SPRINT PCS TRAVELING
Sprint PCS traveling includes both inbound Sprint PCS traveling, when a
Sprint PCS subscriber based outside of our markets uses our portion of the
Sprint PCS Network, and outbound Sprint PCS traveling, when a Sprint PCS
subscriber based in our markets uses the Sprint PCS Network outside of our
markets. Sprint PCS pays us a per minute fee for inbound Sprint PCS traveling.
Similarly, we pay a per minute fee to Sprint PCS for outbound Sprint PCS
traveling. Pursuant to our management agreement with Sprint PCS, Sprint PCS has
the discretion to change the per minute rate for Sprint PCS traveling fees.
Because we serve smaller markets adjacent to larger metropolitan areas, we
believe inbound Sprint PCS traveling will exceed outbound Sprint PCS traveling.
See "Risk Factors--Risks Particular to Our Relationship with Sprint PCS--We may
not receive as much Sprint PCS travel revenue as we anticipate because Sprint
PCS can change the rate we receive or less people may travel on our network.
NON-SPRINT 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
markets 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 management agreement with Sprint PCS, 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 markets, 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 markets.
MARKETING STRATEGY
Our marketing and sales strategy will use Sprint PCS' proven strategies and
developed national distribution channels that have helped generate the highest
incremental wireless penetration of any cellular or PCS provider in the United
States. In the fourth quarter of 1999, Sprint added approximately one million
new subscribers, the largest single quarter of customer growth ever reported by
a wireless provider in the United States. In 1999, Sprint PCS added more than
approximately 3.1 million new wireless subscribers. We plan to enhance Sprint
PCS' proven strategies with strategies tailored to our specific markets.
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BRAND EQUITY
We will feature exclusively and prominently the nationally recognized Sprint
and Sprint PCS brand names in our marketing effort. From the customers' point of
view, they will use our PCS network and the Sprint PCS national network
seamlessly as a unified national network.
PRICING
We will use the Sprint PCS pricing strategy to offer customers in our
markets simple, easy to understand, service plans. Sprint PCS' consumer pricing
plans are typically structured with competitive monthly recurring charges, large
local calling areas, service features such as voicemail, enhanced caller ID,
call waiting and three-way calling, and competitive per-minute rates. Lower
per-minute rates relative to analog cellular providers are possible in part
because the code division multiple access system that both we and Sprint PCS
employ has greater capacity than current analog cellular systems, enabling us to
market high usage customer plans at lower prices. All of Sprint PCS' current
pricing plans:
- include minutes in any Sprint PCS market (with no traveling charges);
- are feature-rich and generally require no annual contracts or hidden
charges;
- offer a wide selection of phones to meet the needs of consumers and
businesses; and
- provide a limited-time money back guarantee on Sprint PCS phones.
In addition, Sprint PCS' national "Free and Clear" calling plans, which
offer simple, affordable plans for every consumer and business customer, include
free long distance calling from anywhere on its nationwide network.
LOCAL FOCUS
Our local focus will enable us to supplement Sprint PCS' marketing
strategies with our own strategies tailored to each of our specific markets.
This will include attracting local businesses to enhance our distribution and
drawing on our management team's experience in our markets. We will use local
radio, television and newspaper advertising to sell our products and services in
each of our markets. We intend to build a local sales force to execute our
marketing strategy and to employ a direct sales force targeted to business
sales. In addition, Sprint PCS' existing agreements with national retailers
provide us with access to 388 retail locations in our markets.
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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. 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 markets, such as RadioShack, Circuit City, OfficeMax 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 that
provide customers with benefits such as additional features at the same rate or
free minutes of use for limited time periods. We will offer these promotional
campaigns to potential customers in our markets.
SPONSORSHIPS
Sprint PCS is a sponsor of numerous selective, broad-based national,
regional and local events. These sponsorships provide Sprint PCS with brand name
and product recognition in high profile events, provide a forum for sales and
promotional events and enhance our promotional efforts in our markets.
BUNDLING OF SERVICES
We intend to take advantage of the complete array of communications services
offered by bundling Sprint PCS services with other Sprint products, such as long
distance and Internet access.
SALES AND DISTRIBUTION
Our sales and distribution plan mirrors Sprint PCS' proven multiple channel
sales and distribution plan. Key elements of our sales and distribution plan
consist of the following:
SPRINT PCS RETAIL STORES
We plan to operate company owned Sprint PCS branded retail stores throughout
our markets. These stores will be located in major traffic centers within our
markets, providing us with a strong local presence and a high degree of
visibility. We will train our sales representatives to be informed and
persuasive advocates for Sprint PCS' services. Following the Sprint PCS model,
these stores will be designed to facilitate retail sales, activation, bill
collection and customer service. We plan to open approximately 20 new stores by
the end of 2001 when we are commercially active in all our markets and continue
adding stores as market conditions require.
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 PCS sold through
RadioShack stores. RadioShack currently has 170 stores in our markets.
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OTHER NATIONAL THIRD PARTY RETAIL STORES
In addition to RadioShack, we will benefit from the distribution agreements
established by Sprint PCS with other national retailers which currently include
Best Buy, Kmart, Staples, Circuit City, OfficeMax, Montgomery Ward, Office
Depot, Ritz Camera, Target and Heileg Meyer. These retailers provide an
additional 218 retail stores in our markets.
NATIONAL ACCOUNTS AND DIRECT SELLING
We will participate in Sprint PCS' national accounts program. Sprint PCS has
a national accounts team which focuses on the corporate headquarters of Fortune
1000 companies. Once a representative reaches an agreement with the corporate
headquarters, we service the offices of that corporation located in our markets.
Our direct sales force will target the employees of these corporations in our
markets and cultivate other local business clients.
INBOUND TELEMARKETING
Sprint PCS will provide inbound telemarketing sales when customers call from
our markets. As the exclusive provider of Sprint PCS products and services in
our market, we will use the national Sprint 1-800-480-4PCS number campaigns that
generate call-in leads. These leads are then handled by Sprint PCS' inbound
telemarketing group.
ELECTRONIC COMMERCE
Sprint PCS launched an Internet site in December 1998 which contains
information on Sprint PCS products and services. A visitor to Sprint PCS'
Internet site can order and pay for a handset and select a rate plan. Customers
visiting the site can review the status of their account, including the number
of minutes used in the current billing cycle. Customers in our markets who
purchase products and services over the Sprint PCS Internet site will be
customers of our PCS network.
TECHNOLOGY
GENERAL
In the commercial mobile 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 relatively 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 services on a geographic basis, using
distinct radio spectrum bands. Cellular service, which uses a portion of the 800
MHz spectrum, was the original form of widely-used commercial mobile wireless
voice communications. Cellular systems were originally analog-based, but over
the last several years cellular operators have been providing digital service,
usually as a complement to analog service in most of the major metropolitan
markets. In 1994, the Federal Communications Commission allocated the
1850 - 1990 MHz band for wireless broadband personal communications services to
be provided utilizing digital technology.
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Both analog and digital mobile wireless communications systems, whether
wireless broadband personal communications services or cellular service, 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 switch:
- 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 broadband personal communications services differ from traditional
analog cellular service principally in that wireless broadband personal
communications services systems use frequencies in a higher spectrum band 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 broadband personal communications services or cellular
service frequencies, to provide greater call privacy and more robust data
transmission, such as facsimile, electronic mail and connecting laptop computers
with computer/data networks. Moreover, digital technology also permits the
provision of enhanced services such as caller ID.
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, commonly referred to as
CDMA, time division multiple access, commonly referred to as TDMA, or global
system for mobile communications, a form of time division multiple access
commonly referred to as GSM. Each of these three digital technologies is
incompatible with the other two. Thus, for example, a subscriber of a system
that utilizes code division multiple access technology is unable to use his or
her code division multiple access handset when traveling in
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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 default to an analog
cellular system in that area. The same issue exists in the case of users of time
division multiple access or global system for mobile communications systems.
Many of the wireless personal communications services operators now have
dual-mode or tri-mode handsets available to their customers. Because not all
areas of the country are served by each of the three digital modes, these
handsets will remain necessary for segments of the subscriber base.
CODE DIVISION MULTIPLE ACCESS TECHNOLOGY
Sprint PCS' national network and its affiliates' networks 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 use 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
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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 allows multi-vendor equipment
to be used in the same network to a larger extent than code division multiple
access platforms. 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 have code division multiple access handsets that support either
the time division multiple access or global system for mobile communications
technologies.
COMPETITION
We will compete throughout our markets with both incumbent cellular and new
PCS providers. The cellular providers in our markets serve different geographic
segments, with AirTouch (recently acquired by Vodafone) and AT&T Wireless
Services covering our three western regional markets, and GTE and BellSouth
servicing the midwestern market of Southern Indiana/Kentucky.
Competition from PCS providers is significantly more fragmented, with a
number of different operators competing with incompatible air-interface
technologies. In the Reno/Tahoe/ Northern California market, Pacific Bell
Wireless is the principle PCS competitor operating with GSM air-interface
technology. In the metropolitan area of Spokane, our network competes with the
GSM operator VoiceStream and the CDMA operator GTE. In Montana, regional
operators Three River Wireless and Black Foot compete with small CDMA networks.
PCS competitors in the Southern Idaho/Utah market consist primarily of the GSM
operator VoiceStream with a small start-up CDMA carrier, South Central
Communications, operating in St. George and southern Utah. In the Southern
Indiana/Kentucky market, CDMA operator Ameritech and GSM operators OmniPoint
(recently acquired by VoiceStream) and PowerTel compete for different markets.
We also face competition from resellers in each of our markets, 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
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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 the same, similar or other communications
technologies, including satellite-based telecommunications and wireless cable
systems and other terrestrial-based telecommunications networks. 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 significantly greater financial and technical
resources and subscriber bases than we do. Some of our competitors also have
well 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 will 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. Indeed, the Federal
Communications Commission has recently reclaimed certain 700 MHz band spectrum
previously allocated for UHF television broadcast use and has scheduled an
auction of licenses for terrestrial-based wireless telecommunications systems in
large geographic areas for later this year. 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 national presence of Sprint PCS;
- the location of our markets;
- our network coverage and reliability;
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- 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 will
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 markets. 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 instances that are noncompetitive 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 markets. In
all other instances, Sprint PCS reserves the right to use the licensed marks in
providing its services within or without our markets.
The trademark license agreements contain numerous restrictions with respect
to the use and modification of any of the licensed marks. See "The Sprint PCS
Agreements--The Trademark and Service Mark License Agreements" for more
information on this topic.
EMPLOYEES
As of March 10, 2000, we employed 14 full-time employees. None of our
employees are represented by a labor union. We believe that our relations with
our employees are good.
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PROPERTIES
Our headquarters are located in Bala Cynwyd, Pennsylvania and we lease space
in a number of locations, primarily for our base stations and switching centers.
As of March 1, 2000, our material leased properties were as listed below:
<TABLE>
<CAPTION>
PURPOSE LOCATION SQUARE FEET LEASE TERM
- ------- -------- ----------- ----------
<S> <C> <C> <C>
Switch lease 5355 Capital Court 5,760 10 years
Unit Number 102
Reno, Nevada
Office Space lease 1 Bala Plaza, Suite 402 6,000 10 years
Bala Cynwyd, Pennsylvania
</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. A former
employee of ours, who voluntarily resigned in January 2000, filed a lawsuit on
March 9, 2000, with the Superior Court of New Jersey Law Division Berger County
alleging breach of employment contract, tortious interference with contract,
fraud, constructive discharge and specific performance of a contract and seeking
actual and punitive damages. The Company believes the claim is without merit and
intends to vigorously contest these allegations.
ENVIRONMENTAL COMPLIANCE
We anticipate that our environmental compliance expenditures will 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 are expected to arise in connection
with standards compliance or permits which are usually related to generators,
batteries or fuel storage. Our environmental compliance expenditures are not
expected to be material to our operations in the future.
BACKGROUND
Ubiquitel, L.L.C., an affiliate of The Walter Group, entered into the
management agreement with Sprint in October 1998. In November 1999, Ubiquitel,
L.L.C. assigned the Sprint management agreement to us. At the time of the
assignment, the Sprint management agreement covered only the Reno/Tahoe market.
Ubiquitel, L.L.C. had no financial transactions, and no assets or liabilities,
other than the Sprint management agreement, from the date of its inception
through December 1999.
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THE SPRINT PCS AGREEMENTS
The following is a summary of the material terms and provisions of the
Sprint PCS agreements and the consent and agreement modifying the Sprint PCS
management agreement. This summary is not complete and is subject to, and
qualified in its entirety by reference to, the Sprint PCS agreements and the
consent and agreement. We have filed the Sprint PCS agreements and the consent
and agreement as exhibits to the registration statement of which this prospectus
is a part.
OVERVIEW OF SPRINT PCS RELATIONSHIP AND AGREEMENTS
Under long-term agreements with Sprint PCS, we will exclusively market PCS
services under the Sprint and Sprint PCS brand names in our markets. The
agreements with Sprint PCS require us to interface with the Sprint PCS national
wireless network by building our PCS network to operate on the PCS frequencies
licensed to Sprint PCS. The Sprint PCS agreements also give us access to Sprint
PCS' equipment discounts, travel revenue from Sprint PCS customers traveling
into our markets, and various other back-office services. Our relationship and
agreements with Sprint PCS provide us with strategic advantages, including
avoiding the need to fund up-front spectrum acquisition costs and the costs of
establishing billing and other customer services infrastructure. The management
agreement has an initial term of 20 years and will automatically renew for three
additional successive 10-year terms for a total term of 50 years, 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.
We have four major agreements with Sprint PCS which we will refer to
collectively as the "Sprint PCS Agreements":
- the management agreement;
- the services agreement;
- the trademark and service mark license agreement with Sprint; and
- the trademark and service mark license agreement with Sprint PCS.
THE MANAGEMENT AGREEMENT
Under our management agreement with Sprint PCS, we have agreed to:
- construct and manage a network in our markets in compliance with Sprint
PCS' PCS licenses and the terms of the management agreement;
- distribute during the term of the management agreement Sprint PCS products
and services;
- use Sprint PCS' and our own distribution channels in our markets;
- conduct advertising and promotion activities in our markets; and
- manage that portion of Sprint PCS' customer base assigned to our markets.
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Sprint PCS will supervise our PCS network operations and has the right to
unconditional access to our PCS network.
EXCLUSIVITY. We are designated as the only person or entity that can manage
or operate a PCS network for Sprint PCS in our markets. Sprint PCS is prohibited
from owning, operating, building or managing another wireless mobility
communications network in our markets while our management agreement is in place
and no event has occurred that would permit the agreement to terminate. Sprint
PCS is permitted under our agreement to make national sales to companies in our
markets and, as required by the FCC, to permit resale of the Sprint PCS products
and services in our markets. 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. If we do not exercise this right, Sprint PCS can build out the markets or
permit another third party to do so.
NETWORK BUILD-OUT. The management agreement specifies the terms of the
Sprint PCS affiliation, including the required network build-out plan. We have
agreed on a minimum build-out plan which includes specific coverage and
deployment schedules for the network planned within our service area. The
aggregate coverage will result in network coverage of approximately 55% of the
population in our markets of 7.7 million by the end of 2001. We have agreed to
operate our PCS network to provide for a seamless handoff of a call initiated in
our markets to a neighboring Sprint PCS Network.
PRODUCTS AND SERVICES. The management agreement identifies the products and
services that we can offer in our markets. 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' sole determination, consumer confusion with
Sprint PCS' products and services. We may cross-sell services such as long
distance service, Internet access, handsets, and prepaid phone cards with
Sprint, Sprint PCS and other Sprint PCS affiliates. If we decide to sell the
same services of third parties, 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.
We will participate in the Sprint PCS sales programs for national sales to
customers, and will pay the expenses and receive the compensation from national
accounts located in our markets. We must use Sprint's long distance service for
calls made from within designated portions of our markets to areas outside those
designated portions and to connect our network to the national platforms Sprint
PCS uses to provide some of its services under our services agreement. We must
pay Sprint PCS the same price for this service that Sprint PCS pays to Sprint,
along with an additional administrative fee.
SERVICE PRICING, ROAMING, TRAVEL AND FEES. We must offer Sprint PCS
subscriber pricing plans designated for regional or national offerings,
including Sprint PCS' "Free and Clear"
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plans. We are permitted to establish our own local price plans for Sprint PCS
products and services offered only in our markets, subject to Sprint PCS'
approval. We are entitled to receive a weekly fee from Sprint PCS equal to 92%
of "collected revenues" for all obligations 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 markets and
inbound non-Sprint PCS roaming. Sprint PCS will receive 8% of the collected
revenues. Outbound non-Sprint PCS roaming revenue, inbound and outbound Sprint
PCS travel fees, proceeds from the sales of handsets and accessories, proceeds
from sales not in the ordinary course of business, and amounts collected with
respect to taxes 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 traveling anywhere on the
Sprint PCS Network without incremental Sprint PCS travel charges. However, we
will earn Sprint PCS travel revenue for every minute that a Sprint PCS
subscriber from outside our markets enters our markets 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 travel 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 markets use the Sprint
PCS Network outside our markets. The analog roaming rate onto a non-Sprint PCS
provider's network is set under Sprint PCS's third party roaming agreements.
ADVERTISING AND PROMOTIONS. Sprint PCS is responsible for all national
advertising and promotion of the Sprint PCS products and services. We are
responsible for advertising and promotion in our markets. Sprint PCS' service
area includes the urban markets around our markets. Sprint PCS will pay for
advertising in these markets. Given the proximity of those markets to ours, we
expect considerable spill-over from Sprint PCS' advertising in surrounding urban
markets.
PROGRAM REQUIREMENTS. We will comply with Sprint PCS' program requirements
for technical standards, travel, roaming and interservice area calls, customer
service standards, national and regional distribution and national accounts
programs. Sprint PCS can adjust the program requirements from time to time. We
have the right to appeal to Sprint PCS' management adjustments which could cause
an unreasonable increase in cost to us if the adjustment: (1) causes us to incur
a cost exceeding 5% of the sum of our equity plus our outstanding long term
debt, or (2) causes our long-term operating expenses to increase by more than
10% on a net present value basis. If Sprint PCS denies our appeal, then we have
10 days after the denial to submit the matter to arbitration. If we do not
submit the matter to arbitration within the ten-day period or comply with the
program adjustment, Sprint PCS has the termination rights described below.
NON-COMPETITION. We may not offer Sprint PCS products and services outside
our markets without the prior written approval of Sprint PCS. Within our markets
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
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we have or obtain licenses to provide PCS services outside our markets, we may
not use the spectrum to offer Sprint PCS products and services without prior
written consent from Sprint PCS. Additionally, if customers from our markets
travel to other geographic areas, we must route those customers' incoming and
outgoing calls according to Sprint PCS' roaming and inter-service area
requirements, without regard to any wireless networks that we or our affiliates
operate.
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.
RIGHTS OF FIRST REFUSAL. Sprint PCS has rights of first refusal to buy our
assets upon a proposed sale of all or substantially all of our assets that are
used in connection with the operation or management of the Sprint PCS Network in
our markets.
TERMINATION OF MANAGEMENT AGREEMENT. The management agreement can be
terminated as a result of:
- termination of Sprint PCS' PCS 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;
- the termination of either of the trademark and service mark license
agreements; or
- our failure to obtain the financing necessary for the build-out of our PCS
network and for our working capital needs. Sprint PCS has agreed that the
commitment for the new senior credit facility and senior subordinated debt
financing in addition to this offering of common stock will meet the
financing requirements of the management agreement.
The termination or non-renewal of the management agreement triggers certain
of our rights and those of Sprint PCS. The right of either party to require the
other to purchase or sell the operating assets, as discussed below, may not be
exercised, except in limited circumstances in the case of Sprint PCS, until
October 15, 2000.
RIGHTS ON TERMINATION
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 PCS network for an amount equal to 80% of our Entire
Business Value (as defined below);
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- if Sprint PCS is the licensee for 20 MHz or more of the spectrum on the
date of 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 (1) the original cost to Sprint PCS of the
license plus any microwave relocation costs paid by Sprint PCS or (2) 9%
of our Entire Business Value; or
- sue Sprint PCS for damages or submit the matter to arbitration and thereby
not terminate the management agreement.
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 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 for an amount equal to the greater of (1) the original cost to
Sprint PCS of the license plus any microwave relocation costs paid by
Sprint or (2) 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 PCS network; or
- sue us for damages or submit the matter to arbitration and thereby not
terminate the management agreement.
RIGHTS ON 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 PCS network for an amount equal to 80% of our Entire
Business Value; or
- if Sprint PCS is the licensee for 20 MHz or more of the spectrum on the
date of 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 (1) the original cost to Sprint PCS of the
license plus any microwave relocation costs paid by Sprint PCS or (2) 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 can be terminated for failure to
comply with legal requirements or regulatory considerations, Sprint PCS may:
- purchase all of our operating assets for an amount equal to 80% of our
Entire Business Value; or
- require us to purchase, subject to governmental approval, the licensed
spectrum for an amount equal to the greater of (1) the original cost to
Sprint PCS of the license plus any microwave relocation costs paid by
Sprint PCS or (2) 10% of our Entire Business Value.
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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, each of whom must be an expert in valuing wireless telecommunications
companies. The three appraisers will determine the Entire Business Value on a
going concern basis using the following guidelines:
- the Entire Business Value will be based on the price a willing buyer would
pay a willing seller for the entire on-going business;
- the appraisers will use then-current customary means of valuing a wireless
telecommunications business;
- the appraisers will value the business as it is conducted under the Sprint
and Sprint PCS brands and the Sprint PCS agreements;
- where Sprint PCS may, or is required to, purchase our operating assets the
appraisers will value the business as if we own the spectrum and
frequencies that we actually use. Where we may, or are required to,
purchase a portion of Sprint PCS' licensed spectrum, the business will be
valued as if we already own that portion of the spectrum and frequencies
that we are going to purchase; and
- the valuation will not include any value for the business not directly
related to the Sprint PCS products and services.
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,
managers, officers, employees, agents and representatives 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, managers, officers, employees, agents and
representatives against all claims against any of the foregoing arising from
Sprint PCS' violation of any law and from Sprint PCS' 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.
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THE SERVICES AGREEMENT
The services agreement outlines various back-office services provided by
Sprint PCS and available to us at established rates. Sprint PCS can change any
or all of the service rates one time in each 12 month period. 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-service area 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.
Sprint may require us to purchase certain services where necessary to comply
with legal or regulatory requirements (for example, where provision of 911
emergency service is mandatory). We have chosen to initially buy services such
as billing, customer care and activation from Sprint PCS. 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 provided under the services agreement in connection with any
other business or outside our markets. We may discontinue use of any service
upon three months' prior written notice. We will have access to these services
during the term of our Sprint PCS management agreement unless Sprint PCS
provides us at least nine months' advance notice of its intention to terminate
any particular service.
We have agreed with Sprint PCS to indemnify each other as well as officers,
directors, employees and certain other related parties and their officers,
directors and employees for violations of law or the services agreement except
for any liabilities resulting from the indemnitee's negligence or willful
misconduct. 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, royalty-free licenses to use 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 "Experience the
Clear Alternative to Cellular Today" on Sprint PCS products and services. We
believe that the Sprint and Sprint PCS brand names and symbols enjoy a very 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 markets of which we become
aware and to provide assistance to Sprint and Sprint PCS in connection with
Sprint's and Sprint PCS' enforcement of their respective rights.
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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' abandonment of the licensed
marks or if Sprint or Sprint PCS files for bankruptcy, or the management
agreement is terminated.
CONSENT AND AGREEMENT
Sprint PCS has entered into a consent and agreement that modifies our
management agreement for the benefit of Paribas, the lender under UbiquiTel
Operating Company's existing $25.0 million credit facility. The parties have
agreed to amend this consent and agreement in connection with the proposed new
senior credit facility. The existing consent generally provides, and the amended
consent is expected to generally provide, among other things, the following:
- Sprint PCS consents to the pledge by us of all of the common stock of our
operating subsidiary, UbiquiTel Operating Company, and the grant of a
security interest in all our assets including the Sprint PCS Agreements;
- Sprint PCS may not terminate its agreements with us until our obligations
to Paribas under the credit facility are satisfied in full, unless our
stock or assets are sold to a purchaser who does not continue to operate
the business as a Sprint PCS Network, which sale would require the
approval of Paribas;
- Sprint PCS may not allow another person to operate or manage a Sprint PCS
Network in our territories;
- Paribas may require redirection of payments from Sprint PCS to Paribas
(which otherwise would have been payable to UbiquiTel Operating Company)
under specified circumstances;
- Sprint PCS and Paribas agree to provide to each other notice if UbiquiTel
Operating Company is in default of its obligations under its agreements
with either of them;
- if UbiquiTel Operating Company is in default on its obligations under the
credit facility, Paribas may appoint an interim replacement, including
Sprint PCS, to operate our PCS network under the Sprint PCS Agreements;
and
- if UbiquiTel Operating Company is in default on its obligations under the
credit facility, and Paribas decides to accelerate the maturity of those
obligations, Sprint PCS has the option to purchase our operating assets or
to purchase all of the outstanding
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obligations under the existing credit agreement. If Sprint PCS chooses not
to exercise its options, Paribas may sell our assets to certain third
parties.
CONSENT TO SECURITY INTEREST AND PLEDGE OF STOCK. Sprint PCS has consented
to the grant of the following:
- a first priority security interest in all our assets including the Sprint
PCS Agreements;
- a lien upon all of our assets and property including our rights under the
Sprint PCS Agreements; and
- a first priority security interest in the capital stock of UbiquiTel
Operating Company.
Sprint PCS has agreed to acknowledge the grant of these security interests
and to waive its right or the right of any of its affiliates to challenge or
contest the validity of the interests.
AGREEMENT NOT TO TERMINATE SPRINT PCS AGREEMENTS UNTIL DEBT OBLIGATIONS ARE
REPAID. Sprint PCS has agreed not to exercise its rights or remedies under the
Sprint PCS Agreements, except its right to cure some defaults, and including its
right to terminate the agreements and withhold payments (other than rights of
setoff) until UbiquiTel Operating Company's obligations under the credit
agreement with Paribas are satisfied in full.
NO COMPETITION UNTIL DEBT OBLIGATIONS ARE REPAID. Sprint PCS has agreed
that it will not permit any person other than us or a successor manager to be a
manager or operator for Sprint PCS in our territories until UbiquiTel Operating
Company's obligations under the credit facility are satisfied in full.
Similarly, Sprint PCS has agreed that it will not own, operate, build or manage
another wireless mobility communications network in our markets unless it is
permitted under the management agreement or the management agreement is
terminated in accordance with the consent, and, in each case, until UbiquiTel
Operating Company's obligations under the credit facility are satisfied in full.
While the credit facility is outstanding, Sprint PCS may, however, sell PCS
services through its national accounts, permit resellers and build new
geographical areas within our territories for which we have chosen not to
exercise our rights of first refusal, all as provided in the management
agreement.
ASSIGNMENTS AND CHANGE OF CONTROL TO PARIBAS. Sprint PCS has agreed not to
apply the restrictions on assignment of the Sprint PCS Agreements and changes in
control of our ownership to Paribas. The assignment and change of control
provisions in the Sprint PCS Agreements will apply if the assignment or change
of control is to someone other than Paribas, or is not otherwise permitted under
the consent.
REDIRECTION OF PAYMENTS FROM SPRINT PCS TO PARIBAS. Sprint PCS has agreed
to make all payments due from Sprint PCS to UbiquiTel Operating Company under
the Sprint PCS Agreements directly to Paribas if Paribas so requests and
provides Sprint PCS with notice that an event of default has occurred and is
continuing under the credit facility. Payments to Paribas would cease upon the
cure of the event of default or certain time limitations.
NOTICE OF DEFAULTS. Sprint PCS has agreed to provide to Paribas a copy of
any written notice it sends us regarding an event of termination or an event
that if not cured, or if notice is provided, would be an event of termination
under the Sprint PCS Agreements. Sprint PCS
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also has acknowledged that notice of an event of termination under the Sprint
PCS agreements constitutes an event of default under UbiquiTel Operating
Company's credit agreement with Paribas. Paribas has agreed to provide Sprint
PCS with a copy of any written notice sent to us or UbiquiTel Operating Company
regarding an event of default or default under the credit agreement with
Paribas.
RIGHT TO CURE. Under the terms of the consent, Paribas has the right, but
not the obligation, to cure a breach by us of our management agreement with
Sprint PCS. Additionally, Sprint PCS has the right, but not the obligation, to
cure certain defaults by UbiquiTel Operating Company of its obligations under
the credit agreement with Paribas.
MODIFICATION OF TERMINATION RIGHTS
The consent modifies the rights and remedies available to Sprint PCS upon an
event of termination under our management agreement, and grants Paribas certain
rights in the event that UbiquiTel Operating Company defaults on its obligations
under the credit facility. Paribas' rights and remedies vary based on whether
(1) UbiquiTel Operating Company has defaulted on its obligations under the
credit facility but no event of termination has occurred under the management
agreement; or (2) we have breached the management agreement with Sprint PCS. The
consent generally permits the appointment of a person to run our business under
the Sprint PCS agreements on an interim basis and establishes a process for the
sale of the business. The person designated to operate our business on an
interim basis is permitted to collect a reasonable management fee. If Sprint PCS
or a related party is the interim operator, the amount of the fee shall not
exceed the amount of direct expenses of its employees to operate the business
plus out-of-pocket expenses. Sprint PCS shall collect its fee by setoff against
the amounts owed to us under the Sprint PCS Agreements.
CREDIT AGREEMENT DEFAULT WITHOUT A MANAGEMENT AGREEMENT BREACH. If
UbiquiTel Operating Company defaults on its obligations to Paribas under the
credit facility, and there is no default under our management agreement with
Sprint PCS, then Paribas may take any of the following actions:
- allow us to continue to operate the business under the Sprint PCS
Agreements;
- appoint Sprint PCS to operate the business on an interim basis; or
- appoint a person other than Sprint PCS to operate the business on an
interim basis.
APPOINTMENT BY PARIBAS OF SPRINT PCS OR A THIRD PARTY DESIGNEE TO OPERATE
BUSINESS. If Paribas appoints Sprint PCS to operate the business, Sprint PCS
must accept the appointment within 14 days or designate another person to
operate the business. Sprint PCS' designee may be an affiliate of Sprint PCS
(other than us) or another person acceptable to Paribas. Sprint PCS or its
designee must agree to operate the business for up to six months. At the end of
the six months, the period may be extended by Paribas for an additional six
months (or an additional 12 months if the aggregate population served by all of
Sprint PCS' affiliates is less than 40 million). During the initial six-month
period, Sprint PCS may not receive reimbursement for amounts expended to cure a
breach until UbiquiTel Operating Company's obligations to Paribas under the
credit facility have been satisfied in full. If the term is
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extended beyond the initial six-month period, we will be required to reimburse
Sprint PCS or its designee for amounts previously expended and to be incurred as
interim manager to cure a default up to an aggregate amount that is equal to 5%
of the sum of our stockholders' equity value plus the outstanding amount of our
long term debt. Sprint PCS or its designated person is not required to incur
expenses beyond this 5% limit. At the end of the initial six-month interim term,
Paribas has the right to appoint a successor to the interim manager subject to
the requirements set forth below.
APPOINTMENT OF THIRD PARTY BY PARIBAS TO OPERATE BUSINESS. If Paribas
appoints a person other than Sprint PCS to operate the business on an interim
basis the third party must:
- agree to serve for six months unless terminated by Sprint PCS or Paribas;
- meet the requirements for a successor manager specified in the consent,
and not be challenged by Sprint PCS for failing to meet these requirements
within 20 days after Paribas provides Sprint PCS with information on the
third party; and
- agree to comply with the terms of the Sprint PCS Agreements.
The third party is required to operate the Sprint PCS Network in our
territories, but is not required to assume our existing liabilities. If the
third party materially breaches the Sprint PCS agreements, this breach will be
treated as an event of default under the management agreement with Sprint PCS.
MANAGEMENT AGREEMENT BREACH. If we breach the Sprint PCS Agreements and
this breach causes a default under the credit agreement with Paribas, Sprint PCS
has the right to designate who will operate our business on an interim basis.
Sprint PCS has the right to:
- allow us to continue to operate the business under the Sprint PCS
Agreements (if Paribas consents);
- operate our PCS business as an interim manager for up to six months; or
- appoint a Sprint PCS affiliate or another person that is acceptable to
Paribas to operate our PCS business on an interim basis.
If Sprint PCS elects not to operate the business or designate a third party
to operate the business on an interim basis, Paribas may do so.
ELECTION OF SPRINT PCS TO SERVE OR DESIGNATE A THIRD PARTY TO OPERATE
BUSINESS. If Sprint PCS elects to operate the business on an interim basis or
designate a third party to operate the business on an interim basis, Sprint PCS
or the third party may operate the business for up to six months at the
discretion of Sprint PCS. At the end of the six-months, the period may be
extended for an additional six-months (or an additional 12 months if the
aggregate population served by us and all other affiliates of Sprint PCS is less
than 40 million). During the initial six-month period, Sprint PCS may not
receive reimbursement for amounts expended to cure a breach until UbiquiTel
Operating Company's obligations to Paribas under the credit facility have been
satisfied in full. If the term is extended beyond the initial six-month period,
we will be required to reimburse Sprint PCS or its third party designee for
amounts previously expended and to be incurred as interim manager to cure a
default up to an aggregate amount
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that is equal to 5% of the sum of our shareholder's equity value plus the
outstanding amount of our long term debt. Sprint PCS or its third party designee
is not required to incur expenses beyond this 5% limit. At the end of the
initial six-month period, Sprint PCS, subject to the approval of Paribas, has
the right to appoint a successor to the interim manager.
APPOINTMENT OF THIRD PARTY BY PARIBAS TO OPERATE BUSINESS. If Sprint PCS
gives Paribas notice of a breach of the management agreement, UbiquiTel
Operating Company's obligations under the credit agreement are accelerated, and
Sprint PCS does not agree to operate the business or is unable to find a
designee, then Paribas may designate a third party to operate the business.
Paribas has this same right if Sprint PCS or its designee is not replaced within
30 days of the end of its term as interim manager. The third party selected by
Paribas must:
- agree to serve for six months unless terminated by Sprint PCS or Paribas;
- meet the requirements for a successor manager specified in the consent and
not be challenged by Sprint PCS for failing to meet the requirements
within 20 days after Paribas provides Sprint PCS with information on the
third party; and
- agree to comply with the terms of the Sprint PCS Agreements.
The third party may continue to operate the business after the six-month
period at Paribas' discretion, so long as the third party continues to satisfy
the requirements to be a successor manager and does not breach the terms of the
Sprint PCS Agreements.
PURCHASE AND SALE OF OPERATING ASSETS
The consent establishes a process for the sale of our operating assets in
the event that UbiquiTel Operating Company defaults on its obligations to
Paribas under the credit facility and Paribas accelerates the maturity of those
obligations.
SPRINT PCS' RIGHT TO PURCHASE ON ACCELERATION OF DEBT. Upon notice of an
acceleration, Sprint PCS has the right to purchase our operating assets or
capital stock under the following terms:
- The purchase price will be the greater of (i) 72% of our Entire Business
Value (as defined in the management agreement), or (ii) the aggregate
amount of UbiquiTel Operating Company's obligations under the credit
agreement;
- Sprint PCS must notify Paribas of its intention to exercise the purchase
right within 60 days of receipt of the notice of acceleration;
- Once Sprint PCS has given notice of its intention to exercise the purchase
right, Paribas is prohibited from enforcing its security interests until
the earlier of 120 days after the acceleration or until Sprint PCS
rescinds its intention to purchase;
- If, after the 120-day period after the acceleration date, we receive a
written offer to purchase our operating assets or capital stock that we
confirm in writing to be acceptable to us, Sprint PCS has the right to
purchase our operating assets or our stock on terms and conditions at
least as favorable to us as the offer we receive. Sprint PCS must agree to
purchase the operating assets or capital stock within 14 business
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days of its receipt of the offer, on acceptable conditions, and in an
amount of time acceptable to us and Paribas;
- Upon completion of the sale to Sprint PCS and satisfaction in full of
UbiquiTel Operating Company's obligations under the credit agreement,
Paribas must release its security interests.
SALE OF OPERATING ASSETS OR CAPITAL STOCK TO THIRD PARTIES. If Sprint PCS
does not purchase the operating assets or capital stock, following an
acceleration by Paribas of UbiquiTel Operating Company's obligations under the
credit agreement, Paribas may sell our operating assets or stock. In that event,
Paribas has two options: (1) to sell the assets or stock to an entity that meets
the requirements of a qualified successor under the Sprint PCS Agreements; or
(2) to sell the assets or stock to any third party, subject to specified
conditions.
SALE OF ASSETS OR CAPITAL STOCK TO QUALIFIED SUCCESSOR. Paribas may sell
the operating assets or capital stock and assign the agreements to entities that
meet the following requirements to succeed us:
- the person has not materially breached a material agreement with Sprint
PCS or its related parties that has resulted in the exercise of a
termination right or in the initiation of judicial or arbitration
proceedings during the past three years;
- the person is not named by Sprint PCS as a prohibited successor and listed
on Schedule 13 to the Consent;
- the person has reasonably demonstrated its credit worthiness and can
demonstrate the ability to service the indebtedness and meet the
requirements of the build-out plan; and
- the person agrees to be bound by the Sprint PCS Agreements.
Paribas is required to provide Sprint PCS with information necessary to
determine if a buyer meets the requirements to succeed us as manager. Sprint PCS
has 20 days after its receipt of this information to object to the
qualifications of the proposed successor manager. If Sprint PCS does not object
to the buyer's qualifications, the buyer can purchase the assets and assume our
rights and responsibilities under the Sprint PCS agreements. The consent will
remain in full force and effect for the benefit of the buyer and its lenders.
The buyer also has a period to cure any defaults under our Sprint PCS
Agreements.
SALE OF ASSETS OR CAPITAL STOCK TO NON-SUCCESSOR. Paribas may sell our
assets or stock to a party that does not meet the requirements to succeed us. If
such a sale is made:
- Sprint PCS may terminate the Sprint PCS Agreements;
- the buyer may purchase from Sprint PCS 5, 7.5 or 10 MHz of the PCS
spectrum licensed to Sprint PCS in our territories under specified terms;
- if the buyer controls, is controlled by or is under common control with an
entity that owns a license to provide wireless service to at least 50% of
the population in a basic
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trading area where the buyer proposes to purchase the spectrum from Sprint
PCS, the buyer may only buy 5 MHz of spectrum;
- the price to purchase the spectrum is equal to the sum of the original
cost of the license to Sprint PCS pro rated on a population and a spectrum
basis, plus the cost paid by Sprint PCS for microwave relocation costs
attributable to clearing in the spectrum ultimately acquired by the buyer
of our assets and the amount of carrying costs attributable to the license
and microwave relocation costs from the date of the Consent until the
closing of the sale, based on a rate of 12% per annum;
- the buyer will receive from Sprint PCS the customers with the MIN assigned
to the market area covered by the purchased spectrum except for customers
of national accounts and resellers;
- with limited exceptions, Sprint PCS will not solicit for six months the
customers transferred to the buyer with the MIN assigned to the market
area;
- the buyer and Sprint PCS will enter into a mutual roaming agreement with
prices equal to the lesser of the most favored pricing provided by buyer
to third parties roaming in the geographic area and the national average
paid by Sprint PCS to third parties; and
- Sprint PCS will have the right to resell the buyer's wireless services at
most favored nation pricing.
DEFERRAL OF COLLECTED REVENUES. For a period of up to two years after an
acceleration by Paribas of UbiquiTel Operating Company's obligations under the
credit facility, Sprint PCS may only retain one-half of the amount of collected
revenues from our operation of the Sprint PCS Network in our territories that it
would otherwise be entitled to under the management agreement. The balance must
be forwarded to us, or to Paribas if Paribas has elected to redirect payments as
provided in the Consent. If Sprint PCS is not serving as the interim manager at
the end of the first year following the acceleration, then Sprint PCS will
retain all of the collected revenues to which it is entitled under the
management agreement (the remainder to be paid to Sprint PCS under an unsecured
deferred note).
RIGHT TO PURCHASE DEBT OBLIGATIONS. Following the acceleration of UbiquiTel
Operating Company's obligations under the credit facility, and until the 60-day
anniversary of the filing of a bankruptcy petition, Sprint PCS has the right to
purchase the obligations to Paribas under the credit facility.
DESCRIPTION OF CERTAIN INDEBTEDNESS
In December 1999, we issued $8.0 million of senior subordinated notes to BET
Associates, L.P. The notes bear interest at 12%. We are required to make
quarterly payments on the notes beginning April 1, 2000, and must pay the notes
in full on December 28, 2007. We are required to prepay the notes with cash
received from the sale of assets or stock or from additional financings. We
intend to pay the notes in full with the proceeds from UbiquiTel Operating
Company's proposed senior subordinated debt financing plus a premium
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of 1% of the principal amount prepaid. We also issued BET Associates a ten-year
warrant to purchase shares of our voting common stock. See "Use of
Proceeds." "Principal Stockholders," and "Certain Transactions."
In December 1999, UbiquiTel Operating Company entered into a senior secured
credit agreement with Paribas, which allows it to borrow up to $25.0 million. As
of March 1, 2000, UbiquiTel Operating Company had made no borrowings under the
Paribas senior secured credit agreement. UbiquiTel Operating Company may borrow
funds as either a base rate loan with an interest rate of prime plus 3.00% for
Term Loans and prime plus 2.75% for a Revolving Loan or as a Eurodollar Loan
with an interest rate of the London Interbank Offered Rate, commonly referred to
as LIBOR, plus 4.00% for Term Loans or plus 3.75% for Revolving Loans. Interest
is payable quarterly in arrears. In addition, an unused facility fee ranging
from 0.75% to 1.75% will be charged quarterly on the average unused portion of
the facility. In connection with the credit agreement, we issued Paribas a
ten-year warrant to purchase shares of our non-voting common stock, which
will convert into a warrant to purchase the same number of shares of common
stock upon completion of this offering.
UbiquiTel Operating Company intends to sign a new senior secured credit
agreement with Paribas prior to the closing of this offering. The new senior
secured credit agreement will allow us to borrow up to $250.0 million. UbiquiTel
Operating Company obtained a financing commitment from Paribas for the new
senior secured credit facility on February 22, 2000. The general terms of the
financing commitment provide that the new senior secured credit agreement with
Paribas will consist of a revolving loan of up to $55.0 million, a term loan A
of $120.0 million and a term loan B of $75.0 million. The financing commitment
provides that the revolving loan and term loan A will mature in seven and
one-half years, and the term loan B will mature in eight and one-half years.
UbiquiTel Operating Company is required to draw down in full the $75.0 million
of the term loan B when the Paribas financing is consummated. The financing
commitment also provides that the revolving loan cannot be drawn down until the
term loan A has been drawn down in full and that certain amounts of the term
loan A must be drawn down by specified dates or a reduction in the outstanding
commitments shall be effected. We will be required to pledge the capital stock
of UbiquiTel Operating Company as well as guarantee all of its obligations under
the Senior credit facility agreement. UbiquiTel Operating Company will be
required to pledge all of its assets and the assets of its direct and indirect
subsidiaries, as well as assign our rights under our agreements with Sprint, as
security for the Paribas senior secured credit agreement. The financing
commitment also provides that the loans will bear interest at a base rate or an
adjusted LIBOR rate, plus margins that range from 2.00% to 3.75%. The financing
commitment provides that we must pay an unused commitment fee, as well as make
mandatory
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prepayments if certain events occur, such as disposing of material assets, or
issuing new debt or equity. The financing commitment provides that the credit
agreement will contain other covenants customary for a credit facility of this
type, including financial covenants. The closing of the new $250.0 million
senior credit facility is subject to a number of conditions, and there can be no
assurance that the Paribas senior secured credit agreement will close prior to
the closing of this offering.
In February 2000, we received a commitment from an affiliate of Donaldson,
Lufkin & Jenrette to provide up to $125.0 million of senior subordinated
increasing rate notes. The senior subordinated increasing rate notes would bear
interest at the greater of:
- the prime borrowing rate plus 4.25%, increasing by an additional 0.50% at
the end of each three month period subsequent to the issue date; or
- the treasury rate, which is the rate applicable to the most recent auction
of direct obligations of the United States having a maturity closest to
the notes, plus 6.40%, increasing by an additional 0.50% at the end of
each three month period subsequent to issue date; or
- the DLJ High Yield Index Rate, plus 0.80%, increasing by an additional
0.50% at the end of each three month period subsequent to the issue date;
or
- in the case of each subsequent quarterly period only, the rate in effect
during the prior quarterly period plus 0.50%, increasing by an additional
0.50% at the end of each subsequent three month period.
Interest payments would be payable in-kind, quarterly, with additional
senior subordinated increasing rate notes, for the first five years.
The terms of the senior subordinated increasing rate notes provide for a
maturity of one year after the issue date, but the maturity would automatically
be extended to the date that is six months after the date of the original final
maturity of our new senior credit facility if we meet certain conditions.
In lieu of issuing the senior subordinated increasing rates notes described
above, we may pursue other alternative senior subordinated debt financing, the
terms of which have not yet been determined.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES
The following table presents information with respect to our executive
officers, directors and other key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Donald A. Harris..... 47 Director, President and Chief Executive Officer
Dean E. Russell...... 47 Chief Operating Officer
Paul F. Judge........ 34 Senior Vice President--Business Development and
Finance
Robert A. 45 Director
Berlacher..........
Peter Lucas.......... 45 Director
Eve M. Trkla......... 37 Director
Joseph N. Walter..... 47 Director
</TABLE>
OTHER KEY EMPLOYEES:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Debra A. 35 Vice President of Human Resources
Gerstenberg........
David L. Zylka....... 39 Vice President of Engineering
</TABLE>
DONALD A. HARRIS has served as President and Chief Executive Officer and as
a director since our inception. Mr. Harris has more than 17 years of experience
in the telecommunications industry, and is the former president of Comcast
Cellular Communications, Inc., and a former senior vice president of Comcast
Corporation. He also participated in Comcast's efforts on the board of Nextel.
Mr. Harris managed the build-out of and had operating responsibility for
Comcast's cellular operations in Pennsylvania, New Jersey and Delaware with over
8 million residents. Mr. Harris was also responsible for Comcast's PCS
experimental trials. Prior to joining Comcast in February, 1992, Mr. Harris was
Vice President/General Manager of PacTel Cellular's Los Angeles office, the then
largest wireline cellular operation in the United States. He also held several
senior management positions with PacTel including Vice President of Corporate
Development, and President and Chief Executive Officer of the San Francisco
Cellular Partnership. Mr. Harris began his career in the cellular communications
industry as a consultant with McKinsey & Company. Mr. Harris is a graduate of
the United States Military Academy at West Point, and holds a Masters Degree in
Business Administration from Columbia University.
DEAN E. RUSSELL has been our Chief Operating Officer since November 1999. He
is responsible for overseeing all of the functional areas of our operations
including sales and marketing, network and field operations, and human
resources. Prior to joining us, Mr. Russell was part of the executive management
team of Education Management Corporation from October 1997 to November 1999. He
held various positions with Education Management Corporation including Director
of Operations for the Art Institute of Fort Lauderdale and President of the Art
Institute International at San Francisco. Previously, Mr. Russell was the
General Sales Manager for Comcast Cellular Communications, Inc. in
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Atlantic City and Cape May County in New Jersey from October 1995 to October
1997. Prior to joining Comcast Cellular Communications, Inc., Mr. Russell served
in the United States Army for 20 years before retiring as a Lieutenant Colonel.
Mr. Russell has 26 years of leadership experience including hands on experience
managing diverse operations. Mr. Russell holds a Bachelor of Science Degree in
engineering from the United States Military Academy at West Point and a Masters
of Education Degree from the University of Georgia and a Masters of Business
Administration in International Business from Long Island University.
PAUL F. JUDGE has been our Senior Vice President of Business Development and
Finance since our inception. He is responsible for acquisition of new markets,
business and financial planning, and management of strategic relationships.
Mr. Judge is a founder of the Company and has more than 13 years of experience
in the wireless telecommunications industry. From August 1992 until joining us,
Mr. Judge served as Director of The Walter Group, Inc., where he served as a
senior member of the consulting firm which specializes in management services
for telecommunications and information management companies. Before joining The
Walter Group, Mr. Judge contributed to the formation and analysis of
telecommunications trade policy within the Department of Commerce, as well as
participated in the development of the OmniTracs satellite communications system
today operated by Qualcomm. Mr. Judge holds a Bachelor of Science in Business
Administration from Pepperdine University and a Masters of Business
Administration in International Business Finance from George Washington
University.
ROBERT A. BERLACHER has been a director since our inception. Mr. Berlacher
is President of LIP Advisors, Inc., the General Partner of Lancaster Investment
Partners, LP, a technology, telecommunications and healthcare investment
partnership based in King of Prussia, Pennsylvania. Mr. Berlacher is also a
co-founder and director of EGE Holdings, Ltd., a holding company with ownership
interests in investment banking, money management and venture capital. While
co-founding EGE Holdings, Ltd., Mr. Berlacher was also a Managing Director of
Boenning & Scattergood, Inc. from January 1997 to September 1999, and was a
Managing Director and shareholder of Pacific Growth Equities, Inc. from
March 1995 to January 1997. Mr. Berlacher graduated from Cornell University in
1976 with a Bachelor of Science degree in Business Administration-Finance.
PETER LUCAS has been a director since our inception. Mr. Lucas served as
Chief Financial Officer of WesTower Corporation, a public provider of
telecommunications sites and wireless network services, from April 1997 to
September 1999. Mr. Lucas also served as Chief Financial Officer of Cotton
Valley Resources Corporation, a Dallas-based public oil and gas company, from
August 1995 to April 1997. Mr. Lucas received a Bachelor of Commerce degree from
the University of Alberta.
EVE M. TRKLA has been a director since our inception. Ms. Trkla is the
Co-Founder, Senior Managing Director and Chief Financial Officer of Brookwood
Financial Partners, L.P. ("Brookwood") and its affiliated companies, Brookwood
Securities Partners, L.P., Brookwood Management Partners, L.P. and Brookwood
Capital Partners, L.P. Ms. Trkla oversees the financial administration of
Brookwood and its affiliates and the origination, evaluation, structuring and
acquisition of real estate and private company investments. Brookwood is a
Boston-based private investment and merchant-banking firm which specializes in
acquiring
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and managing real estate and in providing equity and bridge financing to private
companies. Since its founding in 1993, Brookwood and its affiliated entities
have acquired real estate and corporate assets with a realized and current value
in excess of $400 million. Prior to co-founding Brookwood, Ms. Trkla was the
Senior Credit Officer at The First National Bank of Ipswich, where she created
and managed the credit administration function for this $130 million community
bank. Ms. Trkla spent the first eight years of her career at the First National
Bank of Boston as a lender specializing in large corporate acquisition finance.
Ms. Trkla is a 1984 CUM LAUDE graduate of Princeton University.
JOSEPH N. WALTER has been a director since our inception. Mr. Walter founded
The Walter Group, Inc., an international consulting and project management firm
specializing in telecommunications companies, in 1988 and currently serves as
its Chairman and Chief Executive Officer. In January 2000, The Walter Group sold
its consulting and project management group to Wireless Facilities, Inc. The
Walter Group continues to maintain investments in a variety of
telecommunications-based companies. Prior to establishing The Walter Group,
Mr. Walter served as Senior Vice President for McCaw Cellular
Communications, Inc. and was responsible for the corporate headquarters group of
the Company. During his tenure at McCaw Cellular, Mr. Walter was also
responsible for establishing McCaw Space Technologies, Inc. and McCaw Government
Services, Inc. He served with McCaw Cellular from 1983 to 1988. Mr. Walter holds
undergraduate degrees in biological science and social ecology from the
University of California, Irvine and a Masters in Business Administration from
the University of Washington.
DEBRA A. GERSTENBERG has been our Vice President of Human Resources since
January 2000. She is responsible for developing and directing the critical
functions of employee relations, compensation, benefits, training, equal
employment opportunity, staffing and payroll. Prior to joining us,
Ms. Gerstenberg worked for the wireless division of Southwestern Bell
Corporation from July 1999 to January 2000 as the Director of Human Resources
for their Philadelphia Region. She provided human resources support to the
President with full responsibility for the strategic and operational management
of the human resources function. Prior to the acquisition of Comcast Cellular
Communications by Southwestern Bell, she held various senior human resource
management positions at Comcast Cellular from February 1995 to July 1999,
including Director of Human Resources. Her previous experience included various
human resource management positions as well as customer service and training
management positions in the banking industry. Ms. Gerstenberg attended the
University of Delaware's School of Human Resources in Newark, Delaware.
DAVID L. ZYLKA has been our Vice President of Engineering since January
2000. He is responsible for the quality and performance of all network
operations and company profitability relative to network performance. Mr. Zylka
has 10 years experience in the telecommunications industry. From January 1999 to
December 1999, he served as the Vice President of Engineering for Frontier
Cellular Communications in Rochester, NY where he developed and executed a
$59 million CDMA network expansion plan. Before he joined Frontier Cellular
Communications, Mr. Zylka held various positions at Comcast Cellular
Communications in Philadelphia, Pennsylvania from May 1991 to November 1998,
including Vice President of Systems Performance. He was responsible for the
operational and
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performance engineering for the Comcast Cellular network. Mr. Zylka holds a
Bachelor of Science in Electrical Engineering from the United States Military
Academy at West Point and a Masters of Science in Information Systems Management
from Golden Gate University.
BOARD OF DIRECTORS
The board of directors is currently fixed at nine members. Currently there
are four vacancies on the board. Prior to or simultaneous with the closing of
this offering, we expect to fill the vacancies with at least three outside
directors including one as the designee of DLJ Merchant Banking pursuant to the
terms of our shareholder agreement. We expect the outside directors to be
experienced leaders in the telecommunications and business communities with
direct experience managing and advising public companies. Upon the closing of
this offering, our directors will be divided into three classes. Mr. Lucas and
two of the additional directors to be named to the board will serve as the
Class I directors, and their terms will expire at our 2001 annual stockholders'
meeting. Ms. Trkla and two of the three additional directors to be named to the
board will serve as the Class II directors, and their terms will expire at our
2002 annual stockholders' meeting. Messrs. Harris, Berlacher and Walter will
serve as the Class III directors, and their terms will expire at our 2003 annual
stockholders' meeting. At each annual meeting, the successors to the directors
whose terms expire will be elected to serve three-year terms.
Prior to closing, the board of directors will establish an audit committee
and a compensation 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 compensation committee is responsible for reviewing and approving all
compensation arrangements for our officers, and is also responsible for
administering the equity incentive plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee during the year ended December 31, 1999,
consisted of the board of directors. During 1999, Donald A. Harris served as
both an executive officer and a director and has continued to serve in those
capacities in 2000. Mr. Harris participated in deliberations of the board of
directors concerning compensation of executive officers. None of the executive
officers served as a director or member of the compensation committee or other
board committee performing equivalent functions of another corporation, one of
whose executive officers served on our board of directors.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation and bylaws limit the liability of directors
to the maximum extent permitted by Delaware law. Our certificate of
incorporation and bylaws provide that we shall indemnify our directors and
executive officers and may indemnify our other officers and employees and agents
and other agents to the fullest extent permitted by law.
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At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of UbiquiTel where indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
EXECUTIVE COMPENSATION
The following table presents summary information with respect to the
compensation paid to our Chief Executive Officer. None of our other executive
officers' salary and bonus exceeded $100,000 during the year ended December 31,
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
ANNUAL COMPENSATION OPTION
-------------------- AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) (# OF SHARES) COMPENSATION($)
<S> <C> <C> <C> <C>
Donald A. Harris...................... 19,231(1) -0- -0-
President and Chief Executive
Officer
</TABLE>
- --------------------------
(1) Mr. Harris' annualized salary was $200,000 for 1999. However, he did not
begin to draw any salary until December 1999. Excludes $200,000 paid by us
to Mr. Harris for services rendered prior to our incorporation.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during the fiscal
year ended December 31, 1999 to each of the named executive officers. No stock
appreciation rights were granted to these individuals during that year.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
(IN THOUSANDS)
EXCEPT PER SHARE DATA POTENTIAL
----------------------------------------------------------------- REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
UNEXERCISED EMPLOYEES IN EXERCISE OR FOR OPTION TERM(1)
OPTIONS FISCAL BASE PRICE EXPIRATION -------------------
NAME GRANTED(2) YEAR ($)/(SH)(3) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Donald A. Harris.............. 80% $ 11/29/09 $ $
</TABLE>
- --------------------------
(1) Potential realizable value is based on the assumption that the common stock
price appreciates at the annual rate shown, compounded annually, from the
date of grant until the end of the option term. The amounts have been
calculated based on the assumed appreciation rates shown in the table,
assuming a per share market price at the time of the grant of $ . The
actual value, if any, a named executive officer may realize will depend on
the excess of the stock price over the exercise price on the date the option
is exercised, if the executive were to sell the shares on the date of
exercise, so there is no assurance that the value realized will be equal to
or near the potential realizable value as calculated in this table.
(2) The options granted to Mr. Harris vest annually in three equal installments
beginning November 29, 2000.
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(3) Prior to this offering, there has been no public market for our common
stock. The exercise price of each of these options is equal to the fair
market value of our common stock on the date of grant as determined by our
board of directors.
COMPENSATION OF DIRECTORS
Currently, we do not compensate our directors. We do reimburse directors for
their expenses of attendance at board meetings. Upon the closing of this
offering, each of our independent directors who is not an employee of ours or a
board designee of one of our current stockholders will receive an annual fee of
$12,000 for serving on our board, plus a $1,000 fee for each regularly scheduled
meeting he or she attends and a $1,000 fee for each special meeting and each
committee meeting he or she attends. In addition, each of these directors, upon
joining our board, receives an option to purchase 10,000 shares of our common
stock at an exercise price equal to the fair market value of the stock on the
date of grant. These options will typically vest over three years.
EMPLOYMENT AGREEMENTS
In November 1999, we entered into an employment agreement with Donald A.
Harris, our President and Chief Executive Officer. Mr. Harris' employment
agreement is for a three-year term and provides for an annual base salary of
$200,000, with a guaranteed annual increase of 5% over the next two years. In
addition to his base salary, Mr. Harris is eligible to receive bonuses in such
amounts and at such times as determined by the disinterested members of our
Board of Directors. Under the employment agreement, we granted Mr. Harris stock
options to purchase up to shares of our common stock at a purchase price
of $ per share. Mr. Harris' stock options vest in three equal installments
over a period of three years. In the event of a defined change of control, all
of these options will become fully exercisable.
The employment agreement provides that Mr. Harris' employment may be
terminated by us with or without cause, as defined in the agreement, at any time
or by Mr. Harris for any reason at any time upon thirty days' written notice to
us. If Mr. Harris' employment is terminated by us without cause, he is entitled
to receive one year's base salary and benefits, and all his unvested stock
options will immediately vest on the date of termination. If Mr. Harris's
employment is terminated by us for cause, he is not entitled to any compensation
or benefits other than unpaid salary and benefits and unreimbursed expenses
incurred by him through the date of termination. If Mr. Harris voluntarily
terminates his employment, he is entitled to unpaid salary and benefits and
unreimbursed expenses incurred by him through the date of termination. Under the
employment agreement, Mr. Harris agreed not to compete in the business of
wireless telecommunications either directly or indirectly in our present and
future markets during his employment and for a period of one year after his
employment is terminated. In addition, Mr. Harris agreed not to disclose any of
our confidential information and not to solicit any of our customers or
employees during his employment and for a period of one year after his
employment is terminated.
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2000 EQUITY INCENTIVE PLAN
Our board of directors has adopted, and our stockholders have approved, the
UbiquiTel Inc. 2000 Equity Incentive Plan. Under the Equity Incentive Plan,
stock options and other equity-based awards may be granted to our and our
subsidiaries' directors, officers, selected employees and consultants. A
committee of our board of directors administers the Equity Incentive Plan.
The committee may grant stock options, stock appreciation rights and other
equity-based awards to eligible persons. In no event, however, may the committee
grant awards relating to more than 2,040,000 shares of common stock pursuant to
the Equity Incentive Plan. Shares subject to awards that expire or are
terminated or canceled prior to exercise or payment, or forfeited or reacquired
by us pursuant to rights reserved upon issuance, may be issued again under the
Equity Incentive Plan. Awards paid in cash are not counted against the number of
shares that may be issued under the Equity Incentive Plan.
Awards may be satisfied by the delivery of either authorized but unissued
common stock or issued common stock held as treasury shares. The committee may
grant one or more types of awards in any combination to a particular participant
in a particular year. Subject to earlier termination by our board of directors,
the Equity Incentive Plan will remain in effect until all awards have been
satisfied in stock or in cash or terminated under the terms of the Equity
Incentive Plan and all restrictions imposed on stock in connection with its
issuance under the Equity Incentive Plan have lapsed. Except in the case of an
award of stock to a participant as additional compensation for services to us or
our subsidiaries, each award will be confirmed by, and is subject to the terms
of, an agreement executed by the participant and us.
Following is a description of each type of award or grant that may be made
under the Equity Incentive Plan.
STOCK OPTIONS
Stock options may be incentive stock options that comply with the
requirements of Section 422 of the Internal Revenue Code or nonqualified stock
options that do not comply with Section 422 of the Internal Revenue Code. The
board will determine the exercise price and other terms and conditions of
options.
The exercise price for an option may be paid in shares of common stock
valued at their then fair market value if the shares have been held by the
optionee for at least six months. To the extent permitted by the board, the
exercise price for an option may be paid in shares of common stock that have not
been held for six months, or in any other manner.
All incentive options expire no later than 10 years after the date of grant.
Incentive options may not be granted to any participant who, at the time of the
grant, would own (as determined by the Internal Revenue Code) more than 10% of
the total combined voting power of all classes of our stock or of any of our
subsidiaries.
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STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS
A stock appreciation right is a right to receive, without payment to us, a
number of shares of stock, cash or a combination thereof, as determined by a
formula. A limited stock appreciation right is a right to receive, without
payment to us, cash in amount determined by a formula upon specified change in
control events. Stock appreciation rights may be granted in conjunction with all
or any part of a stock option or independently. Upon the exercise of a stock
appreciation right, the participant will be entitled to receive, for each share
of common stock to which the exercised stock appreciation right relates, the
excess of the fair market value per share of common stock on the date of
exercise over the grant price of the stock appreciation right. Stock
appreciation rights shall have such terms and conditions as may be established
by the board. Upon the exercise of a limited stock appreciation right, the
participant will be entitled to receive a cash payment, for each share of common
stock to which the exercised limited stock appreciation right relates, equal to
the excess of the defined change of control value over the grant price of the
limited stock appreciation right.
OTHER STOCK-BASED AWARDS
The committee has the authority under the Equity Incentive Plan to make
other awards that are valued in whole or in part by reference to, or are payable
in or otherwise based upon, shares of common stock, including awards valued by
reference to our performance or the performance of our subsidiaries. The
committee will determine the participants to whom and the times at which these
awards will be made, the number of shares of common stock to be awarded and all
other terms and conditions of the awards.
If, with respect to the common stock, there is any recapitalization,
reclassification, stock dividend, stock split, combination of stock or other
similar change in stock, the number of shares of common stock issuable or issued
under the Equity Incentive Plan, including stock subject to restrictions,
options or achievement of performance objectives, shall be adjusted in
proportion to the change in the number of outstanding shares of common stock. In
the event of any of these adjustments, the board will adjust, to the extent
appropriate, the purchase price of any option, the performance objectives of any
award and the stock issuable pursuant to any award to provide participants with
the same relative rights before and after the adjustment.
In the event of a defined change of control, all outstanding options,
including incentive options, stock appreciation rights and limited stock
appreciation rights granted pursuant to the Equity Incentive Plan, will become
fully exercisable, all restrictions or limitations on any award under the Equity
Incentive Plan will lapse, and all performance criteria and other conditions
relating to the payment of awards will be deemed achieved or waived by us
without further action.
The Equity Incentive Plan may be amended or terminated at any time by our
board of directors, except that no amendment may be made without stockholder
approval if such approval is necessary to comply with any tax or regulatory
requirement.
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The Equity Incentive Plan is not subject to any provision of ERISA and is
not qualified under Section 401(a) of the Internal Revenue Code.
We have granted an aggregate of 485,000 non-qualified options pursuant to
our Equity Incentive Plan of which 325,000 were granted in 1999 and the balance
of 160,000 were granted in January 2000.
NONCOMPETITION AGREEMENTS
In connection with the granting of any stock options or equity-based awards
under our 2000 Equity Incentive Plan to any of our employees, each employee is
required to enter into a noncompetition agreement. These agreements will provide
that for so long as the employee works for us, and for a period of one year
after the employee's termination for any reason, the employee may not disclose
in any way any confidential information. The agreements also provide that for so
long as the employee works for us and for a period of one year after the
employee's termination for any reason, the employee is prohibited from:
- engaging in the same business or in a similar capacity in our markets;
- soliciting business in competition with us; and
- hiring any of our employees or directly or indirectly causing any of our
employees to leave their employment to work for another employer.
In the event of a breach of the noncompetition agreement by an employee, we
have the option to repurchase any and all shares held by the employee at the
employee's exercise price. We may also pursue any other remedies provided by law
or in equity.
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PRINCIPAL STOCKHOLDERS
The table below sets forth information regarding the beneficial ownership of
our common stock as of March , 2000, assuming the conversion of all of our
outstanding preferred stock into our common stock by the following individuals
or groups:
- each person or entity who is known by us to own beneficially more than
5.0% of any class of our capital stock;
- each of our named executive officers;
- each of our directors; and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of our common stock that are subject to
warrants or stock options that are presently exercisable or exercisable within
60 days of March , 2000 are deemed to be outstanding and beneficially owned by
the person holding the warrants or stock options for the purpose of computing
the percentage of ownership of that person, but are not treated as outstanding
for the purpose of computing the percentage of any other person.
Unless indicated otherwise below, the address of our directors and officers
is c/o UbiquiTel Inc., 1 Bala Plaza, Suite 402, Bala Cynwyd, Pennsylvania 19004.
Except as indicated below, the persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them.
<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP PRIOR PERCENTAGE
NUMBER OF SHARES TO THE OWNERSHIP AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING(1) THE OFFERING
- ------------------------ ------------------ --------------- ---------------
<S> <C> <C> <C>
The Walter Group, Inc.(2)(3)..........
Donald A. Harris(2)(4)................
Brookwood Ubiquitel Investors,
LLC(2)(5)...........................
CBT Wireless Investments,
L.L.C.(2)(6)........................
Stephen C. Marcus(2)(7)...............
BET Associates, L.P.(8)...............
SpectraSite Communications(2)(9)......
Paul F. Judge.........................
Donaldson, Lufkin & Jenrette Merchant
Banking Partners II, L.P.(2)(10)....
New Ventures, L.L.C.(2)(11)...........
Robert A. Berlacher(2)(12)............
Peter Lucas(6)........................
Eve M. Trkla(13)......................
Joseph N. Walter(3)...................
All officers and directors as a group
( persons)....................
</TABLE>
- --------------------------
(FOOTNOTES ON FOLLOWING PAGE)
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(1) Assumes the conversion of all outstanding preferred stock into common stock
and the cancellation of all outstanding shares of non-voting common stock,
as if such conversion and cancellation had occurred as of March , 2000.
(2) Includes shares of preferred stock that automatically convert into common
stock upon the completion of this offering.
(3) The address of The Walter Group, Inc., is 120 Lakeside Avenue, Suite 310,
Seattle, Washington 98122-6578. Joseph N. Walter is a principal of The
Walter Group, Inc. and may be deemed to beneficially owner of the shares
held by The Walter Group, Inc. Mr. Walter disclaims beneficial ownership of
such shares.
(4) Includes 120,000 shares held by the Harris Family Trust as to which shares
Mr. Harris disclaims beneficial ownership.
(5) The address of Brookwood Ubiquitel Investors, LLC, is 55 Tozer Road,
Beverly, Massachusetts 01915.
(6) The address of CBT Wireless Investments, L.L.C., is 1733 H Street, #330-141,
Blaine, Washington 98230. Peter Lucas, a director of ours, serves as the
general manager of CBT Wireless Investment and has investment power over its
shares as to which Mr. Lucas disclaims beneficial ownership.
(7) The address of Stephen Marcus is 915 Exeter Crest, Villanova, Pennsylvania
19085.
(8) Includes shares of common stock subject to warrants. The address of
BET Associates, L.P., is 3103 Filmont Avenue, Huntington Valley,
Pennsylvania 19006.
(9) The address of SpectraSite Communications is 160 Regency Forest Drive,
Suite 400, Cary, North Carolina 27511.
(10) The address of DLJ Merchant Banking Partners II, L.P. is 277 Park Avenue,
New York, New York 10172. A board designee of DLJ Merchant Banking Partners
II, L.P is yet to be named pursuant to the terms of our shareholder
agreement.
(11) The address of New Ventures, L.L.C., is 211 North Union Street, Suite 300,
Alexandria, Virginia 22314.
(12) The address of Robert Berlacher is 675 Church Road, Villanova, Pennsylvania
19805.
(13) Ms. Trkla is a principal of Brookwood Ubiquitel Investors, LLC and may be
deemed to be the beneficial owner of the shares held by Brookwood Ubiquitel
Investors, LLC. Ms. Trkla disclaims beneficial ownership of such shares.
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CERTAIN TRANSACTIONS
UbiquiTel and its management and security holders and their respective
affiliates engage in a variety of transactions between or among each other in
the ordinary course of their respective businesses. As a general rule, we have
not retained an independent third party to evaluate these transactions, and
there has been no independent committee of our board of directors to evaluate
these transactions. Notwithstanding this fact, we believe that the terms and
conditions of these transactions, including the fees or other amounts paid by
us, took into account transactions of a similar nature entered into by us with
unaffiliated third parties and/or market transactions of a similar nature
entered into by unaffiliated third parties. There can be no assurance that we
could not have obtained more favorable terms from an unaffiliated third party.
We have a master lease agreement with SpectraSite. During 1999, SpectraSite
did not perform any services for us under the master lease agreement. We expect
SpectraSite to perform services for us under our master lease agreement with it
in the future. See "Business--Network Build-out."
We have received consulting services from The Walter Group. We paid The
Walter Group $148,000 for consulting services provided to us by The Walter Group
in 1999. The Walter Group recently sold certain of its assets to Wireless
Facilities Inc., a wireless engineering and consulting firm. We may from time to
time seek consulting services from Wireless Facilities.
In December 1999, we borrowed $8.0 million from BET Associates and issued
BET Associates a warrant to purchase shares of our common stock. We
intend to use a portion of the proceeds from UbiquiTel Operating Company's
senior subordinated debt financing to pay off the $8.0 million loan. The
prepayment of the BET Associates loan will also include any unpaid interest
through the date of payoff, and a prepayment fee of $80,000.
The Walter Group, Donald Harris and Paul Judge are, among others, parties to
a Founders Stock Agreement. The Founders Stock Agreement provides that the
stockholders that are parties to the agreement received shares of our common
stock to retain their ownership interest in the event we issue additional
shares. As a result of the terms of the Founders Agreement, these stockholders
received an aggregate amount of 259,387 shares of common stock as a result of
the $25.0 million equity investment by DLJ Merchant Banking described below. The
Founders Stock Agreement will terminate upon the completion of this offering.
Donaldson, Lufkin & Jenrette Securities Corporation is the lead manager of
this offering and will receive a customary underwriting fee. An affiliate of
Donaldson, Lufkin & Jenrette has entered into a commitment letter for UbiquiTel
Operating Company's senior subordinated debt financing, and will receive a
customary committment fee. DLJ Merchant Banking and certain related parties, all
of which are affiliates of Donaldson, Lufkin & Jenrette Securities Corporation,
were issued 2,110,347 shares of preferred stock on February 25, 2000 for an
aggregate purchase price of $25.0 million. The shares of preferred stock will be
converted automatically into common stock upon the closing of this offering.
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REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY
The FCC regulates the licensing, construction, operation, acquisition and
interconnection arrangements of wireless telecommunications systems in the
United States. The FCC has promulgated, and is in the process of promulgating, a
series of rules, regulations and policies to, among other things, (i) grant or
deny licenses for PCS frequencies, (ii) grant or deny PCS license renewals,
(iii) rule on assignments and/or transfers of control of PCS licenses,
(iv) govern the interconnection of PCS networks with other wireless and wireline
carriers, (v) establish access and universal service funding provisions,
(vi) impose fines and forfeitures for violations of any of the FCC's rules, and
(vii) regulate the technical standards of PCS networks. The FCC currently
prohibits a single entity from having a total attributable interest (20% or
greater interest in any license) in broadband PCS, cellular and SMR licenses
totaling more than 45 MHz in all geographic areas except rural areas. In rural
areas, the so-called "spectrum cap" is 55 MHz.
TRANSFERS AND ASSIGNMENTS OF PCS LICENSES
The FCC must give prior approval to the assignment of, or transfers
involving, substantial changes in ownership or control of a PCS license.
Non-controlling interests in an entity that holds a PCS license or operates PCS
networks generally may be bought or sold without prior FCC approval. In
addition, a recent FCC order requires only post-consummation notification of
certain pro forma assignments or transfers of control.
CONDITIONS OF PCS LICENSES
All PCS licenses are granted for 10-year terms conditioned upon timely
compliance with the FCC's build-out requirements. Pursuant to the FCC's
build-out requirements, all 30 MHz broadband PCS licensees must construct
facilities that offer coverage to one-third of the population within 5 years and
to two-thirds of the population within 10 years, and all 10 MHz broadband PCS
licensees (and 15 MHz licensees resulting from disaggregation of MHz spectrum
blocks) must construct facilities that offer coverage to at least one-quarter of
the population within 5 years or make a showing of "substantial service" within
that 5 year period. Rule violations could result in the forfeiture of the
affected license and an inability to regain the license. The FCC also requires
licensees to maintain a certain degree of control over their licenses. The
Sprint PCS agreements reflect an alliance that the parties believe meets the FCC
requirements for licensee control of licensed spectrum. If the FCC were to
determine that our agreements with Sprint PCS need to be modified to increase
the level of licensee control, the Sprint PCS agreements may be modified to cure
any purported deficiency regarding licensee control of the licensed spectrum.
PCS LICENSE RENEWAL
PCS licensees can renew their licenses for additional 10 year terms. PCS
renewal applications are not subject to auctions. However, under the FCC'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.
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The FCC's rules afford PCS 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 PCS renewal applicant has: (i) provided "substantial service" during its
license term; and (ii) substantially complied with all applicable laws and FCC
rules and policies. The FCC'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.
INTERCONNECTION
The FCC has the authority to order interconnection between CMRS providers
and any other common carrier. The FCC has ordered local exchange carriers to
provide reciprocal compensation to CMRS providers for the termination of
traffic. Using these 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. We will seek to negotiate interconnection agreements on a regional or
state-wide basis where possible. If an agreement cannot be reached, under
certain circumstances, parties to interconnection negotiations can submit
outstanding disputes to state authorities for arbitration. Negotiated
interconnection agreements are subject to state approval.
OTHER FCC REQUIREMENTS
In June 1996, the FCC adopted rules that prohibit broadband PCS providers
from unreasonably restricting or disallowing resale of their services or
unreasonably discriminating against resellers. Resale obligations will
automatically expire on November 24, 2002, although wireless carriers will still
face a statutory obligation to provide their interstate services on a
non-discriminatory basis. The FCC is also considering whether wireless providers
should be required to offer unbundled communications capacity to resellers who
intend to operate their own switching facilities.
The FCC also adopted rules in June 1996 that require local exchange and most
CMRS carriers to program their networks to allow customers to change service
providers without changing telephone numbers, which is referred to as service
provider number portability. Initially, the FCC required that most CMRS
providers be able to deliver calls from their networks to ported numbers
anywhere in the country by December 31, 1998. In response to a CTIA petition for
forbearance, the FCC has extended until November 24, 2002 the deadline to
implement local number portability. In addition, the FCC has required that:
(i) CMRS providers must be able to offer their own customers number portability
in their switches in the 100 largest metropolitan areas, including the ability
to support nationwide roaming, by March 31, 2000, and (ii) carriers were
required to request number portability capability in the 100 largest
metropolitan areas by June 30, 1999. Commencing in 1999, all carriers were
required to begin contributing to the Local Number Portability fund.
The FCC has adopted rules permitting broadband PCS and other CMRS providers
to provide wireless local loop and other fixed services that would directly
compete with the wireline services of LECs. The FCC currently is undertaking a
rulemaking proceeding in
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which it is considering actions to help ensure that competitive
telecommunications providers have reasonable and non-discriminatory access to
rights-of-way, buildings, rooftops and facilities in multiple tenant
environments. In June 1996, the FCC adopted rules requiring broadband PCS and
other CMRS providers to implement enhanced emergency 911 capabilities within
18 months after the effective date of the FCC's rules. The FCC revised these
rules to extend the compliance deadline for phase I (requiring carriers to
transmit a caller's phone number and general location to a Public Safety
Answering Point (PSAP) until January 1, 1999 and for phase II (requiring more
precise location information be provided to the PSAP) until October 1, 2001.
Carriers are required to begin selling and activating Automatic Location
Identification (ALI) capable handsets no later than March 1, 2001. Further
waivers of the enhanced emergency 911 capability requirements may be obtained by
individual carriers by filing a waiver request. Congress recently enacted
legislation that extends to wireless carriers the same level of immunity from
lawsuits that is enjoyed by wireline carriers regarding their transmission of
emergency calls. Wireless carriers also face certain statutory and regulatory
requirements regarding accessibility of wireless services to persons with
disabilities.
COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT
The Communications Assistance for Law Enforcement Act, enacted in 1994 to
preserve electronic surveillance capabilities authorized by Federal and state
law, requires telecommunications carriers to meet certain "assistance capability
requirements" by October 25, 1998. However, the FCC granted a blanket extension
of that deadline until June 30, 2000, because CALEA compliant equipment is not
yet available. CALEA provides that a telecommunications carrier meeting industry
CALEA standards shall have safe harbor for purposes of compliance with CALEA.
Toward the end of 1997 telecommunications industry standard-setting
organizations agreed to a joint standard to implement CALEA's capability
requirements, known as J-STD-025. Although we will be able to offer traditional
electronic surveillance capabilities to law enforcement, it, as well as the
other participants in the wireless industry, may not meet the requirements of
J-STD-025 by June 30, 2000, given hardware changes that are yet to be developed
and implemented by switch manufacturers. For CMRS carriers, implementation of a
packet-mode capability and six Department of Justice/ Federal Bureau of
Investigation "punch list" capabilities must be completed by September 30, 2001.
In addition, the FCC is considering petitions from numerous parties to
establish and implement technical compliance standards pursuant to CALEA
requirements.
OTHER FEDERAL REGULATIONS
Wireless systems must comply with certain FCC and FAA regulations regarding
the siting, lighting and construction of transmitter towers and antennas. In
addition, certain FCC environmental regulations may cause certain cell site
locations to become subject to regulation under the National Environmental
Policy Act. The FCC is required to implement the Act by requiring carriers to
meet certain land use and radio frequency standards.
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REVIEW OF UNIVERSAL SERVICE REQUIREMENTS
The FCC 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 FCC has
determined that the Sprint PCS' "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
FCC'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.
PARTITIONING; DISAGGREGATION
The FCC has modified its rules to allow broadband PCS 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.
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 such services. In addition, so long as a
wireless system complies with the FCC'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. The FCC 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
carriers for toll services. However, the FCC is authorized to require unblocked
access to toll carriers 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. However, states
may petition the FCC to regulate such providers and the FCC may grant such
petition if the state demonstrates that (1) market conditions fail to protect
subscribers from unjust and unreasonable rates or rates that are unjustly or
unreasonably discriminatory, or (2) when commercial mobile radio service is a
replacement for landline telephone service within the state. To date, the FCC
has granted no such petition. To the extent we provide fixed wireless service,
we may be subject to additional state regulation.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our charter
gives effect to the -for-one stock split, the conversion of our preferred
stock into common stock that will be effected upon consummation of this
offering, the issuance and sale of shares of common stock in this
offering, and other provisions of our amended and restated certificate of
incorporation, which is to be expected to be filed immediately prior to the
consummation of this offering. It does not purport to be complete, however, and
is qualified in its entirety by reference to the actual terms and provisions of
the capital stock that will be contained in our amended and restated certificate
of incorporation.
AUTHORIZED CAPITAL STOCK
Our authorized capital stock consists of:
- 100,000,000 shares of common stock, par value $0.001 per share, of which
shares are outstanding; and
- 10,000,000 shares of preferred stock, par value $0.001 per share, of which
no shares are outstanding.
STOCK RESERVED FOR ISSUANCE
shares of common stock are reserved for issuance upon exercise of
outstanding stock options and shares are reserved for issuance upon
exercise of outstanding warrants. No shares of preferred stock are reserved for
issuance.
COMMON STOCK
The holders of our common stock are entitled to one vote for each share held
of record on all matters submitted to a vote of our 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 such
dividends as may be declared by the board of directors out of funds legally
available therefor. Holders of shares of common stock have no preemptive,
conversion, redemption, subscription or similar rights. 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 certain 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
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board of directors without approval from the stockholders. These rights,
designations and preferences include:
- number of shares to be issued;
- dividend rights;
- dividend rates;
- right to convert the preferred shares into a different type of security;
- voting rights attributable to the preferred shares;
- 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.
WARRANTS
We currently have outstanding warrants to purchase in the aggregate
shares of common stock. We issued warrants to purchase shares of common
stock to Paribas in connection with our UbiquiTel Operating Company's
$25.0 million credit facility. These warrants are exercisable at a price of $
per share and may be exercised at any time on or before December 28, 2009.
Holders of these warrants are entitled to dividends that are paid with respect
to the common stock even if the warrants have not yet been exercised. We issued
warrants to purchase shares of common stock to BET in connection with our
sale to them of senior subordinated notes. These warrants are exercisable at a
price of $ per share and may be exercised at any time on or before
December 28, 2009. We have the option to repurchase all of the warrants or all
of the shares of non-voting common stock issued upon the exercise of the
warrants beginning on the sixth anniversary of the date the warrants were issued
except that our repurchase rights in respect of the warrants held by BET will
expire upon the completion of this offering. If we exercise this right, we must
repurchase the warrants or shares at price equal to 120% of the market price of
our non-voting common stock as of the date we repurchase the warrants or shares.
REGISTRATION RIGHTS
We have granted registration rights to all of our current stockholders under
a stockholders agreement and registration rights agreement. Under these
agreements, we are required to register their shares of common stock, upon
request. In addition, if we register any of our securities under the Securities
Act for our own account or for the account of other stockholders, these
stockholders are entitled to notice of the registration and are entitled to
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<PAGE>
include their shares of common stock in the registration subject to limitations
in the case of an underwritten offering. In most circumstances, we will be
required to pay the expense of registering these stockholders' shares.
ANTITAKEOVER EFFECTS OF DELAWARE LAW
We are subject to the provisions of Section 203 of the Delaware law. Subject
to certain exceptions, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a certain period of time. That period is three years after the
date of the transaction in which the person became an interested stockholder,
unless the interested stockholder attained that status with the approval of the
board of directors or unless the business combination is approved in a
prescribed manner. A "business combination" includes certain mergers, asset
sales and other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with his or her affiliates and associates, owns, or owned
within three years prior, 15% or more of the corporation's voting stock. The
existence of this provision may have an antitakeover effect with respect
transactions not approved in advance by the board of directors, including
discouraging attempts that might result in a premium over the market price for
shares of common stock held by stockholders.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS THAT MAY PREVENT
TAKEOVERS
Upon the closing of this offering, our certificate of incorporation will
contain provisions that may delay, defer or prevent a change in control of us
and make removal of our management more difficult.
Our certificate of incorporation will provide 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 will also provide that only the board of directors may fix the
number of directors. Our bylaws will 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 will provide 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 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
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<PAGE>
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 will provide 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, or the President. 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.
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 then 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.
Our certificate of incorporation will require 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 duties as a director. The effect of this
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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 us 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 management agreements with the Sprint PCS, under specific
circumstances and without further stockholder approval, Spring PCS may purchase
our operating assets or capital stock for 72% or 80% of the "entire business
value" of UbiquiTel, which includes the value of the spectrum licenses, business
operations and other assets more fully described in "The Sprint PCS
Agreements--The Management Agreement." In addition, Spring PCS must approve any
change of control of our ownership and consent to any assignment of our
management 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 UbiquiTel or our operating assets to competitors of
Sprint or Sprint PCS. These restrictions and other restrictions in our
management agreements with Sprint PCS may limit our ability to sell the business
and may have a substantial anti-takeover effect.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
LISTING
Application will be made to list the shares of our voting common stock on
the Nasdaq National Market under the symbol "UPCS."
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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 certain 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
shares of common stock, assuming no exercise of the underwriters'
over-allotment option (and no exercise of outstanding exercisable warrants for
an aggregate of shares at December 31, 1999) and based upon the number of shares
outstanding as of December 31, 1999. Of these shares, all of the 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
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 such shares that
does not exceed the greater of (i) one percent of the then outstanding shares of
common stock or (ii) the average weekly trading volume in the common stock
during the four calendar weeks preceding the date on which notice of such 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 such 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 a prior owner who was not an
affiliate.
Additional shares of common stock are available for future grants under our
equity incentive plan. See "Management--2000 Equity 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 granted pursuant to our 2000 Equity Incentive Plan that does 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 such registration
statements are expected to become effective upon filing. Shares covered by these
registration statements will thereupon be eligible for sale in the public
markets subject to the lock-up agreements, to the extent applicable.
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REGISTRATION RIGHTS
Upon the closing of this offering, the holders of approximately shares
of our common stock that are restricted securities will be entitled to require
us to register sales of their shares of common stock with the Securities and
Exchange Commission under a stockholders agreement and registration rights
agreement. Under these agreements, we are required to register their shares of
common stock, upon request. In addition, if we register any of our securities
under the Securities Act for our own account or for the account of other
stockholders, these stockholders are entitled to notice of the registration and
are entitled to include their shares of common stock in the registration subject
to limitations in the case of an underwritten offering. In most circumstances,
we will be required to pay the expense of registering these stockholders'
shares.
LOCK-UP AGREEMENTS
We and all of our current stockholders, members of senior management and
directors 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, contract to sell, grant any option, right or
warrant to purchase, or otherwise dispose of any shares of common stock,
including but not limited to any common stock or securities convertible into or
exercisable or exchangeable for common stock which may be deemed to be
beneficially owned in accordance with the rules and regulations of the
Securities and Exchange Commission or enter into any swap or other agreement
that transfers, in whole or in part, the economic consequence of ownership of
common stock, or make any demand for, or exercise any right with respect to, the
registration of common stock or any securities convertible into or exercisable
or exchangeable for common stock, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation.
Following the lock-up period, shares of common stock will become
eligible for sale, subject to compliance with Rule 144 of the Securities Act as
described above.
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UNDERWRITING
We and the underwriters named below have entered into an underwriting
agreement covering the common stock to be offered in this offering. Donaldson,
Lufkin & Jenrette Securities Corporation and Banc of America Securities LLC are
acting as representatives of the underwriters. Each underwriter has agreed to
purchase the number of shares of common stock shown opposite its name in the
following table.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS: SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.......
Banc of America Securities LLC............................
DLJDIRECT Inc.............................................
---------
Total...................................................
=========
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
to purchase and accept delivery of the shares are subject to approval by their
legal counsel of legal matters and other conditions. The underwriting agreement
provides that if the underwriters take any of the shares provided in the table
above, then they must take all of these shares. No underwriter is obligated to
take any shares allocated to a defaulting underwriter except under limited
circumstances.
The underwriters will initially offer to sell shares to the public at the
initial public offering price provided on the cover page of this prospectus. The
underwriters may also sell shares to securities dealers at a discount of up to
$ per share from the initial public offering price. Any such securities
dealers may resell shares to certain other brokers or dealers at a further
discount of up to $ per share. After the initial public offering, the
underwriters may change the public offering price and other selling terms
without notice. The underwriters do not intend to confirm sales to any accounts
over which they exercise discretionary authority. An electronic prospectus is
available on the Web site maintained by DLJDIRECT Inc.
If the underwriters sell more shares than the total number provided in the
table above, the underwriters have the option to buy up to additional
shares of common stock from us to cover such sales. They may exercise this
option during the 30-day period from the date of this prospectus. If any shares
are purchased with this option, the underwriters will purchase shares in
approximately the same proportion as provided in the table above.
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The following table shows the per share and total underwriting discounts and
commissions that we will pay to the underwriters. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
PAID BY UBIQUITEL
---------------------------
NO EXERCISE FULL EXERCISE
<S> <C> <C>
Per share.................................... $ $
Total...................................... $ $
======== ========
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be $ .
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
At our request, the underwriters have reserved shares of common stock
offered by this prospectus for sale at the initial public offering price to our
directors, officers, employees and other persons designated by us who have
expressed an interest in participating in the offering. We expect these persons
to purchase no more than 5% of the common stock offered in the offering. The
number of shares available for sale to the general public will be reduced to the
extent these persons purchase reserved shares. The underwriters will offer
unpurchased reserved shares to the general public on the same basis as the other
offered shares.
We and all of our current stockholders, members of senior management and
directors have agreed that, for a period of 180 days from the date of this
prospectus, we will not, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, do either of the following:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into
or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock.
In addition, during such period, except for the registration of shares
underlying warrants, options in our 2000 Equity Incentive Plan and options
granted prior to the adoption of that plan, we have also agreed not to file any
registration statement with respect to, and each of our executive officers and
directors and several of our stockholders have agreed not to make any demand
for, or exercise any right with respect to, the registration of any shares of
common stock or any securities convertible into or exercisable or exchangeable
for common stock without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation.
Either of the foregoing transaction restrictions will apply regardless of
whether a covered transaction is to be settled by the delivery of common stock
or such other securities, in cash or otherwise.
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Application will be made to list our common stock on the Nasdaq National
Market under the symbol "UPCS." In order to meet the requirements for listing
the common stock on the Nasdaq National Market, the underwriters have undertaken
to sell lots of 100 to a minimum of 400 beneficial owners.
Other than in the United States, no action has been taken by UbiquiTel or
the underwriters that would permit a public offering of the shares of common
stock included in this offering in any jurisdiction where action for that
purpose is required. The shares included in this offering may not be offered or
sold, directly or indirectly, nor may this prospectus or any other offering
material or advertisement in connection with the offer and sale of any such
shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock included in this offering in any jurisdiction where that
would not be permitted or legal.
We expect that delivery of the shares will be made to investors on or about
, 2000.
The underwriters may purchase and sell shares of common stock in the open
market in connection with this offering. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or slowing a decline in the market price of the common stock while
the offering is in progress. The underwriters may also impose a penalty bid,
which means that an underwriter must repay to the other underwriters a portion
of the underwriting discount received by it. An underwriter may be subject to a
penalty bid if the representatives of the underwriters, while engaging in
stabilizing or short covering transactions, repurchase shares sold by or for the
account of that underwriter. These activities may stabilize, maintain or
otherwise affect the market price of the common stock. As a result, the price of
the common stock may be higher than the price that otherwise might exist in the
open market. If the underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these transactions on the
Nasdaq National Market, in the over-the-counter market or otherwise.
Some of the underwriters are also acting as underwriters under our
concurrent offering of senior subordinated discount notes, for which they will
receive fees customary for performing such services.
In February 2000, DLJ Merchant Banking Partners II, L.P., an affiliate of
Donaldson, Lufkin & Jenrette, one of the underwriters for this offering, entered
into a securities purchase agreement whereby it purchased 2,110,347 shares of
our 7% senior pay-in-kind non voting convertible preferred stock, referred to as
our series B preferred stock, at a purchase price of $11.85 per share, or
$25.0 million in aggregate. The shares of series B preferred stock convert
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into shares of our common stock automatically upon consummation of this offering
on a share-for-share basis.
In addition, DLJ Bridge Finance, Inc., an affiliate of Donaldson, Lufkin &
Jenrette, has entered into a commitment letter with us with respect to the
purchase of up to $125.0 million of our senior subordinated increasing rate
notes. For a description of these notes, see "Certain Indebtedness." In
connection therewith, DLJ Bridge Finance is entitled to receive a customary
commitment fee and a takedown fee in the event that we issue the notes.
PRICING OF THIS OFFERING
Before this offering, there has been no public market for our common stock.
Consequently, the initial public offering price for our common stock was
determined by negotiation among us and the representatives of the underwriters.
Among the factors considered in determining the public offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stages of development of other companies
which the representatives of the underwriters believe to be comparable to
us; and
- estimates of our business potential.
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of common
stock offered hereby will be passed upon for UbiquiTel by Greenberg Traurig,
LLP, Tysons Corner, Virginia, and for the underwriters by Weil, Gotshal & Manges
LLP, Dallas, Texas and New York, New York.
EXPERTS
The audited consolidated balance sheet of UbiquiTel Inc. and Subsidiaries as
of December 31, 1999, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the period from Inception
(September 29, 1999) to December 31, 1999 have been included in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent certified public accountants as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving such reports.
The financial statements of the Spokane District (wholly owned by Sprint
Spectrum L.P.) as of December 31, 1999 and 1998, and for each of the three years
in the period ended December 31, 1999, appearing in this Prospectus and
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
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AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock being offered by this
prospectus. This prospectus does not contain all of the information set forth in
the registration statement. For further information about us and the common
stock, see the registration statement, and its exhibits. Descriptions in this
prospectus of any contract or other document are not necessarily complete and,
where the contract or document is an exhibit to the registration statement, any
such description is qualified in all respects by the exhibit. Copies of the
registration statement, including exhibits, 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 60601, 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-0300. 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.
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. Such reports, proxy statements and other
information may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, DC 20006.
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<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES AND PREDECESSORS
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UBIQUITEL INC. AND SUBSIDIARIES--CONSOLIDATED FINANCIAL
STATEMENTS
Report of Independent Public Accountants................ F-2
Consolidated Balance Sheet as of December 31, 1999...... F-3
Consolidated Statement of Operations for the period from
inception to
December 31, 1999..................................... F-4
Consolidated Statement of Stockholders' Equity for the
period from inception to December 31, 1999............. F-5
Consolidated Statements of Cash Flows for the period
from inception to December 31, 1999.................... F-6
Notes to Consolidated Financial Statements.............. F-7
SPOKANE DISTRICT--FINANCIAL STATEMENTS
Report of Independent Auditors.......................... F-26
Statements of Assets to be Sold as of December 31, 1999
and 1998............................................... F-27
Statements of Revenues and Expenses for the years ended
December 31, 1999, 1998 and 1997....................... F-28
Notes to Statements of Assets to be Sold and Statements
of Revenues and Expenses............................... F-29
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To UbiquiTel Inc.:
We have audited the accompanying consolidated balance sheet of
UbiquiTel Inc. and Subsidiaries (a Delaware Corporation in the development
stage, formerly known as UbiquiTel Holdings, Inc. (see Note 15)) as of
December 31, 1999, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the period from inception
(September 29, 1999) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of UbiquiTel Inc.
and Subsidiaries as of December 31, 1999 and the results of their operations and
their cash flows for the period from inception to December 31, 1999, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
New York, New York
March 8, 2000
F-2
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $23,959,190
Prepaid expenses.......................................... 35,636
-----------
Total current assets.................................. 23,994,826
CONSTRUCTION IN PROGRESS.................................... 4,085,942
DEFERRED FINANCING COSTS, net............................... 2,110,642
-----------
Total assets.............................................. $30,191,410
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 577,216
Due to shareholders....................................... 1,663,441
Due to Lucent Technologies................................ 3,883,419
Accrued interest.......................................... 10,521
Dividends payable......................................... 9,030
-----------
Total current liabilities............................. 6,143,627
LONG-TERM DEBT.............................................. 5,811,869
-----------
Total liabilities......................................... 11,955,496
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Convertible preferred stock, par value, $0.001 per share;
125,000,000 shares authorized; 17,008,500 shares issued
and outstanding......................................... 17,009
150,000,000 shares of voting common stock, par value
$0.001 authorized; 3,417,000 shares issued and
outstanding............................................. 3,417
16,000,000 shares of nonvoting stock, par value $0.001
authorized, all shares are issued and outstanding....... 16,000
Additional paid-in-capital................................ 20,186,579
Accumulated deficit during the development stage.......... (1,987,091)
-----------
Total stockholders' equity............................ 18,235,914
-----------
Total liabilities and stockholders' equity................ $30,191,410
===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS CONSOLIDATED BALANCE SHEET.
F-3
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
REVENUES.................................................... $ --
COST OF REVENUES............................................ --
-----------
Gross profit.............................................. --
OPERATING EXPENSES
General and administrative expenses....................... 554,430
Equity participation compensation expense................. 1,394,729
-----------
Operating loss.......................................... (1,949,159)
INTEREST EXPENSE............................................ 28,902
-----------
NET LOSS.................................................... (1,978,061)
LESS: PREFERRED STOCK DIVIDENDS............................. (9,030)
-----------
LOSS AVAILABLE TO COMMON STOCKHOLDERS....................... (1,987,091)
===========
BASIC AND DILUTED LOSS PER COMMON SHARE..................... $ (0.10)
===========
WEIGHTED-AVERAGE OUTSTANDING COMMON SHARES.................. 19,417,000
===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS CONSOLIDATED STATEMENT.
F-4
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
---------------------- ---------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
----------- -------- ----------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, at inception
(September 29, 1999)..... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of voting common
stock.................. -- -- 3,417,000 3,417 -- -- 3,417
Issuance of non-voting
common stock........... -- -- 16,000,000 16,000 -- -- 16,000
Issuance of convertible
preferred stock, net of
offering costs......... 17,008,500 17,009 -- -- 15,294,936 -- 15,311,945
Equity participation
compensation expense... -- -- -- -- 1,394,729 -- 1,394,729
Equity participation non-
employees.............. -- -- -- -- 738,760 -- 738,760
Issuance of warrants for
voting common stock.... -- -- 2,188,131 -- 2,188,131
Issuance of warrants for
non-voting common
stock.................. -- -- -- 570,023 570,023
Net loss................. -- -- -- -- -- (1,987,091) (1,987,091)
----------- ------- ----------- ------- ----------- ----------- -----------
BALANCE,
December 31, 1999........ 17,008,500 $17,009 19,417,000 $19,417 $20,186,579 $(1,987,091) $18,235,914
=========== ======= =========== ======= =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS CONSOLIDATED STATEMENT.
F-5
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(1,978,061)
Adjustments to reconcile net loss to net cash provided by
operating activities--
Amortization of deferred financing costs................ 18,381
Equity participant compensation expense................. 1,394,729
Changes in operating assets and liabilities:
Prepaid expenses........................................ (35,636)
Accounts payable and accrued expenses................... 373,534
Accrued interest........................................ 10,521
-----------
Net cash used in operating activities................. (216,532)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (10,400)
-----------
Net cash used in investing activities................. (10,400)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior subordinated notes and
detachable warrants..................................... 8,000,000
Deferred financing cost................................... (734,000)
Proceeds from issuance of convertible preferred stock..... 17,008,500
Proceeds from issuance of common stock.................... 19,417
Offering costs............................................ (107,795)
-----------
Net cash provided by financing activities............. 24,186,122
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 23,959,190
CASH AND CASH EQUIVALENTS, beginning of period.............. --
-----------
CASH AND CASH EQUIVALENTS, end of period.................... $23,959,190
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ --
Cash paid for income taxes................................ --
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Network assets acquired but not paid...................... 4,075,542
Deferred financing costs incurred but not paid............ 825,000
Preferred stock dividends................................. 9,030
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS CONSOLIDATED STATEMENT.
F-6
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
1. ORGANIZATION AND NATURE OF BUSINESS
UbiquiTel Inc. (the "Company") was formed for the purpose of becoming the
exclusive provider of Sprint Personal Communications Services ("PCS") in midsize
and smaller markets in the west and midwestern United States.
In October 1998, Ubiquitel L.L.C. (a Washington State Limited Liability
Company), whose sole member was The Walter Group entered into an agreement with
Sprint PCS for the exclusive rights to market Sprint's 100% digital, 100% PCS
products and services to the approximately 1 million residents in the Reno/Tahoe
Nevada market. Ubiquitel L.L.C. had no financial transactions from its inception
(August 24, 1998) to September 29, 1999. On September 29, 1999, UbiquiTel Inc.
(formerly "UbiquiTel Holdings, Inc."), a Delaware Corporation, was incorporated.
On November 1, 1999, the Founders' Agreement was executed and common stock was
issued to a group of five shareholders referred to as "the Founders" including
The Walter Group. In November 1999, Ubiquitel L.L.C. assigned all of its
material contracts including the rights to the Sprint PCS agreements to
UbiquiTel Inc. On December 28, 1999, UbiquiTel Inc. amended its agreement with
Sprint PCS to expand the Company's markets to the Northern California,
Spokane/Montana, Southern Idaho/Utah/ Nevada and Southern Indiana/Kentucky
markets which together with the Reno/Tahoe markets contain approximately
7.7 million residents.
Also on November 9, 1999, UbiquiTel Operating Company, Inc. (a Delaware
Corporation) incorporated to serve as the operating company for UbiquiTel Inc.
The consolidated financial statements contain the financial information of
UbiquiTel Inc., its sole subsidiary, UbiquiTel Operating Company, Inc. and its
predecessor Ubiquitel L.L.C. collectively ("the Company"). Ubiquitel L.L.C., did
not have any operations or financial transactions for the period from its
inception of August 24, 1998 through December 31, 1999 and no other assets or
liabilities existed other than assets and contingencies under the contracts
assigned to UbiquiTel Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and short-term investments with
original maturities of three months or less.
PROPERTY AND EQUIPMENT
Property and equipment are reported at cost less accumulated depreciation.
Costs incurred to design and construct the wireless network in a market are
classified as
F-7
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Property and equipment are depreciated using the straight-line method based
on estimated useful lives of the assets.
Assets lives are as follows:
<TABLE>
<S> <C>
Network equipment....................................... 5-10 years
Computer equipment...................................... 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.
CONSTRUCTION IN PROGRESS
Construction in progress includes equipment engineering and site development
cost in connection with the build out of the Company's PCS network. The Company
will capitalize interest on its construction in progress activities. The
capitalized interest will be recorded as part of the asset to which it relates
and will be amortized over the remaining estimated useful life. At December 31,
1999, no interest cost was capitalized.
ADVERTISING COSTS
Adverting costs are expensed as incurred. The Company did not incur
advertising expense during 1999.
DEFERRED FINANCING COSTS
Costs incurred in connection with obtaining the Company's senior
subordinated notes and senior secured credit agreement are deferred and will be
amortized into interest expense over the term of the respective financing using
the effective interest method. For the period from inception (September 29,
1999) to December 31, 1999, amortization amounted to $18,381 and was included in
interest expense.
F-8
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach which
requires the recognition of deferred tax assets and deferred tax liabilities for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Valuation
allowances will be established when necessary to reduce deferred tax assets to
the amount expected to be realized.
NET LOSS PER SHARE
The Company computes net loss per common share in accordance with SFAS
No. 128, "Earnings per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB
98"). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net
loss per common share is computed by dividing the net loss available to common
shareholders for the period by the weighted average number of shares of common
stock outstanding during the period. In accordance with SFAS No. 128, no
conversion of preferred shares has been assumed in the calculation of diluted
loss per share since the effect would be antidilutive. Accordingly, the number
of weighted average shares outstanding as well as the amount of net loss per
share are the same for basic and diluted per share calculations for the period
reflected in the accompanying financial statement.
REVENUE RECOGNITION
The Company will recognize revenue as services are performed. Sprint PCS
will handle the Company's billings and collections and will retain 8% of
collected service revenues from Sprint PCS subscribers based in the Company's
markets and from non-Sprint PCS subscribers who roam onto the Company'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 traveling
services provided to Sprint PCS customers who are not based in the Company's
markets are not subject to the 8% service revenue fee for Sprint.
Sprint PCS will pay the Company a Sprint PCS traveling fee for each minute
that a Sprint PCS subscriber based outside the Company's markets travels on to
the Company's portion of the Sprint PCS Network. Revenue from these services
will be recognized as the services are performed. Similarly, the Company will
pay traveling fees to Sprint PCS, when a Sprint PCS subscriber based in the
Company's markets travels on to the Sprint PCS Network outside of the Company's
markets. These costs will be included as cost of sales when incurred.
F-9
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Product revenues consisting of proceeds from sales of handsets and
accessories will be recorded net of allowance for sales returns. There were no
product revenues or related costs for the period from inception to December 31,
1999.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. The Company
has identified no such impairment losses at December 31, 1999.
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. If these
and the other risks included under "Risk Factors" in the Company's Form S-1 are
not properly managed and resolved the results could have a material adverse
impact on the Company's financial statements.
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 a significant credit risk
associated with deposits in excess of Federally insured amounts.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
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,
F-10
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
"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
the Company'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
consolidated financial results.
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 liabilities, at the date of the financial statements
and the reported amount of expenses during the reporting period. Actual results
could differ from those estimates.
COMPREHENSIVE INCOME
No statement of comprehensive income have been included in the accompanying
financial statements since the Company does not have any other comprehensive
income to report.
3. SPRINT AGREEMENTS
As of December 28, 1999, the Company signed four major agreements with
Sprint and Sprint PCS. They are the management agreement, the services
agreement, the trademark and service mark license agreement with Sprint and the
trademark and service mark license agreement with Sprint PCS. These agreements
allow the Company to exclusively offer Sprint PCS services in the Company's four
markets--Reno/Tahoe/Northern California; Spokane/ Montana; Southern
Idaho/Utah/Nevada; and Southern Indiana/Kentucky.
The management agreement has an initial term of 20 years with three 10-year
renewals. It can be terminated if either party provides the other with two
years' prior written notice or unless the Company is in material default of its
obligations. The key clauses within the management agreement are summarized as
follows:
(A) EXCLUSIVITY. The Company is designated as the only person or entity
that can manage or operate a PCS network for Sprint PCS in the
Company's markets. Sprint PCS is prohibited from owning, operating,
building or managing another
F-11
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
3. SPRINT AGREEMENTS (CONTINUED)
wireless mobility communications network in the Company's markets
while the management agreement is in place.
(B) NETWORK BUILD-OUT. The management agreement specifies the terms of
the Sprint PCS affiliation, including the required network build-out
plan. The Company has agreed on a minimum build-out plan which
includes specific coverage and deployment schedules for the network
planned within its service area and sets a target date for
completion of June 1, 2005.
(C) PRODUCTS AND SERVICES OFFERED FOR SALE. The management agreement
identifies the products and services that can be offered for sale in
the Company's markets. The Company cannot offer wireless local loop
services specifically designed for the competitive local market in
areas where Sprint owns the local exchange carrier unless the Sprint
owned local exchange carrier is named as the exclusive distributor
or Sprint PCS approves the terms and conditions.
(D) SERVICE PRICING. The Company must offer Sprint PCS subscriber
pricing plans designated for national offerings. The Company is
permitted to establish local price plans for Sprint PCS products and
services only offered in the Company's market. Sprint PCS will
retain 8% of the Company's collected service revenues but will remit
100% of revenues derived from traveling and sales of handsets and
accessories and proceeds from sales not in the ordinary course of
business.
(E) TRAVELING. The Company will earn travel revenues when a Sprint PCS
customer from outside of the Company's markets travels onto the
Company's network. Similarly, the Company will pay Sprint PCS when
the Company's own subscribers use the Sprint PCS nationwide network
outside the Company's markets.
(F) ADVERTISING AND PROMOTION. Sprint PCS is responsible for all
national advertising and promotion of Sprint PCS products and
services. The Company is responsible for advertising and promotion
in the Company's markets.
(G) PROGRAM REQUIREMENTS INCLUDING TECHNICAL AND CUSTOMER CARE
STANDARDS. The Company will comply with Sprint PCS' program
requirements for technical standards, customer service standards,
national and regional distribution and national accounts programs.
(H) NON-COMPETITION. The Company may not offer Sprint PCS products and
services outside the Company's markets.
F-12
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
3. SPRINT AGREEMENTS (CONTINUED)
(I) INABILITY TO USE NON-SPRINT PCS BRANDS. The Company may not market,
promote, advertise, distribute, lease or sell any of the Sprint PCS
products 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.
(J) RIGHTS OF FIRST REFUSAL. Sprint PCS has certain rights of first
refusal to buy the Company's assets upon a proposed sale.
The management agreement can be terminated as a result of a number of events
including an uncured breach of the management agreement or bankruptcy of either
party to the agreement. In the event that the management agreement is not
renewed or terminated, certain formulas apply to the valuation and disposition
of the Company's assets.
The services agreement outlines various support services such as activation,
billing and customer care that will be provided to the Company by Sprint PCS.
These services are available to the Company at established rates. Sprint PCS can
change any or all of the service rates one time in each twelve month period. The
Company may discontinue the use of any service upon three months written notice.
Sprint PCS may discontinue a service provided that it gives nine months written
notice. The services agreement automatically terminates upon termination of the
management agreement.
The trademark and service mark license agreements with Sprint and Sprint PCS
provide the Company with non-transferable, royalty free licenses to use the
Sprint and Sprint PCS brand names, the "diamond" symbol and several other
trademarks and service marks. The Company's use of the licensed marks is subject
to adherence to quality standards determined by Sprint and Sprint PCS. Sprint
and Sprint PCS can terminate the trademark and service mark license agreements
if the Company files for bankruptcy, materially breaches the agreement or if the
management agreement is terminated.
4. DEVELOPMENT STAGE ENTERPRISE
The Company was established on September 29, 1999 (inception). The Company
has devoted most of its efforts to date on activities such as preparing business
plans, raising capital, and planning the build-out of its PCS network in the
Reno/Tahoe market. From inception through December 31, 1999, the Company has not
generated any revenues and has incurred expenses of $1,978,061, resulting in an
accumulated deficit during the development stage of $1,987,091 as of
December 31, 1999 after preferred stock dividends.
F-13
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
5. LONG-TERM DEBT
Long-term debt outstanding as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
12% Senior Subordinated Note........................... $ 8,000,000
Less: Discount......................................... (2,188,131)
-----------
Long-term debt..................................... $ 5,811,869
===========
</TABLE>
On November 12, 1999, the Company signed a commitment letter for a Purchase
Agreement with BET Associates which included an $8,000,000 senior subordinated
note. The Purchase Agreement was finalized and executed on December 28, 1999.
The note bears stated interest at 12% payable quarterly and matures on
December 28, 2007. The first interest payment is due April 1, 2000 for the
period from the closing date through March 31, 2000.
BET Associates also received warrants to purchase 2,489,075 shares of voting
common stock at a par value of $0.001 per share and an exercise price of $0.01
per share with an exercise period of ten years. Of the $8,000,000 in proceeds
received under the purchase agreement, $2,188,131 was allocated to the
detachable warrants based on the fair value of the warrants on the date of
issuance as determined using the Black-Scholes Model (Note 8). The Company also
paid a commitment fee of $160,000 that will be amortized over the term of the
loan.
The proceeds of the note are available to fund capital expenditures related
to the construction of the Company's PCS network for the Reno/Tahoe markets. The
loan agreement requires the Company to adhere to specific financial covenants
including limitation on capital expenditures. The Company is required to prepay
the notes with cash received from the sale of assets or stock or from additional
financings. The notes may be prepaid if the Company completes a private or
public offering of debt or equity of at least $100 million plus a premium of 1%
of the principal amount paid.
On November 15, 1999, the Company signed a commitment letter for a
$25 million Senior Secured Credit Agreement (the "Facility"), with Paribas, as
Administrative Agent, and certain banks and other financial institutions party
thereto. The Facility was finalized and executed on December 29, 1999 (the
"Facility Effective Date"). The Facility provides for (i) a $12.5 million Term
Loan Commitment ("Term Loans") which may be drawn in installments at any time
after the Facility Effective Date through the second anniversary of the Facility
Effective Date and (ii) a $12.5 million Revolving Loan Commitment ("Revolving
Loans") which may be drawn in installments after the date the Term Loans has
been repaid through
F-14
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
5. LONG-TERM DEBT (CONTINUED)
the sixth anniversary of the Facility Effective Date. The aggregate outstanding
principal amount of the Facility is subject to the following limitations:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED AMOUNT
<S> <C>
March 31, 2000.......................................... $ 5 million
June 30, 2000........................................... $ 7 million
September 30, 2000...................................... $10 million
December 31, 2000....................................... $12 million
March 31, 2001.......................................... $15 million
June 30, 2001........................................... $18 million
September 30, 2001...................................... $22 million
</TABLE>
As of December 31, 1999, no amounts were outstanding under the Facility.
The Term Loans are required to be repaid, beginning on March 31, 2005 in
eight consecutive quarterly installments (the amount of each of the first four
installments, $625,000 and the next four installments, $2,500,000). The
Revolving Loans are required to be repaid beginning on March 31, 2004 in eight
consecutive quarterly installments (the amount of the first four installments,
$1.5 million and the next four installments $1.625 million).
5. LONG-TERM DEBT
The Company may borrow funds as either a base rate loan with an interest
rate of prime plus 3.00% for Term Loans and prime plus 2.75% for a Revolving
Loan or a Eurodollar Loan with an interest rate of the London Interbank Offered
Rate, commonly referred to as LIBOR, plus 4.00% for Term Loans or plus 3.75% for
Revolving Loans. Interest is payable quarterly in arrears. In addition, an
unused facility fee ranging from 0.75% to 1.75% will be charged quarterly on the
average unused portion of the facility. Paribas, as agent, is paid an annual
administrative agency of $30,000.
Upon acceptance and delivery of the Facility, the Company paid financing
costs of $655,000 which are being amortized over the term of the facility. In
addition, the Company issued Paribas detachable warrants to purchase 574,402
shares of non-voting common stock at a par value of $0.001 per share and an
exercise price of $0.01 per share with an exercise period of ten years. The fair
value of the warrants of $570,023 have been determined using the Black-Scholes
Model (Note 8).
The Facility contains covenants customary for transactions similar to the
Facility, including covenants relating to the amounts of indebtedness that the
Company may incur,
F-15
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
5. LONG-TERM DEBT (CONTINUED)
limitations on dividends and distributions on, and redemptions and repurchases
of, capital stock and other similar payments and various financial maintenance
covenants. The Facility also contains covenants relating to the population
covered by the Company's network and number of customers and customary
representations, warranties, indemnities, conditions precedent to borrowing, and
events of default.
Proceeds under the Facility are available to fund capital expenditures
related to the construction of the Company's PCS network for the
Reno/Tahoe/Northern California market, the acquisition of related businesses,
working capital needs of the Company, and customer acquisition costs.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates, assumptions, and methods used to estimate the fair
value of the Company's financial instruments are made in accordance with the
requirements of SFAS No. 107, "Disclosure about Fair Value of Financial
Instruments." The Company has used available information to derive its
estimates. However, because these estimates are made as of a specific point in
time, they are not necessarily indicative of amounts the Company could realize
currently. The use of different assumptions or estimating methods may have a
material effect on the estimated fair value amounts.
<TABLE>
<S> <C>
Cash and cash equivalents.............................. $23,959,190
Accounts payable and accrued expenses.................. 6,124,076
Accrued interest....................................... 10,521
Long-term debt......................................... 5,811,869
</TABLE>
The carrying amounts of cash and cash equivalents, accounts payable and
accrued expenses, and accrued interest are a reasonable estimate of their fair
value due to the short-term nature of the instruments. Long-term debt consists
of the senior subordinated notes.
7. BASIC AND DILUTED NET LOSS PER SHARE
Basic loss per share amounts are computed by dividing the net loss by the
weighted average number of shares of common stock outstanding during the period.
Diluted loss per share is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding during the period plus the
effects of any potentially dilutive securities. In the accompanying statements
of operations, diluted loss per share does not
F-16
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
7. BASIC AND DILUTED NET LOSS PER SHARE (CONTINUED)
include the effects of potentially dilutive securities for all periods presented
as they would have been anti-dilutive in years in which a loss is reported.
The following summarizes the securities outstanding at December 31, 1999
which are excluded from the loss per share calculation as amounts would have an
anti-dilutive effect. Preferred Stock is reflected on an "if-converted" basis.
<TABLE>
<S> <C>
Series A preferred stock............................... 17,008,500
Stock options.......................................... 1,600,000
Warrants............................................... 3,063,477
-----------
Total.............................................. 21,671,977
===========
</TABLE>
8. STOCKHOLDERS' EQUITY
COMMON STOCK
On November 1, 1999, the Company issued 3,417,000 shares of voting common
stock and 16,000,000 shares of non-voting common stock to a group collectively
referred to as the Founders at a par value of $0.001 per share as compensation
for the Founders' efforts prior to that time and for the assignment of the
Sprint PCS Reno/Tahoe agreement. The fair value at the time of issuance was
$1.00 per share. In accordance with Accounting Principles Board No. 25
"Accounting for Stock Issued to Employees", the Company recorded compensation of
$1,394,729 which is presented as equity participation compensation expense in
the Company's Statement of Operations. For stock issued to non-employees the
company recorded a charge to additional paid in capital of $738,760 as the
founders were involved in raising equity capital for the Company.
The holders of voting 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 voting common stock are entitled to receive
ratably such dividend as may be declared by the board of directors out of funds
legally available. Holders of shares of voting common stock have no preemptive,
conversion, redemption, subscription or similar rights. If the Company
liquidates, dissolves, or winds up, the holders of shares of voting 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.
F-17
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
8. STOCKHOLDERS' EQUITY (CONTINUED)
The nonvoting common stock is identical in all respects to the voting common
stock except that holders of shares of nonvoting common stock shall not have the
right to vote on any matters submitted to a vote by the Company's stockholders.
At December 31, 1999 none of the non-voting common stock was vested. Upon
completion of the initial public offering, the Founders Agreement will be
terminated and any remaining non-vested shares of common stock will be
forfeited.
CONVERTIBLE SERIES A PREFERRED STOCK
On September 30, 1999, the Company entered into an escrow agreement with a
group of investors intending to subscribe for and purchase a total of
$17,000,000 of the Company's Series A Preferred Stock. The investors agreed to
deposit its subscription amount in escrow pursuant to which the subscription
payments would be held until the closing of the purchase of the Series A
Preferred.
On November 23, 1999, the Company entered into a Series A Preferred Stock
Agreement (Agreement) for a total of 17,008,500 shares of Series A Preferred
Stock at a purchase price of $1.00 per share. Subject to the terms of the
Agreement, $1,000,000 of Series A Preferred Stock was purchased on November 23,
1999 when the Company had firm commitments for at least $33 million in senior
and subordinated debt financing, (see Note 5) and the balance of $16,008,500 of
Series A Preferred Stock was purchased on December 23, 1999 prior to the
execution of the senior and subordinated debt financing which occurred by
December 31, 1999. Each share of the Series A Preferred Stock is convertible at
any time after the date of issuance into common stock at an initial conversion
price of $1.00 subject to adjustments as defined in the Agreement. In addition,
upon the closing of a qualified initial public offering, as defined in the
Agreement, all outstanding shares of Series A Preferred Stock will automatically
convert into voting common stock at the then effective conversion price.
WARRANTS
At December 31, 1999, the Company had outstanding warrants to purchase
2,489,075 shares of voting common stock and 574,402 shares of non-voting common
stock. The warrants to purchase 2,489,075 shares of voting common stock were
issued to BET Associates in connection with the issuance of the $8.0 million 12%
senior subordinated note. The voting stock warrants contain repurchase
provisions similar to those of the non-voting stock warrants, but the repurchase
provisions will expire upon the completion of an initial public offering. The
warrants to purchase 574,402 shares of non-voting common stock were issued to
Paribas
F-18
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
8. STOCKHOLDERS' EQUITY (CONTINUED)
in connection with the $25.0 million credit facility. All warrants are
exercisable at $0.01 per share and have a ten year life. Holders of the warrants
are entitled to dividends that are paid with respect to the non-voting common
stock even if the warrants have not yet been exercised. Additionally, beginning
on the earlier of the fifth anniversary of the date the warrants were issued or
the date the Company experiences a change in control, the holder of the warrants
may require the Company to repurchase at market value the warrants or any shares
of non-voting common stock that were issued to the holder upon the exercise of
the warrants. The Company also has the option to repurchase all of the warrants
or all of the shares of non-voting common stock issued upon the exercise of the
warrants beginning on the sixth anniversary of the date the warrants were
issued. If the Company exercises this right, it must repurchase the warrants or
shares at a price equal to 120% of the market price of the non-voting common
stock as of the date the Company repurchases the warrants or shares.
The Company's accounting for these warrants at the time of issuance was as
follows:
- The fair market value of the warrants, as determined by using the
Black-Scholes model, were recorded as deferred financing costs and will be
amortized as interest expense over the life of their respective debt which
ranges from six to eight years. The amount charged to interest expense at
December 31, 1999 was $0. The fair market value of the warrants was
$2,758,154 and was determined by using the Black-Scholes model with the
following assumptions:
- risk free interest rate of 6.4%,
- expected dividend yield of 0%,
- expected life of five years, and
- expected volatility of 70%
9. STOCK OPTION PLAN
On November 29, 1999, the Company entered into an employment agreement with
its Chief Executive Officer. Under the employment agreement, the company granted
stock options for 1,275,000 shares of common stock at a purchase price of $1.00
per share which the Company believes was the fair market value of the stock at
that time. The options vest in three equal installments over a period of three
years.
In 1999, the Company granted an aggregate of 325,000 non-qualified options
to three employees pursuant to its 2000 Stock Equity Incentive Plan. These
options have an exercise price of $1.00 per share and vest over four years.
F-19
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
9. STOCK OPTION PLAN (CONTINUED)
In February 2000, the board of directors approved the 2000 Equity Incentive
Plan (the "Plan"). The purpose of the Plan is to attract, retain and reward key
employees, consultants and non-employee directors. A committee consisting of
members from the board of directors administers the Plan. The committee may
grant stock options, stock appreciation rights and other equity-based awards to
eligible persons, as defined in the Plan. The plan authorized up to 2,040,000
shares of common stock for issuance under the Plan and does not include awards
paid in cash.
At December 31, 1999, the following is a summary of the options granted and
outstanding:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
---------- ---------------
<S> <C> <C>
Outstanding at beginning of period -- $ --
Granted 1,600,000 1.00
Exercised -- --
Forfeited -- --
---------- ----------
Outstanding at end of period 1,600,000 $ 1.00
========== ==========
Options exercisable at end of period --
Weighted average fair value of options
granted 596,323
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-
EXERCISE OUTSTANDING AT REMAINING WEIGHTED-AVERAGE EXERCISABLE AT AVERAGE
PRICE DECEMBER 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE
- --------------------- ----------------- ---------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
$1.00 1,600,000 8.9 Years $1.00 -- $1.00
</TABLE>
The Company applies Accounting Principles Board No. 25, "Accounting for
Stock Issued to Employees," in accounting for its stock option grants to
employees and directors. Accordingly, no compensation cost has been recognized
related to such grants in the accompanying Statements of Operations for the
period from inception through December 31, 1999. Had compensation cost for these
grants been determined consistent with Statement of Financial Accounting
Standard No. 123, "Accounting for Stock-Based Compensation," our net
F-20
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
9. STOCK OPTION PLAN (CONTINUED)
loss and basic and diluted loss per share at December 31, 1999 would have been
reduced as indicated in the following pro forma amounts:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Net loss:
As reported $(1,987,091)
Pro forma $(2,040,465)
Basic and diluted loss per share:
As reported $ (0.10)
Pro forma $ (0.10)
</TABLE>
The fair value of all of the four option grants was estimated on the date of
grant using the Black-Scholes model with the following weighted-average
assumptions used for grants:
- weighted-average risk free interest rates ranging from 5.78% to 6.01%,
- expected dividend yields of 0%,
- expected lives ranging from 1.5 years to 2.0 years and
- expected volatility of 70%.
10. INCOME TAXES
Income tax expense (benefit) for the period from inception to December 31,
1999 differed from the amount computed by applying the statutory U.S. Federal
income tax rate of 34% to the loss recorded as a result of the following:
<TABLE>
<S> <C>
Computed "expected" tax expense.......................... $(675,611)
State tax, net of Federal benefit........................ (43,716)
Equity participation compensation expense................ 508,161
Increase in valuation allowance.......................... 211,166
---------
Total income tax expense (benefit)................... $ 0
=========
</TABLE>
Since inception, we have generated losses for both book and tax purposes. We
have not recorded potential income tax benefits that we may receive from our
ability to apply current losses to future years in which we have taxable income.
Under accounting rules, these benefits can only be recorded when it is more
likely than not that these benefits will be realized. Since the Company has a
limited operating history, an assessment cannot be determined.
F-21
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
10. INCOME TAXES (CONTINUED)
At December 31, 1999, we have net operating loss carryforwards for federal
and state income tax purposes totaling approximately $583,332, which will expire
in 2014.
Our net deferred tax asset consists of the following amounts of deferred tax
assets and liabilities as of December 31, 1999:
<TABLE>
<S> <C>
Deferred tax asset....................................... $ 211,166
Less: Valuation allowance for deferred tax assets........ $(211,166)
---------
Net deferred tax asset............................... -0-
=========
</TABLE>
11. COMMITMENTS
(a) CAPITAL EXPENDITURE
The Company expects to incur capital expenditures of approximately $155
million in 2000.
(b) LEASES
The Company is obligated under a month-to-month operating lease agreement
for office space with a 30-day termination notice. In addition, the Company is
obligated under an operating lease agreement for three cell sites. Future
minimum annual lease payments under these operating lease agreements for the
next five years and in the aggregate at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
<S> <C>
2000...................................................... $ 62,880
2001...................................................... 62,880
2002...................................................... 62,880
2003...................................................... 62,880
2004...................................................... 62,880
Thereafter................................................ 628,880
--------
Total future minimum annual lease payments............ $943,280
========
</TABLE>
Rental expense for all operating leases was $10,400 for the period from
inception through December 31, 1999.
F-22
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
11. COMMITMENTS (CONTINUED)
(c) EMPLOYMENT AGREEMENTS
In November 1999, the Company entered into an employment agreement with its
President and Chief Executive Officer. The employment agreement is for a
three-year term and provides for an annual base salary of $200,000, with a
guaranteed annual increase of 5% over the next two years. In addition to his
base salary, the President and Chief Executive Officer is eligible to receive
bonuses in such amounts and at such times as determined by the disinterested
members of the Board of Directors.
Under the employment agreement, the Company granted stock options to the
purchase up to 1,275,000 shares of common stock at a purchase price of $1.00 per
share. The stock options vest in three equal installments over a period of three
years. The employment agreement provides that the President's employment may be
terminated by the Company with or without cause, as defined in the agreement, at
any time or by the President for any reason at any time upon thirty days'
written notice to the Company. If his employment is terminated by the Company
without cause, he is entitled to receive one year's base salary and benefits,
and all his unvested stock options will immediately vest on the date of
termination. If his employment is terminated by the Company for cause, he is not
entitled to any compensation or benefits other than unpaid salary and benefits
and unreimbursed expenses incurred by him through the date of termination. If he
voluntarily terminates his employment, he is entitled to unpaid salary and
benefits and unreimbursed expenses incurred by him through the date of
termination and vested stock options. The employment agreement also provides
that the President will not compete in the business of wireless
telecommunications either directly or indirectly in the Company's present and
future markets and not disclose any of the Company's confidential information
and not solicit any of the Company's customers or employees during his
employment and for a period of one year after his employment is terminated.
For the period from inception through December 31, 1999, the Company
incurred compensation expense under the employment agreement of $19,231. In
addition, the Chief Executive Officer received $200,000 for services rendered
prior to incorporation.
12. DEFERRED FINANCING COSTS
The Company incurred fees totaling $2,129,023 to secure commitments from
lenders for the note and credit facility. The Company has classified these
charges as noncurrent assets and is amortizing these costs using the effective
interest rate method for the issuance of debt, and the credit facility is
amortized on a straight-line basis over the life of the arrangement. As of
December 31, 1999, amortization totaled $18,381 and is included in interest
expense. An additional $1,713,564 was incurred for legal fees and success fees
associated with the sale of
F-23
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
12. DEFERRED FINANCING COSTS (CONTINUED)
preferred stock. The Company has charged these expenses against the proceeds
from the issuance of the preferred stock.
13. RELATED PARTY TRANSACTIONS
In 1999, certain shareholders of the Company provided services in connection
with obtaining, negotiating and closing the preferred stock offering. Placement
fees incurred for those services amounted to $1,515,000.
In 1999, the Company paid the Walter Group, a shareholder approximately
$148,000 for consulting services.
On October 28, 1999, the Company entered into an agreement with a
shareholder, Spectrasite, that owns and operates communications towers. During
1999, no services were provided to the Company.
14. LITIGATION
On March 9, 2000, a former employee filed a lawsuit alleging breach of
employment contract, tortious interference with contract, fraud, constructive
discharge and specific performance of a contract and is seeking actual and
punitive damages aggregating in excess of $20 million. The Company will
vigorously contest these charges. It is management's opinion that it is too
early in this process to determine the ultimate outcome of this matter.
15. SUBSEQUENT EVENTS
In February 2000, the stockholders of the company approved the Board of
Directors decision to change the company's name to UbiquiTel Inc.
The Company intends to file a registration statement for equity financing
through an initial public offering. Donaldson, Lufkin & Jenrette Securities
Corporation is the lead underwriter of this offering and will receive a
customary underwriting fee. The Company plans to utilize the proceeds from the
aforementioned offerings to fund the build-out of its expanded network.
The Company signed an agreement to purchase from Sprint PCS the Spokane,
Washington market's PCS networks and related assets for approximately
$35 million. The Company intends to close this transaction by April 15, 2000.
The acquisition is subject to financing and other contingencies.
F-24
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1999) TO DECEMBER 31,
1999
15. SUBSEQUENT EVENTS (CONTINUED)
On February 22, 2000, the Company received a commitment letter from Paribas
for a $250.0 million senior credit facility. The company intends to close on the
senior credit facility prior to the closing of its initial public offering. In
conjunction with the closing of this facility, the company will pay a success
fee of $1.0 million to a company that is affiliated with a shareholder of the
Company.
On February 24, 2000 the Company secured a commitment from an affiliated
company of Donaldson, Lufkin & Jenrette to provide senior subordinated debt
financing sufficient to generate, at minimum, gross proceeds at issuance of
approximately $125 million.
On February 25, 2000 DLJ Merchant Banking and certain related parties, all
of which are affiliates of Donaldson, Lufkin & Jenrette Securities Corporation,
were issued 2,110,347 shares of preferred stock on February 25, 2000 for an
aggregate purchase price of $25 million (or $11.85 per share). The shares of
preferred stock will be converted automatically into common stock upon the
closing of the initial public offering. In the event the Company does not close
this offering prior to June 30, 2000, DLJ Merchant Banking shall purchase an
additional 11,837,024 shares of preferred stock for an aggregate purchase price
of $100 million (or $8.45 per share).
The Founders Agreement provides that the Founders will receive shares of
common stock to retain their ownership interest in the event the Company issues
additional shares. As a result of the terms of the Founders Agreement, these
founding shareholders were issued an aggregate amount of 331,027 shares of
common stock due to a $25 million equity investment by DLJ Merchant Banking
described above. The Founders Agreement will terminate upon the completion of an
initial public offering.
F-25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of Sprint Spectrum L.P.
We have audited the accompanying statements of assets to be sold of the
Spokane District (as described in NOTE 1), which are wholly owned by Sprint
Spectrum L.P. (the Company), as of December 31, 1999 and 1998 and the related
statements of revenues and expenses for each of the three years in the period
ended December 31, 1999. These statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statements' presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in NOTE 2, the accompanying statements were prepared for
inclusion in the Registration Statement on Form S-1 of UbiquiTel Inc. for
purposes of complying with the rules and regulations of the Securities and
Exchange Commission in lieu of the full financial statements required by
Rule 3-05 of Regulation S-X for the pending transaction between UbiquiTel and
the Company. The statements are not intended to be a complete presentation of
the Spokane District's financial position or results of its operations.
In our opinion, the statements referred to above present fairly, in all
material respects, the assets to be sold of the Spokane District as of
December 31, 1999 and 1998, and the related revenues and expenses for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
February 29, 2000
F-26
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
STATEMENTS OF ASSETS TO BE SOLD
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Assets:
Property, plant and equipment
Network equipment...................................... $29,038,828 $25,246,441
Other.................................................. 231,661 185,586
Construction work in progress.......................... 211,167 349,480
----------- -----------
Total property, plant and equipment...................... 29,481,656 25,781,507
Less: accumulated depreciation......................... 9,785,334 6,314,486
----------- -----------
Net property, plant and equipment........................ 19,696,322 19,467,021
Prepaid lease expense...................................... 87,416 83,767
----------- -----------
Total assets to be sold.................................... $19,783,738 $19,550,788
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-27
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
STATEMENTS OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
Net revenues..................................... $5,624,927 $3,280,648 $ 1,246,181
Expenses:
Cost of services and equipment................. 5,046,416 3,970,423 2,902,605
Selling, general and administrative............ 5,419,104 4,470,494 8,167,807
Depreciation................................... 3,470,848 3,111,511 2,968,406
---------- ---------- -----------
13,936,368 11,552,428 14,038,818
---------- ---------- -----------
Expenses in excess of net revenues............... $8,311,441 $8,271,780 $12,792,637
========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-28
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND STATEMENTS OF REVENUES AND EXPENSES
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. ASSET PURCHASE AGREEMENT
On December 28, 1999, Sprint Spectrum L.P. (the Company) and UbiquiTel Inc.
(UbiquiTel) entered into an Asset Purchase Agreement (the Agreement) whereby the
Company will sell to UbiquiTel certain assets and UbiquiTel will assume certain
leases as stipulated in the Agreement. Under the Agreement, the Company agrees
to sell to UbiquiTel the assets related to its wireless mobile telephone
services in the Spokane, Washington district (the Spokane District), which are
wholly owned by the Company. The assets to be sold to UbiquiTel primarily
consist of property, plant and equipment including network assets and retail
stores located in the Spokane District. Not included in the Agreement are PCS
licenses currently owned by the Company or the existing subscriber base and
related accounts receivable balances, the ownership of which will remain with
the Company. UbiquiTel will assume certain operating leases within the Spokane
District; however, no deferred revenue, commission or other similar liabilities
will be assumed. Under the terms of the Agreement, this transaction is expected
to close on or before April 15, 2000.
Following the close of the pending transaction, UbiquiTel will operate the
Spokane District as a Sprint PCS market through a management agreement with the
Company. Under the terms of this agreement, UbiquiTel will sell wireless mobile
telephone services under the Sprint PCS brand name in exchange for a fee. Also
as part of the agreement, the Company will continue to provide network
monitoring, customer service, billing and collection services to UbiquiTel.
2. BASIS OF PRESENTATION
Historically, financial statements have not been prepared for the Spokane
District as it has no separate legal status or existence. The accompanying
statements of assets to be sold and statements of revenues and expenses of the
Spokane District have been prepared for inclusion in the Registration Statement
on Form S-1 of UbiquiTel for purposes of complying with the rules and
regulations of the Securities and Exchange Commission in lieu of the full
financial statements required by Rule 3-05 of Regulation S-X for the pending
transaction between UbiquiTel and the Company. These statements have been
derived from the historical accounting records of the Company and include
revenues and expenses directly attributable to the Spokane District. Certain
operating expenses that are indirectly attributable to the Spokane District have
been allocated using the methods set forth below. As a result, the statements
may not be indicative of the financial position or operating results of the
Spokane District had it been operated as a separate, stand-alone company.
F-29
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND STATEMENTS OF REVENUES AND EXPENSES
(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. BASIS OF PRESENTATION (CONTINUED)
PROPERTY, PLANT & EQUIPMENT
The property, plant and equipment balances included in the accompanying
statements of assets to be sold are assets specifically identified within the
Spokane District and that are to be purchased by UbiquiTel pursuant to the
Agreement.
REVENUES
The service revenues included in the statements of revenues and expenses are
those specifically related to subscribers of the Spokane District. Allocations
have been made of certain revenue and bad debt accruals, based on average
subscribers of the Spokane District relative to total subscribers of the
Company.
The equipment revenues included in the statements of revenues and expenses
are those specifically related to equipment sales occurring in the Company's
retail stores located in the Spokane District. Also included are revenues from
third-party equipment sales occurring within the Spokane District.
COST OF SERVICES AND EQUIPMENT
The cost of services expense in the statements of revenues and expenses
includes those expenses directly attributable to the Spokane District. In
addition, allocations have been made of cost of services incurred at levels
above the district level. These allocations are based on the Spokane District's
directly attributable cost of services relative to the total Company directly
attributable cost of services.
The cost of equipment included in the statements of revenues and expenses
are those specifically related to equipment sold in the Company's retail stores
located in the Spokane District. Also included is the cost of equipment from
third-party equipment sales occurring within the Spokane District.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Direct selling, general and administrative expenses are those costs that
were incurred as a result of providing wireless mobile telephone services in the
Spokane District and which will no longer be incurred by the Company subsequent
to consummation of the pending transaction with UbiquiTel.
F-30
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND STATEMENTS OF REVENUES AND EXPENSES
(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. BASIS OF PRESENTATION (CONTINUED)
Selling, general and administrative expenses of the Company that are
indirectly associated with the Spokane District's operations were allocated to
the Spokane District's statements of revenues and expenses based on reasonable
allocation methods as discussed below. Management believes these allocation
methodologies are reasonable and represent the most appropriate methods of
determining the expenses of the Spokane District.
Sales and marketing expenses included in allocated selling, general and
administrative expenses represent costs of the Company that have been identified
as indirectly attributable to the Spokane District. Such allocations have been
based on the amount of covered population in the Spokane District relative to
the Company's total covered population.
Included in allocated selling, general and administrative expenses are costs
related to the provisioning of customer care activities. These expenses
represent customer care costs of the Company that have been identified as
indirectly attributable to the Spokane District. Such allocations have been
based on the number of subscribers of the Spokane District relative to the
Company's total subscribers.
DEPRECIATION EXPENSE
The depreciation expense included in the statements of revenues and expenses
is specifically related to the assets identified with the Spokane District which
will be purchased by UbiquiTel pursuant to the Agreement.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes operating revenues as services are rendered or as
equipment is delivered to customers. Operating revenues are recorded net of an
estimate for uncollectible accounts.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The cost of property,
plant and equipment is generally depreciated on a straight-line basis over
estimated economic useful lives. Repairs and maintenance costs are expensed as
incurred.
F-31
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND STATEMENTS OF REVENUES AND EXPENSES
(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
Advertising costs are expensed when the advertisement occurs. Total
advertising expense amounted to $1,034,861 in 1999, $813,563 in 1998 and
$785,492 in 1997.
USE OF ESTIMATES
The statements of assets to be sold and statements of revenues and expenses
are prepared in conformity with accounting principles generally accepted in the
United States. These principles require management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Also, as
discussed in Note 2, the statements of revenues and expenses include allocations
and estimates that are not necessarily indicative of the costs and expenses that
would have resulted if the Spokane District had been operated as a separate
stand-alone company.
4. OPERATING LEASES
The Spokane District's minimum rental commitments at year-end 1999 for all
non-cancelable operating leases, consisting mainly of leases for cell and switch
sites, are as follows:
<TABLE>
<S> <C>
2000.......................................... $ 262,186
2001.......................................... 136,436
2002.......................................... 126,925
2003.......................................... 129,511
2004.......................................... 133,581
Thereafter.................................... 1,816,302
</TABLE>
The table excludes renewal options related to certain cell and switch site
leases. These renewal options generally have five-year terms and may be
exercised from time to time. The Spokane District's gross rental expense totaled
$592,539 in 1999, $588,657 in 1998 and $530,512 in 1997.
F-32
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND STATEMENTS OF REVENUES AND EXPENSES
(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
5. CASH FLOWS
The Spokane District's primary requirements for cash have been to fund
operating losses and capital expenditures associated with the network build-out.
Capital expenditures of the Spokane District were $5,050,843 in 1999, $3,368,870
in 1998 and $19,604,854 in 1997.
6. IMPACT OF YEAR 2000 (UNAUDITED)
During 1999, the Company completed its remediation and testing of systems
related to its Year 2000 readiness. As a result of those efforts, the Company
experienced no significant disruptions in the mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company is not aware of
any material problems resulting from Year 2000 issues, either with its
equipment, its internal systems, or the equipment and services of third parties.
The Company and UbiquiTel will continue to monitor the mission critical computer
applications of the Spokane District and those of the Spokane District's
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
F-33
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 2000
[LOGO] UBIQUITEL INC.
SHARES OF COMMON STOCK
-------------------
PROSPECTUS
-------------------
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
DLJDIRECT INC.
- ---------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the deliver of this prospectus nor any
of the sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or our affairs have not
changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus), all dealers
that effect transactions in these securities may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter in this offering or when selling
previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
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......... $ 39,600
NASD filing fee............................................. 15,500
Nasdaq National Market listing fees......................... 95,000
Printing and engraving expenses............................. 250,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 200,000
Transfer agent and registrar fees........................... 100,000
Miscellaneous expenses...................................... 299,900
----------
Total....................................................... $1,400,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Upon completion of this offering, the Restated Certificate of Incorporation
of UbiquiTel Inc. ("UbiquiTel") will provide that the liability of the directors
and officers of UbiquiTel to UbiquiTel or any of its stockholders for monetary
damages arising from a breach of their fiduciary duty as directors and officers
shall be limited to the fullest extent permitted by the General Corporation Law
of Delaware. This limitation does not apply with respect to any action in which
a director or officer would be liable under Section 174 of the General
Corporation Law of Delaware, nor does it apply with respect to any liability in
which a director or officer:
- breached his duty of loyalty to UbiquiTel 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.
UbiquiTel's bylaws provide that UbiquiTel may 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, whether civil, criminal, administrative
or investigative (other than an action by or in the right of UbiquiTel) by
reason of the fact that he is or was a director,
II-1
<PAGE>
officer, employee, or agent of UbiquiTel, or is or was serving at the request of
UbiquiTel as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), 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 UbiquiTel 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
UbiquiTel 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
respect of any claim, issue or matter as to which such person has been adjudged
to be liable to UbiquiTel unless the court, in its discretion, believes that in
light of all the circumstances indemnification should apply. To the extent that
any present or former director of UbiquiTel has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
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
UbiquiTel signing the registration statement and certain controlling persons of
UbiquiTel against certain liabilities, including those arising under the
Securities Act.
UbiquiTel has purchased directors' and officers' liability insurance
covering its directors and officers in amounts customary for similarly situated
companies.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling UbiquiTel
pursuant to the foregoing provisions, UbiquiTel 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
The information set forth in this Item 15 does not give effect to a
for-one split of UbiquiTel's outstanding common stock to be effected
immediately prior to completion of the
II-2
<PAGE>
offering. Since its inception on September 29, 1999, the Registrant has entered
into agreements to issue the following unregistered securities:
1. 3,417,000 shares of its Voting Common Stock for an aggregate purchase
price of $3,417. The purchasers of the shares and the amount purchased are
listed on the table below.
<TABLE>
<CAPTION>
NAME OF PURCHASER NUMBER OF SHARES
<S> <C>
The Walter Group, Inc............................... 1,281,375
Donald A. Harris.................................... 994,500
James Parsons....................................... 443,700
Paul F. Judge....................................... 401,625
US Bancorp.......................................... 295,800
</TABLE>
2. 16,000,000 shares of its Non-Voting Common Stock subject to forfeiture
under certain events, for an aggregate purchase price of $16,000. The purchasers
of the shares and the amount purchased are listed on the table below.
<TABLE>
<CAPTION>
NAME OF PURCHASER NUMBER OF SHARES
<S> <C>
The Walter Group, Inc............................... 6,000,160
Donald A. Harris.................................... 4,656,640
James Parsons....................................... 2,077,600
Paul F. Judge....................................... 1,880,480
US Bancorp.......................................... 1,385,120
</TABLE>
3. 17,008,500 shares of its Series A Preferred Stock at an aggregate
purchase price of $17,008,500. The purchasers of the shares and the amount
purchased are listed in the table below.
<TABLE>
<CAPTION>
NAME OF PURCHASER NUMBER OF SHARES
<S> <C>
Brookwood UbiquiTel Investors, L.L.C................ 4,668,999
CBT Wireless Investments, L.L.C..................... 2,701,350
New Ventures, L.L.C................................. 2,001,000
Stephen C. Marcus................................... 1,800,900
SpectraSite Communications, Inc..................... 1,666,500
Lancaster Investment Partners....................... 1,000,500
Donald A. Harris.................................... 1,000,500
Porter Partners, L.P................................ 900,450
Ballyshannon Partners, L.P.......................... 500,250
Mark Buechly........................................ 300,150
Barry Porter........................................ 250,125
Richard C. Walling, Jr.............................. 166,750
Robert Berlacher.................................... 50,025
</TABLE>
4. employee stock options to Donald A. Harris to purchase 1,275,000 shares
of Voting Common Stock at $1.00 per share.
II-3
<PAGE>
5. warrants to Paribas North America, Inc. to purchase 574,402 shares of
its Non-Voting Common Stock in connection with a Credit Agreement for a
$25 million line of credit.
6. warrants to BET Associates, L.P. to purchase 2,489,075 shares of its
Voting Common Stock and issuance of 12% Senior Subordinated Notes due 2007 to
BET Associates, L.P. for an aggregate purchase price of $8,000,000.
7. 2,110,347 shares of its Series B Preferred Stock to DLJ Merchant Banking
Partners II, L.P. for an aggregate purchase price of $25,000,000.
8. 331,027 shares of the 16,000,000 shares of Non-Voting Common Stock
originally issued on November 1, 1999, vested. The holders of these shares and
the amount issued to these holders are listed in the table below.
<TABLE>
<CAPTION>
NAME OF PURCHASER NUMBER OF SHARES
<S> <C>
The Walter Group, Inc............................... 124,135
Donald A. Harris.................................... 96,344
James Parsons....................................... 42,984
Paul F. Judge....................................... 38,908
US Bancorp.......................................... 28,656
</TABLE>
None of the foregoing transactions involved any public offering. All sales
were made in reliance on Section 4(2) of the Securities Act, Rule 701
promulgated under the Securities Act and/or Regulation D promulgated under the
Securities Act. These sales were made without general solicitation or
advertising. The recipients in each such transaction represented their intention
to acquire the securities for investment only and not with a view to sell or for
sale in connection with any distribution thereof. All recipients had adequate
access, through their relationship with us, to information about us.
II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1 Restated Certificate of Incorporation of UbiquiTel Inc.
*3.2 Bylaws of UbiquiTel Inc.
*4.1 Specimen Common Stock Certificate.
*5.1 Form of opinion of Greenberg Traurig, LLP, regarding
legality of the Common Stock being issued.
*10.1 Sprint PCS Management Agreement, as amended, dated as of
October 15, 1998 by and between Sprint Spectrum, LP,
WirelessCo, LP and UbiquiTel, LLC.
*10.2 Sprint PCS Services Agreement dated as of October 15, 1998
by and between Sprint Spectrum, LP and UbiquiTel, LLC.
*10.3 Sprint Trademark and Service Mark License Agreement dated as
of October 15, 1998 by and between Sprint Communications
Company, LP and UbiquiTel, LLC.
*10.4 Sprint Spectrum Trademark and Service Mark License Agreement
dated as of October 15, 1998 by and between Sprint Spectrum,
LP and UbiquiTel, LLC.
*10.5 Asset Purchase Agreement dated as of December , 1999
by and between Sprint Spectrum, LP, Sprint Spectrum
Equipment Company, LP, Sprint Spectrum Realty Company, LP,
Cox Communications PCS, LP, Cox PCS Leasing Co., LP, Cox PCS
Assets, LLC and UbiquiTel Holdings, Inc.
*10.6 Registration Rights Agreement made as of November 23, 1999
by and among UbiquiTel Holdings, Inc. and the shareholder
signatories thereto.
*10.7 Amended and Restated Registration Rights Agreement made as
of February 16, 2000 by and among UbiquiTel Holdings, Inc.
and the shareholder signatories thereto.
10.8 Shareholders' Agreement dated as of February 16, 2000 by and
among UbiquiTel Holdings, Inc., DLJ Merchant Banking
Partners II, L.P. and the several shareholders named
therein.
10.9 Stockholders' Voting Agreement dated November 23, 1999 by
and among UbiquiTel Holdings, Inc. and the shareholder
signatories thereto.
10.10 Credit Agreement dated as of December 29, 1999 by and
between UbiquiTel Holdings, Inc., UbiquiTel LLC, the
financial institutions party thereto from time to time and
Paribas, as agent, for a $25,000,000 credit facility.
*10.11 Consent and Agreement dated as of December 28, 1999 by and
between Sprint Spectrum, LP, Sprint Communications Company,
LP, WirelessCo, LP, Cox Communications PCS, LP, Cox PCS
License, LLC and Paribas.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
10.12 Warrant Agreement dated as of December 28, 1999 by and
between UbiquiTel Holdings, Inc. and Paribas North America,
Inc.
10.13 Series A Preferred Stock Purchase Agreement dated as of
November 23, 1999 by and between UbiquiTel Holdings, Inc.,
The Walter Group, Donald A. Harris, Paul F. Judge, James
Parsons, U.S. Bancorp and the individuals listed on
Exhibit A thereto.
*10.14 Purchase Agreement dated as of December 28, 1999 among
UbiquiTel, L.L.C., UbiquiTel Holdings, Inc. and BET
Associates, L.P. relating to $8,000,000 principal amount of
UbiquiTel, L.L.C. 12% Senior Subordinated Notes due 2007 and
Warrants to Purchase 9.75% of the Shares of Common Stock of
UbiquiTel Holding Co.
10.15 Preferred Stock Purchase Agreement dated February 16, 2000
between UbiquiTel Holdings, Inc. and DLJ Merchant Banking
Partners II, L.P.
10.16 Form of 2000 Equity Incentive Plan.
*10.17 Employment Agreement dated as of November 29, 1999 by and
between UbiquiTel Holdings, Inc. and Donald A. Harris.
21.1 Subsidiaries of UbiquiTel Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Greenberg Traurig, P.A. (contained in legal
opinion filed as Exhibit 5.1).
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by Amendment.
(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 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>
The undersigned registrant hereby undertakes that:
(1) The undersigned registrant hereby undertakes to provide the underwriter
at the closing specified in the underwriting agreements, certifcates in
such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(2) 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 UbiquiTel 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.
(3) 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 the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the 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.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, UbiquiTel Inc.
has duly caused this registration statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Bala Cynwyd, State of
Pennsylvania, on the 10th day of March, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
UBIQUITEL INC.
By: /s/ DONALD A. HARRIS
---------------------------------------
Donald A. Harris
President and Chief Executive Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Donald A. Harris and Paul F. Judge his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
II-8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Donald A. Harris Chairman of the Board and Chief March 10, 2000
- --------------------------------- Executive Officer
Donald A. Harris (Principal Executive Officer)
/s/ Paul F. Judge Senior Vice President--Business March 10, 2000
- --------------------------------- Development and Finance
Paul F. Judge (Principal Financial Officer
and Accounting Officer)
/s/ Peter Lucas Director March 10, 2000
- ---------------------------------
Peter Lucas
/s/ Robert Berlacher Director March 10, 2000
- ---------------------------------
Robert Berlacher
/s/ Eve M. Trkla Director March 10, 2000
- ---------------------------------
Eve M. Trkla
/s/ Joseph N. Walter Director March 10, 2000
- ---------------------------------
Joseph N. Walter
</TABLE>
II-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
10.8 Shareholders' Agreement dated as of February 16, 2000 by and
among UbiquiTel Holdings, Inc., DLJ Merchant Banking
Partners II, L.P. and the several shareholders named
therein.
10.9 Stockholders' Voting Agreement dated November 23, 1999 by
and among UbiquiTel Holdings, Inc. and the shareholder
signatories thereto.
10.10 Credit Agreement dated as of December 29, 1999 by and
between UbiquiTel Holdings, Inc., UbiquiTel LLC, the
financial institutions party thereto from time to time and
Paribas, as agent, for a $25,000,000 credit facility.
10.12 Warrant Agreement dated as of December 28, 1999 by and
between UbiquiTel Holdings, Inc. and Paribas North America,
Inc.
10.13 Series A Preferred Stock Purchase Agreement dated as of
November 23, 1999 by and between UbiquiTel Holdings, Inc.,
The Walter Group, Donald A. Harris, Paul F. Judge, James
Parsons, U.S. Bancorp and the individuals listed on
Exhibit A thereto.
10.15 Preferred Stock Purchase Agreement dated February 16, 2000
between UbiquiTel Holdings, Inc. and DLJ Merchant Banking
Partners II, L.P.
10.16 Form of 2000 Equity Incentive Plan.
21.1 Subsidiaries of UbiquiTel Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule.
</TABLE>
<PAGE>
EXHIBIT 10.8
SHAREHOLDERS' AGREEMENT
by and among
UBIQUITEL HOLDINGS, INC.
DLJ MERCHANT BANKING PARTNERS II, L.P.
and
THE SEVERAL SHAREHOLDERS NAMED IN SCHEDULE I
dated as of February 16, 2000
<PAGE>
EXHIBIT 10.8
TABLE OF CONTENTS
SECTION 1. CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. METHODOLOGY FOR CALCULATIONS.. . . . . . . . . . . . . . . . . . . 5
SECTION 3. CORPORATE GOVERNANCE.. . . . . . . . . . . . . . . . . . . . . . . 5
3.5. BOARD OF DIRECTORS.. . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. VACANCIES; REMOVAL.. . . . . . . . . . . . . . . . . . . . . . . . 5
3.3. QUORUM.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. COMMITTEES OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . 6
3.5. DIRECTORS' INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . 7
3.6. NO EXPANSION OF DUTIES . . . . . . . . . . . . . . . . . . . . . . 7
3.7. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8. APPOINTMENT OF SENIOR OFFICERS . . . . . . . . . . . . . . . . . . 8
SECTION 4. [Intentionally Deleted]. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5. TAG-ALONG RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6. PREEMPTIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 7. PUT RIGHTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 8. RIGHTS OF FIRST OFFER. . . . . . . . . . . . . . . . . . . . . . .11
SECTION 9. BRING-ALONG RIGHTS.. . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 10. [Intentionally Deleted]. . . . . . . . . . . . . . . . . . . . . .15
SECTION 11. REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . . . .15
SECTION 12. CERTAIN COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . .16
12.1. PROTECTION OF INVESTORS. . . . . . . . . . . . . . . . . . . . . .16
12.2. ADDITIONAL ISSUANCES . . . . . . . . . . . . . . . . . . . . . . .16
12.3. ACCESS TO RECORDS. . . . . . . . . . . . . . . . . . . . . . . . .16
12.4. FINANCIAL REPORTS. . . . . . . . . . . . . . . . . . . . . . . . .16
12.5. SYSTEM OF ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . .18
12.6. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . .18
12.7. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
12.8. LICENSES AND PERMITS . . . . . . . . . . . . . . . . . . . . . . .18
12.9. DISCLOSURE OF INVESTMENT . . . . . . . . . . . . . . . . . . . . .18
12.10. UNDERWRITTEN OFFERING-RELATED LOCK-UP OF SHARES. . . . . . . . . .19
SECTION 13. RESERVATION OF COMMON STOCK; CONVERSION. . . . . . . . . . . . . .19
SECTION 14. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 15. SPECIFIC PERFORMANCE; INJUNCTION.. . . . . . . . . . . . . . . . .20
SECTION 16. NO INCONSISTENT AGREEMENTS . . . . . . . . . . . . . . . . . . . .20
SECTION 17. FURTHER ASSURANCES.. . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 18. DURATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 19. LEGENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 20. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 21. GOVERNING LAW, WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . .22
SECTION 22. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . .22
SECTION 23. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 24. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
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SECTION 25. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 26. NOUNS AND PRONOUNS . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 27. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 28. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 29. NO PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . .24
SCHEDULE I - List of Shareholders
SCHEDULE II - Security holdings of each Shareholder
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EXHIBIT 10.8
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (this "AGREEMENT"), dated as of
February 16, 2000, by and among UBIQUITEL HOLDINGS, INC., a Delaware corporation
(the "COMPANY"), DLJ MERCHANT BANKING PARTNERS II, L.P., a Delaware limited
partnership ("DLJ" and, together with its permitted assigns, the "INVESTORS"),
and the signatories listed on SCHEDULE I hereto.
WITNESSETH:
WHEREAS, the Company and DLJ are parties to that certain
Preferred Stock Purchase Agreement, dated as of February 16, 2000 (the
"PURCHASE AGREEMENT"), pursuant to which the Company has issued to DLJ, and
DLJ has purchased from the Company, shares of a newly created class of 7%
Senior Pay-in-Kind Convertible Preferred Stock (the "PREFERRED STOCK"); and
WHEREAS, the Purchase Agreement contemplates that the parties
hereto will enter into this Agreement and the parties hereto deem it to be in
their best interests to establish and set forth their agreement with respect to
certain rights and obligations associated with ownership of Shares (as defined
below).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. CERTAIN DEFINITIONS.
(a) As used herein, the following terms shall have the
following meanings:
"AFFILIATE" shall mean (i) with respect to any Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, or (ii) with respect to any
individual, shall also mean the spouse, child (including a stepchild or an
adopted child), grandchildren, parent, brother, sister or other BONA FIDE estate
planning recipient thereof or any spouse of any of the foregoing, and each trust
created for the exclusive benefit of any one or more of them. Notwithstanding
the foregoing, neither the Company nor any Person controlled by the Company
shall be deemed to be an Affiliate of any Shareholder for purposes of this
Agreement.
"BOARD" shall mean the Board of Directors of the Company.
"CAUSE" shall mean, with respect to any Senior Officer, such
Senior Officer's:
(i) conviction of, or plea of guilty or nolo contendre
to, any felony or any crime involving fraud, dishonesty or moral turpitude;
(ii) gross negligence or willful misconduct that is
likely to bring the reputation of the Company into disrepute;
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(iii) drug or alcohol abuse;
(iv) fraud, misappropriation, embezzlement, or other act
of material misconduct against the Company or any of its Affiliates;
(v) failure to follow substantive written directions or
resolutions of the Board;
(vi) willful and knowing violation of any rules or
regulations of any government or regulatory authority; or
(vii) substantial breach of any fiduciary duty owed to the
Company.
"CLOSING DATE" shall mean February 24, 2000.
"COMMON STOCK" shall mean any common stock of the Company of any
class or series whether now or hereafter authorized, and any stock into which
such common stock may be exchanged, reclassified, recapitalized, converted or
otherwise.
"COMMON STOCK EQUIVALENTS" shall mean all options, warrants and
other securities and obligations convertible into, or exchangeable or
exercisable for, at any time or upon the occurrence of any event or contingency
and without regard to any vesting or other conditions to which such securities
may be subject, shares of Common Stock.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934,
as amended.
"GROUP" shall mean two or more Persons who agree to act together
for the purpose of acquiring, holding, voting or disposing of Shares.
"IPO" shall mean BONA FIDE underwritten public offering of Common
Stock in a Public Sale pursuant to an effective registration statement filed
under the Securities Act.
"KEY SHAREHOLDERS" shall mean and include any person who is (i) a
holder of Shares, and (ii) is (x) a director (other than an Investor Designee),
or (y) a Senior Officer or (z) an employee or consultant of the Company or a
Subsidiary, who acquires from the Company at least one-half of one percent of
Shares in the aggregate of the then outstanding Shares (on either a primary or
fully diluted basis).
"MAJORITY OF INVESTORS" shall mean, at any time of determination,
Investors holding a majority of all Shares held at that time by all Investors.
"NON-INVESTOR SHAREHOLDER" shall mean a Shareholder who is not
an Investor.
"OTHER SHAREHOLDERS" shall mean, in connection with any
transaction involving a Selling Shareholder, the Shareholders other than the
Selling Shareholder.
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"PERSON" shall mean any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, other entity or government or any
agency or political subdivisions thereof.
"PRIVATE SALE" shall mean a Sale that is not a Public Sale.
"PUBLIC SALE" shall mean a Sale (i) pursuant to a BONA FIDE
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act or (ii) pursuant to Rule 144 under the Securities
Act.
"QUALIFIED IPO" shall mean an IPO (i) resulting in at least
$50,000,000 of gross aggregate proceeds to the Company before deducting
underwriting discounts and commissions and offering expenses, and (ii) upon
consummation of which the Company's Common Stock is listed on a national
securities exchange in the United States or the Nasdaq National Market.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELL" shall mean, as to any Shares, to sell, or in any other way
directly or indirectly transfer, assign, distribute, pledge, encumber or
otherwise dispose of, either voluntarily or involuntarily, including the
assignment or transfer of voting rights attaching to such Shares (if any); the
terms Sale, Selling and Sold shall have meanings correlative to the foregoing.
"SELLING SHAREHOLDERS" shall mean any Shareholders who Sell or
propose to Sell any Shares of the Company.
"SENIOR OFFICER" shall mean any of the individuals who hold any of
the following positions or their functional equivalents irrespective of actual
title held in the Company: (A) Chairman; (B) Vice-Chairman; (C) Chief Executive
Officer; (D) President; (E) Chief Financial Officer; (F) Chief Operating
Officer; and (G) Executive Vice President.
"SHAREHOLDERS" shall mean the parties to this Agreement (other
than the Company) and any other Person who executes, and agrees to be bound by
the terms of, this Agreement.
"SHARES" shall mean any shares of (i) Common Stock or (ii) Common
Stock Equivalents, in each case, whether owned or outstanding on the date hereof
or hereafter.
"SUBSIDIARY" shall mean with respect to the Company, any company,
partnership or other entity (i) of which at least a majority of the shares of
capital stock or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other similar managing body of such
company, partnership or other entity are at the time owned or controlled,
directly or indirectly, by the Company or (ii) the management of which is
otherwise controlled, directly or indirectly, through one or more intermediaries
by the Company.
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(b) Each of the following terms is defined in the Section set
forth opposite such term:
TERM SECTION
All or Nothing Sale 8(a)
Buyer 9(a)
Commission 12.4(b)
Compensation Committee 3.4(a)
Competing Businesses 3.6
Confidants 14(a)
Confidential Information 14(a)
Equity Security 6(a)
Exempt Securities 6(d)
Exit Sale 9(a)
First Offer Shares 8(b)
Investor Designee 3.1(c)
Issuance 6(a)
Issue 6(a)
Litigation 22
Management Letter 12.4(b)
Material Adverse Effect 12.4(g)
Offered Securities 6(a)
Oversubscribed Shareholder 8(b)
Permitted Nominee 8(a)
Preemptive Holder 6(a)
Preemptive Offer 6(a)
Proportionate Percentage 8(b)
Pro Rate Share 6(a)
Put 7(a)
Put Price 7(a)
Quarterly Financials 12.4(b)
Refused Shares 8(b)
Remaining Shares 8(b)
Sale Period 8(c)
Section 5 Acceptance Period 5(a)(i)
Section 5 Notice 5(a)(i)
Section 5 Offer 5(a)(i)
Section 5 Purchaser 5(a)(i)
Section 5 Seller 5(a)(i)
Section 6 Notice of Acceptance 6(b)
Section 6 Offer Notice 6(a)
Section 8(a) Acceptance Notice 8(a)
Section 8(a) Acceptance Period 8(a)
Section 8(b) Acceptance Period 8(b)
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Section 8 Offer 8(a)
Section 8 Offer Notice 8(a)
Section 9 Closing Date 9(b)
Section 9 Notice 9(a)
Subject Shares 8(a)
METHODOLOGY FOR CALCULATIONS. For purposes of this Agreement, the
Sale of shares of a Common Stock Equivalent shall be treated as the Sale of the
shares of Common Stock into which such shares of the Common Stock Equivalent can
be converted, exchanged or exercised. Except as otherwise provided in this
Agreement, for purposes of all calculations under this Agreement (including,
without limitation, calculations to determine the ownership of Common Stock of
any Shareholder), all shares of Preferred Stock, but no other Common Stock
Equivalents, shall be treated as having been converted, exchanged or exercised
into or for shares of Common Stock.
SECTION 3. CORPORATE GOVERNANCE.
3.1. BOARD OF DIRECTORS.
(a) The Board shall have overall responsibility for managing
and supervising the management of the business and affairs of the Company, and
the power and authority of the directors shall be subject only to such
restrictions as are imposed by this Agreement and by applicable law.
(b) The maximum number of members of the Board shall be six.
(c) The Majority of Investors shall have the right to nominate
one person (the "INVESTOR DESIGNEE") to serve as a director on the Board. The
Parties to this Agreement agree to take any and all action as may be necessary
to elect the Investor Designee to the Board as of the date hereof.
(d) At each meeting of Shareholders at which the election of
members of the Board is on the agenda, the Company shall recommend to
Shareholders the election of the Investor Designee as a director and each
Shareholder shall vote all of the voting securities of the Company over which
such Person has voting control so as to effect the provisions of this Section 3.
3.2. VACANCIES; REMOVAL.
(a) Subject to paragraph (b) of this Section 3.2, each director
of the Company shall hold office until his or her death or resignation or until
his or her successor shall have been duly elected and qualified. If the
Investor Designee shall cease to serve as a director of the Company for any
reason, the vacancy resulting thereby shall be filled by another director
nominated by the Majority of Investors.
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(b) Each Shareholder in its capacity as a holder of Shares
agrees that it shall not vote in favor of a resolution in respect of the removal
of an Investor Designee unless that resolution has been put forward by an
Investor, and the removal of that director has been recommended by the Majority
of Investors. Any Investor shall have the right to call a meeting of
Shareholders to put forward a resolution of the Shareholders removing any
director designated by it, with or without cause, at any time.
3.3. QUORUM.
(a) Subject to paragraphs (b) and (c) below, a quorum for
meetings of the Board shall be a majority of the total of the whole Board of
which one shall be the Investor Designee.
(b) If at a meeting of directors a quorum is not present, the
directors may adjourn the meeting to a fixed time and place (provided they shall
give written notice of such time and place to each director not in attendance).
At the meeting immediately following the adjourned meeting, the directors
present at such meeting shall constitute a quorum; PROVIDED, HOWEVER, that
unless a full quorum is present as provided in paragraph (a) above, the
directors present at such meeting may not transact any business except as
specifically set forth in the notice of meeting.
(c) The Company agrees that (i) each director shall be provided
written notice of the meetings of the Board, including adjourned meetings, at
least 48 hours before such meetings, unless such notice is waived in any manner,
with attendance at such meetings constituting valid waiver (other than
attendance for the express purpose of objecting to the manner in which the
meeting was called), and (ii) the Investor Designee shall be provided with an
opportunity to participate in each meeting of the Board by means of a conference
telephone or similar communications equipment.
3.4. COMMITTEES OF THE COMPANY.
(a) On or before the date hereof, the Board shall establish a
compensation committee (the "COMPENSATION COMMITTEE") comprised of three
directors, one of whom shall be the Investor Designee as long as an Investor
Designee continues to serve on the Board, and two of whom shall be designated by
the Company, and which committee will have the exclusive authority to make
recommendations to the Board with respect to all aspects of compensation and
other benefits, including stock options or other equity based compensation, of
the Senior Officers of the Company.
(b) Without limiting paragraphs (a) or (b) above, the Company
shall, at the request of any Investor, cause the Investor Designee to be
appointed or elected in each case to each of the other committees of the Board.
If any director serving on any committee shall cease to serve as a director of
the Company for any reason or otherwise is unable to fulfill his or her duties
on any such committee, he or she shall be succeeded by another director
designated in accordance with the provisions of Section 3.1 by the party
initially designating the director.
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3.5. DIRECTORS' INDEMNIFICATION.
(a) The Company shall obtain by March 31, 2000 and cause to be
maintained in effect, with financially sound insurers, a policy of directors'
and officers' liability insurance in an amount of at least $5,000,000 and upon
such terms as are reasonably acceptable to the Majority of Investors.
(b) The Company's Certificate of Incorporation, or By-Laws, or
both, shall to the fullest extent permitted by law provide for indemnification
of, and advancement of expenses to, and limitation of the personal liability of,
the directors of the Company or such other person or persons, if any, who,
pursuant to a provision of such Certificate of Incorporation, exercise or
perform any of the powers or duties otherwise conferred or imposed upon such
directors, which provisions shall not be amended, repealed or otherwise modified
in any manner adverse to the directors until at least six years following the
date that the Investor is no longer entitled to designate directors pursuant to
this Section 3.
NO EXPANSION OF DUTIES. The parties acknowledge that the
Investors and their Affiliates have investments in other businesses similar to
and which may compete with the Company's business ("COMPETING BUSINESSES") and
reserve the right to make additional investments in other Competing Businesses
independent of their investments in the Company. By virtue of the Investors
holding Shares or by having persons designated by or affiliated with the
Investors serving on the Board or any Subsidiary's Board of Directors (or the
functional equivalent thereof in the case of non-corporate Subsidiaries) or
otherwise, no Investor or any of its Affiliates shall have any obligation to the
Company, any Subsidiary or any holder of Shares to refrain from competing with
the Company or any Subsidiary, making investments in Competing Businesses, or
otherwise engaging in any commercial activity, and none of the Company, any
Subsidiary or any holder of Shares (other than such Investor) shall have any
right with respect to any such investments or activities undertaken by such
Investor. Without limitation of the foregoing, the Investors and their
Affiliates may engage in or possess an interest in other business ventures of
any nature or description, independently or with others, similar or dissimilar
to the business of the Company or any Subsidiary, and none of the Company, any
Subsidiary or any holder of Shares (other than the Investors) shall have any
rights or expectancy by virtue of the Investors' relationships with the Company,
any Subsidiary, this Agreement or otherwise in and to such independent ventures
or the income of profits derived therefrom; and the pursuit of any such venture,
even if such investment is in a Competing Business, shall not be deemed wrongful
or improper. None of the Investors nor any of their Affiliates shall be
obligated to present any particular investment opportunity to the Company or any
Subsidiary even if such opportunity is of a character that, if presented to the
Company or a Subsidiary, could be taken by the Company or such Subsidiary, and
the Investors and their Affiliates shall continue to have the right to take for
their own respective account or to recommend to others any such particular
investment opportunity. Notwithstanding the foregoing, the Investors agree to
keep confidential any Confidential Information (as defined herein) in accordance
with Section 14 hereof.
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EXPENSES. The Company shall pay all reasonable travel expenses
and other out-of-pocket disbursements incurred by the directors to attend
meetings of the Board, or any Subsidiary board of directors or of any committees
thereof.
APPOINTMENT OF SENIOR OFFICERS. The Board shall have the sole and
absolute authority to elect, appoint or hire any Senior Officer of the Company.
SECTION 4. [Intentionally Deleted]
TAG-ALONG RIGHTS. Each Shareholder shall not, whether acting
alone or in concert with any Other Shareholders, in any transaction or series of
transactions, Sell any Shares to another Person or Group (other than to an
Investor), except in accordance with the following procedures:
(a) Any Shareholder or Shareholders proposing to Sell Shares
(for purposes of this Section, the "SECTION 5 SELLER") shall first deliver to
each Other Shareholder a written notice (the "SECTION 5 NOTICE"), which shall
specifically identify the proposed transferee (the "SECTION 5 PURCHASER"), the
amount and type of Shares proposed to be sold, the purchase price therefor, and
a summary of the other material terms and conditions of the proposed sale, and
shall contain an offer (the "SECTION 5 OFFER") by the Section 5 Purchaser to
each Other Shareholder, which shall be irrevocable for a period of ten days
after the delivery thereof (the "SECTION 5 ACCEPTANCE PERIOD") (and, to the
extent the Section 5 Offer is accepted during such ten day period, until the
closing of the Sale contemplated by the Section 5 Offer), to purchase an amount
of Shares of such Other Shareholder at the same price per share (and, in the
case of Common Stock Equivalents, such price per share multiplied by the number
of shares of Common Stock issuable upon the conversion, exchange or exercise of
such Common Stock Equivalent, subject to reduction, if appropriate, for the
amount per share of the exercise or purchase price (if any) to be paid by the
holder of such Common Stock Equivalent) to be paid to, and upon the same terms
and conditions as, the Section 5 Seller. A copy of the Section 5 Notice shall
promptly be sent to the Company. Notice of an Other Shareholder's intention to
accept a Section 5 Offer, in whole or in part, shall be evidenced by a writing
signed by such Other Shareholder and delivered to the Section 5 Purchaser as
specified in the Section 5 Notice and the Company prior to the end of the
Section 5 Acceptance Period, setting forth the number of Shares that such Other
Shareholder elects to Sell; PROVIDED, HOWEVER, that such Other Shareholder may
only sell up to that number of Shares (calculated in accordance with Section 2)
as shall equal the product of (x) a fraction, the numerator of which is the
number of Shares owned by the Other Shareholder as of the date of such proposed
sale and the denominator of which is the aggregate number of outstanding Shares
as of the date of such proposed sale, multiplied by (y) the aggregate number of
Shares proposed to be sold by the Section 5 Seller. The number of shares
proposed to be sold by the Section 5 Seller shall be reduced if and to the
extent necessary to provide for such sale of Shares by such Other Shareholders
electing to exercise their right to Sell Shares under this Section 5. If
effective acceptance by any Other Shareholders has been received pursuant to
this paragraph (a), then the Selling Shareholder shall not consummate such Sale
of Shares without participation of such Other Shareholders.
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(b) All Sales of Shares to the Section 5 Purchaser shall be
consummated contemporaneously at the offices of the Company on a mutually
satisfactory business day as soon as practicable, but in no event more than 15
days after the expiration of the Section 5 Acceptance Period, or, if later, the
fifth business day following the receipt of all regulatory approvals, if any
(including, without limitation, the expiration or termination of all waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, applicable to such Sales). The delivery of certificates or other
instruments evidencing such Shares duly endorsed for transfer shall be made on
such date against payment of the purchase price for such Shares.
(c) Notwithstanding the foregoing, the provisions of this
Section 5 shall not apply to sales or other transfers of Shares by a Shareholder
to its partners, stockholders, members, immediate family members, trusts for the
benefit of any of the foregoing, or any affiliate of such Shareholder.
SECTION 6. PREEMPTIVE RIGHTS.
(a) Except for Exempt Securities (as defined below), the
Company shall not issue, sell or exchange, or agree to issue, sell or exchange
(collectively, "ISSUE," and any issuance, sale or exchange resulting therefrom,
an "ISSUANCE") (i) any of the Company's capital stock, (ii) any Common Stock
Equivalent or (iii) any other equity security of the Company, including any
rights to subscribe for, purchase or otherwise acquire any capital stock or
other equity security of the Company (collectively, an "EQUITY SECURITY")
unless, in each case, the Company shall have first given written notice (the
"SECTION 6 OFFER NOTICE") to each Investor (a "PREEMPTIVE HOLDER") that shall
(a) state the Company's intention to sell Equity Securities, the amount to be
issued, sold or exchanged, the terms of such securities, the purchase price
therefor and a summary of the other material terms of the proposed Issuance and
(b) offer (a "PREEMPTIVE OFFER") to Issue to the Preemptive Holder such
Preemptive Holder's Pro Rata Share (as defined below) of such securities (with
respect to the Preemptive Holder, the "OFFERED SECURITIES") upon the terms and
subject to the conditions set forth in the Section 6 Offer Notice, which
Preemptive Offer by its terms shall remain open for a period of 15 days from the
date it is delivered by the Company to the Preemptive Holder (and, to the extent
the Preemptive Offer is accepted during such 15 day period, until the closing of
the Sales contemplated by the Preemptive Offer). "PRO RATA SHARE," for purposes
of this Section, shall mean the quotient obtained by dividing (i) the number of
Shares owned by that Preemptive Holder on the date of the Preemptive Offer, BY
(ii) the total number of Shares outstanding on the date of the Preemptive Offer.
(b) Notice of a Preemptive Holder's intention to accept a
Preemptive Offer, in whole or in part, shall be evidenced by a writing signed by
the Preemptive Holder and delivered to the Company prior to the end of the 15
day period of such Preemptive Offer (each, a "SECTION 6 NOTICE OF ACCEPTANCE"),
setting forth such portion of the Offered Securities that the Preemptive Holder
elects to purchase.
(c) (i) In the event that a Section 6 Notice of Acceptance
is not given by a Preemptive Holder accepting all of its Offered Securities, the
Company shall have 30 days
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following the earlier of (A) delivery of the Section 6 Notice of Acceptance
and (B) the expiration of the 15 day period referred to in clause (b) above
if no Section 6 Notice of Acceptance is delivered, to Issue all or any part
of such remaining Offered Securities not covered by the Section 6 Notice of
Acceptance to any other Person or Persons, but only upon terms and
conditions, including, without limitation, per Share price, payment terms and
dividend payment rates, interest rates, conversion ratios or similar terms,
if any, which are no more favorable, in the aggregate, to such other Person
or Persons or less favorable to the Company than those set forth in the
Preemptive Offer.
(ii) If the Company does not consummate the Issuance of
all or part of the remaining Offered Securities to such other Person or Persons
within the 30 day period referred to in clause (c) above, the right provided
hereunder shall be deemed to be revived and such securities shall not be offered
unless first reoffered to the Preemptive Holders in accordance with this Section
6.
(iii) The purchase by a Preemptive Holder of any Offered
Securities is subject in all cases to the execution and delivery by the Company
and such Preemptive Holder of a purchase agreement relating to such Offered
Securities in form and substance similar in all material respects to the extent
applicable to that executed and delivered between the Company and such other
persons. All Issuances of Shares to the Preemptive Holders pursuant to this
Section 6 shall be consummated contemporaneously at the offices of the Company
(or such other place as is mutually agreed upon by the parties) on the later of
(A) a business day not less than 15 or more than 60 days after the end of the 15
day period referred to in clause (b) above, and (B) the fifth business day
following the receipt of all regulatory or third party consents and approvals,
if any, applicable to such Sales, or at such other time and/or place as the
parties to such Sales may agree. The delivery of certificates or other
instruments evidencing such Shares duly endorsed for transfer shall be made on
such date against payment of the purchase price for such Shares.
(d) As used herein, "EXEMPT SECURITIES" shall mean: (i) any
Equity Securities issuable or issued to employees, directors and consultants of
the Company pursuant to any employee benefit plans, and which issuances have
been approved in accordance with Section 10, and where the primary purpose of
such issuance is not to raise additional equity capital for the Company; (ii)
Equity Securities issued or issuable as direct consideration for the acquisition
by the Company of another business entity or in connection with a merger of any
business entity with or into the Company; or (iii) the issuance of any Common
Stock upon conversion, exercise or exchange of any Common Stock Equivalent
outstanding on the Closing Date.
SECTION 7. PUT RIGHTS.
(a) In the event that, at any time following the fifth
anniversary of the Closing Date, the Company has not completed a Qualified IPO,
each Investor may, by written notice given to the Company, elect to cause the
Company to acquire from it all of the securities (the "PUT") held by it against
payment by the Company of the purchase price therefor (the "PUT PRICE"), which
Put Price per share of Preferred Stock shall be equal to the Liquidation
Preference
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(as defined in the Certificate of Designations); PROVIDED that, for purposes
of calculation the Liquidation Preference, (i) accreted and unpaid dividends
on the Preferred Stock shall be calculated through and including the date on
which the Company pays the Put Price pursuant hereto, and (ii) the amount
that would have been paid to the holders of the Preferred Stock in a
liquidation, dissolution or winding up of the Company if such Preferred Stock
had been converted in full into Common Stock shall be determined by an
investment banking firm of nationally recognized standing selected by the
Majority of Investors. Such investment banking firm shall have 30 days to
make such determination. In reaching such determination, such investment
banking firm shall base its appraisal solely upon the value of the entire
common equity (on a fully diluted basis) of the Company as of the date of
such determination and as an ongoing business (without giving effect to any
discount relating to the fact that such shares are not publicly tradeable),
multiplied by the percentage of the entire common equity of the Company
represented by the shares to be acquired by it upon exercise of the Put.
Upon receipt of such valuation, the Company shall have 20 days to object to
such valuation by providing notice of such objection to the Investor. If the
Company shall so object, the Company shall have the right to engage an
investment banking firm of nationally recognized standing to perform a
valuation of such shares on the basis described above. Such valuation shall
be completed within 30 days after receipt of such notice by the Company. If,
upon completion of such valuation by the second investment banking firm, the
two investment banking firms are able to agree upon a valuation, such
agreed-upon value shall be utilized for purposes of determining the
Liquidation Preference. If, at the expiration of such 30-day period, the two
investment banking firms are unable to agree upon a valuation, then the
Company and the Majority of Investors shall engage a third investment banking
firm of nationally recognized standing, who shall perform a valuation of such
shares on the basis described above and shall, within a period of 30 days
after the date of its engagement, select the valuation determined by either
the investment banking firm engaged by the Company or the investment banking
firm engaged by the Investors, and such valuation shall be utilized for
purposes of determining the Liquidation Preference. Any and all expenses
incurred as a result of such evaluations shall be borne by the Company.
(b) Notwithstanding paragraph (a) of this Section 7, if the
exercise of the Put would cause a default under any of the Company's bank
financing documents, credit agreements or other debt instruments, the Investor
shall not have the Put right described in Section 7(a) above, and in lieu
thereof the Board shall (i) as promptly as possible, market the Company with a
view towards the reorganization or acquisition of the Company in a transaction
that would allow the Investor to exercise the Put, and (ii) use its best
efforts, consistent with its fiduciary duty, to consummate such a transaction as
promptly as possible.
RIGHTS OF FIRST OFFER. Each Shareholder shall not Sell any Shares
to another Person or Group, except in accordance with the following procedures:
(a) The Selling Shareholder shall first deliver to the Company
and each of the Other Shareholders a written notice (a "SECTION 8 OFFER
NOTICE"), which shall (i) state the Selling Shareholder's intention to sell
Shares to one or more Persons (with no obligation to identify or theretofore
have identified the name of such Person or Persons or to have negotiated a
transaction with respect to the Sale of such Shares), the amount and type of
Shares to be sold (the "SUBJECT
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SHARES"), the purchase price therefor and a summary of the other material
terms of the proposed Sale, and (ii) offer the Company and the Other
Shareholders the option to acquire all or a portion of such Subject Shares
upon the same terms and subject to the same conditions of the proposed Sale
as set forth in the Section 8 Offer Notice (the "SECTION 8 OFFER"), PROVIDED
that such Section 8 Offer may require that it must be accepted by the Company
and the Other Shareholders on an all or nothing basis (an "ALL OR NOTHING
SALE"). The Section 8 Offer shall remain open and irrevocable for the
periods set forth below (and, to the extent the Section 8 Offer is accepted
during such periods, until the consummation of the Sale contemplated by the
Section 8 Offer). The Company shall have the right and option, but not the
obligation, for a period of 30 days after delivery of the Section 8 Offer
Notice (the "SECTION 8(a) ACCEPTANCE PERIOD"), to accept all or any part of
the Subject Shares at the purchase price and on the terms stated in the
Section 8 Offer Notice on its own behalf or on behalf of a nominee of the
Company that has been approved for such purposes in writing by the Majority
of Investors (a "PERMITTED NOMINEE"); PROVIDED, HOWEVER, that, if the Section
8 Offer contemplates an All or Nothing Sale and only a part of the Subject
Shares is accepted by the Company (or its Permitted Nominee) during the
Section 8(a) Acceptance Period, such acceptance shall be subject to the
acceptance of the Other Shareholders, pursuant to Section 8(b), of the
remaining Subject Shares. Notice of the Company's intention to accept a
Section 8 Offer, in whole or in part, shall be evidenced by a writing signed
by the Company (the "SECTION 8(a) ACCEPTANCE NOTICE") and delivered to the
Selling Shareholder and Other Shareholders prior to the end of the Section 8
Acceptance Period, setting forth the number and type of Shares that the
Company elects to acquire.
(b) If the Company or its Permitted Nominee, as the case may
be, (i) shall fail to accept all of the Subject Shares offered for sale pursuant
to the Section 8 Offer, (ii) shall reject in writing the Section 8 Offer, or
(iii) shall fail to respond to a Section 8 Offer Notice prior to the expiration
of the Section 8(a) Acceptance Period, then, upon the earlier of the expiration
of the Section 8(a) Acceptance Period, the giving of the Section 8(a) Acceptance
Notice and the giving of written notice of rejection by the Company, each Other
Shareholder shall have the right and option, for a period of 15 days thereafter
(the "SECTION 8(b) ACCEPTANCE PERIOD"), to accept all or any part of the Subject
Shares so offered and not accepted by the Company or its Permitted Nominee, as
the case may be (the "REFUSED SHARES") at the purchase price and on the terms
stated in the Section 8 Notice; PROVIDED, HOWEVER, that, if the Section 8 Offer
contemplates an All or Nothing Sale, the Other Shareholders, in the aggregate,
may accept, during the Section 8(b) Acceptance Period, the Subject Shares which,
when taken together with the Subject Shares accepted by the Company pursuant to
Section 8(a), if any, constitute all, but not less than all, of the Subject
Shares, at the purchase price and on the terms stated in the Section 8 Offer
Notice. Such acceptance shall be made by delivering a written notice to the
Company and the Selling Shareholder within the Section 8(b) Acceptance Period
specifying the maximum number of Shares such Other Shareholder will purchase
(the "FIRST OFFER SHARES"). If, upon the expiration of the Section 8(b)
Acceptance Period, the aggregate amount of First Offer Shares exceeds the
amount of Refused Shares, the Refused Shares shall be allocated among the Other
Shareholders as follows: (i) first, each Other Shareholder shall be entitled
to purchase no more than its Proportionate Percentage (as defined below) of
Refused Shares; (ii) second, if any of the Other Shareholders offered to
purchase less than its Proportionate Percentage in its acceptance notice so that
Refused Shares have not been allocated for purchase pursuant to (i) above (the
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"REMAINING SHARES"), each Other Shareholder (an "OVERSUBSCRIBED SHAREHOLDER")
that had offered to purchase a number of Refused Shares in excess of the amount
of Shares allocated for purchase to it in accordance with previous allocations
of such Refused Shares, shall be entitled to purchase an amount of Remaining
Shares equal to no more than its Proportionate Percentage (treating only
Oversubscribed Shareholders as Shareholders for these purposes) of the Remaining
Shares; and (iii) third, the process set forth in (ii) above shall be repeated
with respect to any Refused Shares not allocated for purchase until all Refused
Shares are allocated for purchase. For purposes of this Agreement,
"PROPORTIONATE PERCENTAGE" shall mean, as to each Other Shareholder, the
quotient obtained (expressed as a percentage) by dividing (A) the number of
Shares owned by such Other Shareholder on the first day of the Section 8(b)
Acceptance Period by (B) the aggregate number of Shares owned on the first day
of the Section 8(b) Acceptance Period by all Other Shareholders who exercise
their option to purchase Refused Shares.
(c) If complete effective acceptance shall not be received
pursuant to Sections 8(a) and 8(b) above with respect to all of the Subject
Shares offered for sale pursuant to the Section 8 Offer Notice, then the Selling
Shareholder may (subject to complying with the provisions of Section 5 hereof)
Sell all or any portion of the Subject Shares so offered for sale and not so
accepted, at a price not less than the purchase price, and on terms not more
favorable, in the aggregate, to the purchaser thereof than the terms stated in
the Section 8 Offer Notice at any time within 90 days after the expiration of
the Section 8(b) Acceptance Period (the "'SALE PERIOD"); PROVIDED, HOWEVER,
that, if the Section 8 Offer contemplates an All or Nothing Sale and only a part
of the Subject Shares has been accepted by the Company (or its Permitted
Nominee) and the Other Shareholders following the expiration of the Section 8(b)
Acceptance Period, the Selling Shareholder may Sell all, but not less than all,
of the Subject Shares held by such Selling Shareholder. To the extent the
Selling Shareholder Sells all or any portion of the Subject Shares so offered
for sale during the Sale Period, the Selling Shareholder shall promptly notify
the Company, and the Company shall promptly notify the Other Shareholders, as to
(i) the number of Shares, if any, that the Selling Shareholder then owns, (ii)
the number of Shares that the Selling Shareholder has sold, (iii) the terms and
conditions of such Sale and (iv) the name of the beneficial and record
purchasers of any Shares sold. In the event that all of the Shares are not sold
by the Selling Shareholder during the Sale Period, the right of the Selling
Shareholder to Sell such unsold Shares shall expire and the obligations of this
Section 8 shall be reinstated; PROVIDED, HOWEVER, that, in the event that the
Selling Shareholder determines, at any time during the Sale Period, that the
sale of all of the Shares on the terms set forth in the Section 8 Offer Notice
is impractical, the Selling Shareholder may terminate the attempt to Sell the
Subject Shares as provided in this Section 8(c) by written notice to all
Shareholders that are a party to this Agreement and reinstate the procedures
provided in this Section 8 without waiting for the expiration of the Sale
Period.
(d) All Sales of Subject Shares to the Company (or its
Permitted Nominee) and/or the Other Shareholders subject to any one Section 8
Offer Notice shall be consummated contemporaneously at the offices of the
Company on the later of (i) a mutually satisfactory business day within 15 days
after the expiration of the Section 8(b) Acceptance Period or (ii) the fifth
business day following the receipt of all regulatory approvals, if any,
applicable to such sales, or at such other time and/or place as the parties to
such sales may agree. The delivery of
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certificates or other instruments evidencing such Subject Shares duly
endorsed for transfer and accompanied by stock powers shall be made on such
date against payment of the purchase price for such Subject Shares.
(e) The requirements of this Section 8 shall not apply to any
sale pursuant to Section 9 hereof.
BRING-ALONG RIGHTS. (a) If the Non-Investor Shareholders
collectively propose to Sell to any Person or Group of Persons (collectively, a
"BUYER"), in a bona fide arm's-length transaction or series of transactions,
including by way of a purchase agreement, tender offer, merger or other business
combination transaction or otherwise, all of the Shares held by them at a price
per Share of more than 100% of the Initial Per Share Price (any such transaction
being referred to herein as an "EXIT SALE"), then the Non-Investor Shareholders
may elect to require the Investors to Sell all Shares beneficially owned by each
of them concurrently with such Exit Sale to such Buyer at the purchase price per
share (and, in the case of Common Share Equivalents, such purchase price per
share multiplied by the number of Common Shares issuable upon the conversion,
exchange or exercise of such Common Share Equivalent subject to reduction, if
appropriate, for the amount per share of the exercise or purchase price (if any)
of such Common Share Equivalent), including any fees and the value of any other
consideration received by such Selling Shareholders in connection with the Exit
Sale, and upon the same terms and conditions, of the Exit Sale.
(b) The rights set forth in Section 9(a) shall be exercised by
giving written notice (the "SECTION 9 NOTICE") to each Other Shareholder setting
forth in detail the terms of the proposed Sale and the proposed closing date of
the Exit Sale, which proposed date (the "SECTION 9 CLOSING DATE") shall be the
later of (i) a business day not less than 15 or more than 60 days after such
Section 9 Notice is delivered to the Other Shareholders or (ii) the fifth
business day following the receipt of all regulatory or third party consents and
approvals, if any, applicable to such Sale.
(c) Each Other Shareholder shall (i) take all such actions,
including, without limitation, voting in favor of such proposed Sale and waiving
any appraisal, dissenter or similar rights under applicable law, as may be
requested by the Selling Shareholders to carry out the purposes of this Section
9, and (ii) execute all documents reasonably requested by the Selling
Shareholders containing such terms and conditions, including, without
limitation, representations and warranties with respect to (x) matters of title
to such Other Shareholder's securities and (y) the due authorization (or
capacity) and due and valid execution and delivery by such Other Shareholder of
documentation in respect of the Exit Sale, as those executed by the Selling
Shareholders; PROVIDED, HOWEVER, such Other Shareholder shall not be required to
make any other representations and warranties and shall not be required to join
in any indemnity other than with respect to such Other Shareholder's specific
representations and warranties described above, or be a party to any non-compete
or similar provision.
(d) All Sales of Shares to the Buyer pursuant to this Section 9
shall be consummated contemporaneously at the offices of the Company (or such
other place as is
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mutually agreed upon by the parties in advance) on the Section 9 Closing
Date. The delivery of certificates or other instruments evidencing the Sale
of such Shares, duly endorsed for transfer, shall be made on such date
against payment of the purchase price for such Shares. The Selling
Shareholders shall bear all of the costs and expenses incurred solely in
connection with an Exit Sale to the extent such costs are incurred for the
benefit of all Shareholders and are not otherwise paid by the Company or the
Buyer.
(e) Notwithstanding anything to the contrary contained herein,
any Sale of Shares pursuant to an Exit Sale shall be exempt from the provisions
of Section 8 hereof.
(f) Notwithstanding the foregoing, the provisions of this
Section 9 shall not apply to sales or other transfers of Shares by a Shareholder
to its partners, stockholders, members, immediate family members, trusts for the
benefit of any of the foregoing, or any affiliate of such Shareholder.
SECTION 10. [Intentionally Deleted]
SECTION 11. REPRESENTATIONS AND WARRANTIES.
(a) Each of the parties hereto represents and warrants to the
other parties hereto as follows:
(i) It has full power and authority to execute, deliver
and perform its obligations under this Agreement;
(ii) This Agreement has been duly and validly authorized,
executed and delivered by it, and constitutes a valid and binding obligation of
it, enforceable against it in accordance with its terms except to the extent
that enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting creditors' rights generally;
(iii) The execution, delivery and performance of this
Agreement by it does not (A) violate, conflict with, or constitute a breach of
or default under its organizational documents, if any, or any material agreement
to which it is a party or by which it is bound or (B) violate any law,
regulation, order, writ, judgment, injunction or decree applicable to it;
(iv) No consent or approval of, or filing with, any
governmental or regulatory body is required to be obtained or made by it in
connection with the transactions contemplated hereby (except those which have
been made or obtained); and
(v) It is not a party to any contract or agreement that
is inconsistent with the rights of any party hereunder or otherwise conflicts
with the provisions hereof.
(b) Each of the Shareholders, severally and not jointly,
further represents and warrants that SCHEDULE II hereto sets forth a list of all
securities of the Company (including, without limitation, capital stock,
convertible securities, notes and debentures) held of record or beneficially
owned by it immediately after the Closing Date.
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SECTION 12. CERTAIN COVENANTS.
PROTECTION OF INVESTORS. The Company and the Shareholders each
agree that all of the following provisions of this Section 12 are for the
exclusive benefit, protection and enjoyment of the Investors and their permitted
successors and assigns, and may only be enforced or remedied by the Investors
and their permitted successors and assigns.
ADDITIONAL ISSUANCES The Company agrees that, anything contained
herein to the contrary notwithstanding, (i) any Person to which Shares are
issued in a Private Sale after the date hereof and who after giving effect to
such Issuance, would own more than 1% in the aggregate of the then total
outstanding Shares or voting power (on either a primary or fully diluted basis),
or (ii) any Person to which Shares are issued and who is or becomes a Key
Shareholder of the Company, shall upon consummation of, and as a condition to,
such Issuance execute, and agree to be bound by the terms of, this Agreement and
shall thereafter be deemed a Shareholder for all purposes of this Agreement.
ACCESS TO RECORDS. From and after the Closing Date and so long as
any Investor continues to hold any shares of Preferred Stock or Common Stock,
the Company shall, and shall cause each of its Subsidiaries to, allow each
Investor and its employees, counsel and other authorized representatives once
annually to access, during normal business hours, upon reasonable advance
notice, with due regard to its ongoing operations, all of its books, records and
properties, and all of its officers and employees for any reasonable purpose
whatsoever.
FINANCIAL REPORTS. From and after the Closing Date and provided
the Investor holds any shares of Preferred Stock or Common Stock, the Company
agrees to furnish to each Investor the following:
(a) Within 15 days after the end of each fiscal month, (i)
internal monthly financial and operating statements for such month prepared by
the Company under the direction of a Senior Officer of the Company.
(b) Within 30 days after the end of each quarterly fiscal
period, (i) unaudited balance sheets and an income statement as of the end of
such period, together with statements of retained earnings and cash flow for
such period ("QUARTERLY FINANCIALS") and a letter or memorandum discussing the
summary financial information for such period and setting forth a comparison by
reasonable categories of such financial information to the comparable figures
for the prior year and a reasonable explanation of any differences (a
"MANAGEMENT LETTER") (with the Management's Discussion and Analysis of Financial
Condition and Results of Operation section of any Form 10-Q or Form 10-K or
similar document filed with the Securities and Exchange Commission (the
"COMMISSION") for such quarter being sufficient to satisfy this requirement),
plus (ii) a statement certified by the Chief Financial Officer of the Company,
certifying that the financial position and results of operations of the Company
for such period as presented in the Quarterly Financials are presented fairly
and have been prepared in accordance with GAAP (subject to normal year-end
adjustments and the absence of footnotes) consistently applied.
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(c) Within 90 days (or such lesser period as is either (x)
required under applicable laws for similar disclosure to any securityholders of
the Company or (y) in which similar disclosure is provided to other financing
sources of the Company, including, without limitation, any banks) after the end
of each fiscal year, commencing with the first fiscal year ending after the
Closing Date, (i) audited balance sheets and an income statement as of the end
of such fiscal year, together with statements of retained earnings and cash flow
for such fiscal year, all in reasonable detail and certified by a recognized
national firm of independent accountants selected by the Board as presenting
fairly the financial position and results of operations of the Company and as
having been prepared in accordance with GAAP consistently applied, including
their opinion thereon, (ii) the accounting firm's management letter and (iii) a
Management Letter (with the Management's Discussion and Analysis of Financial
Condition and Results of Operation section of any Form 10-Q or Form 10-K or
similar document filed with the Commission for such quarter being sufficient to
satisfy this requirement).
(d) Promptly upon becoming available, (i) copies of all
financial statements, reports, press releases, notices, proxy statements and
other documents sent by the Company to its shareholders or released to the
public and copies of all regular and periodic reports, if any, filed by the
Company with any securities regulatory agency or any securities exchange and
(ii) any other financial or other information available to management of the
Company as the Investor shall have reasonably requested on a timely basis.
(e) If for any period the Company shall have any Subsidiary or
Subsidiaries whose accounts are consolidated with those of the Company, then, in
respect of such period, the financial statements and information delivered
pursuant to the foregoing paragraphs (a), (b) and (c) of this Section 12.4 shall
be the consolidated and consolidating financial statements of the Company and
all such consolidated Subsidiaries.
(f) At least 30 days but not more than 90 days prior to the
beginning of each fiscal year, an annual budget prepared on a monthly basis for
the Company for such fiscal year (displaying anticipated statements of income
and cash flows and balance sheets), and promptly upon preparation thereof any
other significant budgets prepared by the Company and any revisions of such
annual or other budgets, and, if requested by any Investor within 30 days after
any monthly period in which there is a material adverse deviation from the
annual budget, a statement explaining the deviation and what actions the Company
has taken and proposes to take with respect thereto.
(g) Promptly (but in any event within seven business days)
after the discovery or receipt of notice of (i) any default under any material
agreement to which the Company and/or any of its Subsidiaries is a party, which
default could have a material adverse effect on the condition (financial or
otherwise), operations, properties, prospects, results of operations, business,
assets, or liabilities of the Company, any Subsidiary, or the industry in which
the Company and the Subsidiaries conduct or propose to conduct their business (a
"MATERIAL ADVERSE EFFECT"), (ii) any other event that could reasonably be
expected to have a Material Adverse Effect (including, without limitation, the
filing of any material litigation against the Company or any of its Subsidiaries
or the existence of any dispute with any Person which involves a reasonable
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likelihood of such litigation being commenced) a statement describing the
foregoing in reasonable detail.
(h) Promptly, any information or financial data the Company
provides to its lenders or other sources of financing, which, if certified by an
officer of the Company, shall be certified to the Investors on no less favorable
terms.
SYSTEM OF ACCOUNTING. The books of account and other financial
and corporate records of the Company and its Subsidiaries shall be maintained in
accordance with good business and accounting practices and the financial
condition of the Company shall be accurately reflected in the financial
statements referred to in this Section 12.
COMPLIANCE WITH LAWS. The Company shall, and shall cause each of
its Subsidiaries to, comply with all applicable laws, rules, regulations and
orders except where failure to comply would not have a Material Adverse Effect.
INSURANCE. The Company shall, and shall cause each of its
Subsidiaries to, keep its assets and those of its Subsidiaries which are of an
insurable character, if any, insured by financially sound and reputable insurers
against loss or damage by fire, extended coverage and other hazards and risks
and liability to Persons and property to the extent and in the manner customary
for companies in similar businesses similarly situated.
LICENSES AND PERMITS. The Company shall, and shall cause each of
its Subsidiaries to, use its best efforts to obtain all federal, state and local
governmental licenses, permits, authorizations, consents, waivers, certificates
and approvals material to and necessary in the conduct of their business.
DISCLOSURE OF INVESTMENT. The Company, on the one hand, and each
Investor, on the other hand, agrees that it will not use in advertising or
publicity the name of any party hereto, or any partner or employee of such party
hereto or any of its respective affiliates, or any trade name, trademark, trade
device, service mark, symbol or any abbreviation, contraction or simulation
thereof owned by the other party hereto or any of its respective affiliates, in
either case without the prior written consent of such party (except as such
release or announcement may be required by applicable securities law or the
rules or regulations of the Commission, in which case the party required to make
the release or announcement shall make reasonable best efforts to allow each
other party reasonable time to comment on such release or announcement in
advance of such issuance). From and after the date hereof, neither the Company
nor any of its Subsidiaries will represent, directly or indirectly, that any
product or any service provided by the Company has been approved or endorsed by
any Investor without the prior written consent of such Investor. The Company
and the Investors further agree that, from the date hereof through the Closing
Date, no public release or announcement concerning the transactions contemplated
hereby shall be issued by any party without the prior consent of the Company and
the Investors (which consent shall not be unreasonably withheld), except as such
release or announcement may be required by applicable securities law or the
rules or regulations of the Commission, in which case the party required to make
the release or announcement shall make reasonable best efforts to
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allow each other party reasonable time to comment on such release or
announcement in advance of such issuance.
12.10. UNDERWRITTEN OFFERING-RELATED LOCK-UP OF SHARES.
If requested in writing by the managing underwriter(s), if any, of
the first IPO by the Company of equity securities (or securities convertible
into or exchangeable for equity securities) of the Company, each Shareholder
holding Shares agrees not to effect any Sale or distribution, including, without
limitation, any sale pursuant Rule 144 under the Securities Act, of Shares
(other than as part of such underwritten public offering) during the time period
requested by the managing underwriter(s), if any, not to exceed 180 days. This
Section 12.10 does not apply to any subsequent IPO.
RESERVATION OF COMMON STOCK; CONVERSION. The Company shall at all
times reserve and keep available out of its authorized but unissued capital (i)
sufficient shares of Common Stock to permit conversion of all outstanding shares
of Preferred Stock and (ii) sufficient shares of Preferred Stock to satisfy the
Company's obligation to issue additional shares of Preferred Stock to the
Investors in accordance with the terms of the Purchase Agreement and the
Certificate of Designations. The Company represents, warrants and agrees that
all shares of Common Stock and Preferred Stock that are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens, encumbrances and charges. The Company shall take all such
actions as may be necessary, including adoption of amendments to the Certificate
of Incorporation, to assure that all such Common Stock may be so issued without
violation of any applicable law or governmental regulation or the Certificate of
Incorporation of the Company or any requirements of any securities exchange
(including, without limitation, the Nasdaq National Market) upon which such
Common Stock may be listed (except for official notice of issuance which shall
be immediately transmitted by the Company upon issuance).
SECTION 14. CONFIDENTIALITY.
(a) Each Investor and each of the other Shareholders severally
(the "CONFIDANTS") recognize that certain non-public, confidential, proprietary
information ("CONFIDENTIAL INFORMATION") may be furnished orally or in writing
to the Confidants by, or at the direction of, the Company. The Confidants agree
not to disclose any Confidential Information to any Person except to a Person
who is advised of the Confidant's obligations under this Section 16 and who is
(i) a partner, managing director, director, officer or employee of a Confidant
or a Confidant's Affiliate who is involved in the Confidant's investment in the
Company, who is consulted with respect to such investment, or who a Confidant
determines otherwise needs to know such information, or (ii) a Person acting as
an advisor to a Confidant in connection with such investment, except with the
consent of the Company or pursuant to a subpoena, civil investigative demand (or
similar process), order, statute, rule or other legal requirement promulgated or
imposed by a court or by a judicial, regulatory, self-regulatory or legislative
body, organization, agency or committee or otherwise in connection with any
judicial or administrative proceeding (including, in response to oral questions,
interrogatories or requests for
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information or documents) in which a Confidant or its Affiliate is involved.
The Confidants acknowledge that the United States securities laws prohibit
any person who is in possession of material, non-public information regarding
an issuer from purchasing or selling securities of such issuer or from
communicating such information to any, other person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell such securities.
(b) If Confidential Information is to be disclosed pursuant to
the foregoing paragraph, the Confidant will, to the extent practicable, promptly
notify, the Company thereof and cooperate with the Company to the extent legally
permissible if it should seek to obtain an order or other reliable assurance
that confidential treatment will be accorded to designated portions of the
Confidential Information. The Confidants shall be entitled to periodic
reimbursement from the Company for expenses incurred by it or any Affiliate,
including the fees and expenses of counsel, in connection with any action taken
pursuant to this paragraph.
(c) Information will not be deemed Confidential Information if
it (i) was already available to, or in the possession of, the Confidant prior to
its disclosure by, or at the direction of, the Company, (ii) is or becomes
available in the public domain on or after the date hereof (other than as a
result of a disclosure by any Confidant or any of its advisors), or (iii) is
acquired from a person who is not known by a Confidant to be in breach of an
obligation of confidentiality to the Company.
SECTION 15. SPECIFIC PERFORMANCE; INJUNCTION.
(a) The parties agree that it is impossible to determine the
monetary damages that would accrue to the Company or any Shareholder or his
personal representative by reason of the failure of any Other Shareholder or the
Company to perform any of his or its obligations under this Agreement requiring
the performance of an act other than the payment of money only. Each
Shareholder shall be entitled to enforce its rights under this Agreement
specifically and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that each party
may in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
(b) In the event of a breach or threatened breach by a
Shareholder of any of the provisions of this Agreement, the Company, and the
remaining Shareholders shall be entitled to an injunction restraining such
Shareholder from any such breach. The availability of these remedies shall not
prohibit the Company from pursuing any other remedies for such breach or
threatened breach, including the recovery of damages from the Shareholder.
NO INCONSISTENT AGREEMENTS. Neither the Company nor any
Shareholder shall take any action or enter into any agreement which is
inconsistent with the rights of any party hereunder or otherwise conflicts with
the provisions hereof.
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SECTION 17. FURTHER ASSURANCES.
(a) At any time or from time to time after the date hereof, the
parties agree to cooperate with each other, and at the request of any other
party, to execute and deliver any further instruments or documents and to take
all such further action as the other party may reasonably request in order to
evidence or effectuate the consummation of the transactions contemplated hereby
and to otherwise carry out the intent of the parties hereunder.
(b) At any time or from time to time, the parties agree to take
all action, including, without limitation, voting to approve any amendment to
the Certificate of Designations, or the By-Laws of the Company required to
increase the authorized number of shares of Common Stock or Preferred Stock, if
necessary, to permit the issuance of all Shares contemplated under the Purchase
Agreement, and the conversion of all outstanding shares of Preferred Stock.
DURATION OF AGREEMENT. The rights and obligations of a
Shareholder under this Agreement shall terminate at such time as such
Shareholder no longer holds any Shares. This Agreement shall terminate upon the
consummation of a Qualified IPO except that the terms of Section 4, Sections
12.1, 12.5, 12.6, 12.7, 12.8, 12.9, 12.10, and Sections 13 through Section 29
(inclusive) shall survive until by their respective terms, they are no longer
operative.
LEGENDS. Each certificate representing Shares shall bear a legend
containing the following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN THE SHAREHOLDERS' AGREEMENT,
DATED AS OF FEBRUARY 16, 2000, BY THE COMPANY AND
THE PARTIES THERETO, A COPY OF WHICH IS ON FILE IN
THE OFFICE OF THE COMPANY.
The requirement that the above securities legend be placed upon
certificates evidencing any such securities shall cease and terminate upon the
earliest of the following events: (i) when such Shares are transferred in an
IPO; (ii) when such Shares are transferred pursuant to Rule 144 under the
Securities Act; or (iii) when such Shares are transferred in any other
transaction if the seller delivers to the Company an opinion of its counsel,
which counsel and opinion shall be reasonably satisfactory to the Company to the
effect that such legend is no
-21-
<PAGE>
longer necessary in order to protect the Company against a violation by it of
the Securities Act upon any sale or other disposition of such Shares without
registration thereunder. The requirement that the above legend regarding the
Shareholder Agreement be placed upon certificates evidencing any such
securities shall cease and terminate upon the termination of this Agreement.
Upon the occurrence of any event requiring the removal of a legend hereunder,
the Company, upon the surrender of certificates containing such legend,
shall, at its own expense, deliver to the holder of any such Shares as to
which the requirement for such legend shall have terminated, one or more new
certificates evidencing such Shares not bearing such legend.
SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid, but if any
provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement. In the event that pursuant
to any regulatory authority or regulation, the Company is required to make any
revisions or modifications to any provision of this Agreement, the parties agree
to enter into good faith negotiations and make revisions or modifications, to
the extent possible, that are in compliance with such regulation or the rules of
such regulatory authority, and which are designed to accomplish the purposes of
such provision to be revised or modified.
GOVERNING LAW, WAIVER OF JURY TRIAL. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law. Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to the
exclusive Jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
action, proceeding or investigation in any court or before any governmental
authority ("LITIGATION") arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by facsimile or registered mail to its
respective address set forth in this Agreement shall be effective service of
process for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York and of
the United States of America, in each case located in the County of New York,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such Litigation brought in any such
court has been brought in an inconvenient forum. EACH OF THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY
LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and shall be binding upon the parties hereto and their respective successors,
assigns, heirs and personal representatives. No Shareholder shall have the
right to assign its rights and obligations under this Agreement without the
consent of the other Shareholders. No Shareholder shall have the right to
assign its rights under Section 3 or 6 of this Agreement without the consent of
the
-22-
<PAGE>
Company and the Investor. Upon any such assignment, such assignee shall
have and be able to exercise all rights of the assigning Shareholder. The
parties acknowledge that, subject to compliance with applicable securities laws,
each Investor may transfer and assign all or a part of its rights and
obligations under this Agreement (including, for the avoidance of doubt, under
Section 3 or 6) to one or more other parties without the consent of the Company
or any other Shareholder. Upon any such assignment, the assignee shall become
an Investor for purposes of this Agreement and shall have and be able to
exercise all rights of an Investor hereunder.
NOTICES. All notices, requests, consents and other communications
hereunder to any party, shall be deemed to be sufficient if contained in a
written instrument delivered in Person or by telecopy, nationally recognized
overnight courier or first class registered or certified mail, return receipt
requested, postage prepaid, addressed to such party at the address set forth
below or such other address as may hereafter be designated in writing by such
party to the other parties:
(a) if to the Company, to:
UbiquiTel Holdings, Inc.
3 Bala Plaza East
Bala Cynwyd, PA 19004
Fax: (610) 660-4920
Attention: Donald A. Harris
with a copy to:
Greenberg Traurig P.A.
1750 Tysons Boulevard, 12th Floor
Tysons Center, Virginia 22102
Fax: (703) 749-1301
Attention: Lee R. Marks
(b) if to an Investor, to:
c/o DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, New York 10172
Fax: (212) 892-7272
Attention: Andrew Rush
Tim White
with a copy to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
-23-
<PAGE>
Fax: (212) 751-4864
Attention: Ian B. Blumenstein
(c) if to any other Shareholder, to the notice information set forth
in SCHEDULE I hereto.
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
AMENDMENTS. Unless otherwise set forth in this Agreement,
the terms and provisions of this Agreement may be modified or amended, or any of
the provisions hereof waived, temporarily or permanently, pursuant to the
written consent of the parties hereto.
HEADINGS. The headings of the Sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
NOUNS AND PRONOUNS. Whenever the context requires, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
ENTIRE AGREEMENT. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior and contemporaneous agreements and understandings
with respect thereto.
COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
NO PARTNERSHIP. The obligations of each of the parties to
this Agreement are several and not Joint. Nothing in this Agreement shall imply
or be deemed to imply a partnership, joint venture or other relationship between
the parties.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
UBIQUITEL HOLDINGS, INC.
By:
------------------------------
Name:
Title:
FOUNDERS:
-------------------------------------
DONALD A. HARRIS
-------------------------------------
JAMES PARSONS
-------------------------------------
PAUL F. JUDGE
THE WALTER GROUP, INC.
By:
--------------------------------
Name:
Title:
U.S. BANCORP
By:
--------------------------------
Name:
Title:
-25-
<PAGE>
SERIES A PREFERRED SHAREHOLDERS:
BROOKWOOD UBIQUITEL INVESTORS, LLC
By:
--------------------------------
Name:
Title:
LANCASTER INVESTMENT PARTNERS
By:
--------------------------------
Name:
Title:
-------------------------------------
STEPHEN C. MARCUS
-------------------------------------
ROBERT BERLACHER
-------------------------------------
RICHARD C. WALLING, JR.
PORTER PARTNERS L.P.
By:
By:
--------------------------------
Name:
Title:
BALLYSHANNON PARTNERS L.P.
By:
-26-
<PAGE>
By:
--------------------------------
Name:
Title:
-------------------------------------
BARRY PORTER
CBT WIRELESS INVESTMENTS, LLC
By:
--------------------------------
Name:
Title:
SPECTRASITE COMMUNICATIONS
By:
--------------------------------
Name:
Title:
-------------------------------------
MARK BUECHLEY
-------------------------------------
JERRI BUECHLEY
NEW VENTURES, LLC
By:
--------------------------------
Name:
Title:
-27-
<PAGE>
-------------------------------------
DONALD A. HARRIS
MEZZANINE FINANCING:
BET ASSOCIATES, L.P.
By:
By:
------------------------------
Name:
Title:
PARIBAS NORTH AMERICA, INC.
By:
------------------------------
Name:
Title:
INVESTOR:
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: DLJ Merchant Banking II, Inc.,
ITS GENERAL PARTNER
By:
------------------------------
Name:
Title:
-28-
<PAGE>
Exhibit 10.9
UBIQUITEL HOLDINGS, INC.
STOCKHOLDERS' VOTING AGREEMENT
This Agreement dated as of November 23, 1999, is entered into by
and among UbiquiTel Holdings, Inc., a Delaware Company (the "COMPANY"), the
persons and entities listed on EXHIBIT A hereto (individually, a "PURCHASER" or
"PURCHASER GROUP" and collectively, the "PURCHASERS"), Donald A. Harris
("Harris"), James Parsons, Paul F. Judge, U.S Bancorp, and The Walter Group,
Inc., a State of Washington corporation ("The Walter Group"), (individually, a
"Founder" and collectively, the "Founders"). The Purchasers and the Founders
are sometimes referred to in this Agreement collectively as the "STOCKHOLDERS."
RECITALS:
A. The Founders own Voting Common Stock and Non-Voting Common Stock ,
par value $0.001 per share ("COMMON STOCK"), of the Company;
B. Concurrently herewith and pursuant to the Series A Preferred Stock
Purchase Agreement of even date herewith (the "PURCHASE AGREEMENT"), the
Purchasers are purchasing the Series A Preferred Stock of the Company;
C. In some cases individual Purchasers are members of a Purchaser
Group as identified and indicated on EXHIBIT A; and
D. The Purchasers and Founders wish to provide for their continuing
representation on the Board of Directors of the Company in the manner set forth
below.
Now, therefore, the parties agree as follows:
1. VOTING OF SHARES.
(a) In any and all elections of directors of the Company (whether at a
meeting or by written consent in lieu of a meeting), each Stockholder shall vote
or cause to be voted all Shares (as defined in Section 2 below) owned by him or
it, or over which he or it has voting control, and otherwise use his or its
respective best efforts, so as to fix the number of directors of the Company at
five (5) and to elect (i) one director designated by each of the Brookwood
Purchaser Group, the Lancaster Purchaser Group, and the Westower Purchaser
Group, (ii) one member designated by The Walter Group, and (iii) Harris, for so
long as he is employed by and the chief executive officer of the Company. Each
of the Brookwood Purchaser Group, the Lancaster Purchaser Group, and the
Westower Purchaser Group, and The Walter Group shall upon the execution of this
Agreement designate a director and the director so designated shall upon such
designation become a director of the Company.
1
<PAGE>
(b) No Stockholder shall vote to remove Harris as a director, any
director designated by the Purchaser Groups, or the director designated by The
Walter Group, except for bad faith or willful misconduct, provided, however,
that Harris shall cease to be a director if he ceases to be employed by and be
the chief executive officer of the Company.
(c) The Company shall provide the Stockholders with 30 days' prior
written notice of any intended mailing of a notice to stockholders for a meeting
at which directors are to be elected or of any intended mailing of a written
consent electing directors. Each Purchaser Group and The Walter Group shall
give written notice to all other parties to this Agreement, no later than 20
days prior to such mailing, of the persons designated by the Purchaser Group and
The Walter Group as nominees for election as directors. The Company agrees to
nominate and recommend for election as directors only the individuals so
designated, or to be designated, pursuant to Section 1(a). If the Purchaser
Group or The Walter Group shall fail to give notice to the Company as provided
above, it shall be deemed that the designees then serving as directors shall be
their designees for reelection.
(d) Any vacancy occurring in the board of directors due to
resignation, removal, death or disability of a director elected pursuant to
Section 1(a) shall be filled only by a designee of the same Stockholder or
Purchaser Group, which nominated the director whose position became vacant.
2. SHARES. "SHARES" shall mean and include the Series A Preferred
being issued pursuant to the Purchase Agreement, the shares of Common Stock
issued or issuable upon the conversion of the Series A Preferred, and any other
shares of Voting Common Stock now owned or subsequently acquired by a
Stockholder, including without limitation stock acquired as a result of stock
splits and stock dividends.
3. TERMINATION. This Agreement shall terminate on the earliest of
(a) the tenth anniversary of the date of this Agreement, (b) the closing of the
Company's initial public offering of shares of Common Stock pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "ACT"), resulting in at least $30,000,000 of gross proceeds to the Company,
or (c) the sale of all or substantially all of the assets or business of the
Company, by merger, sale of assets or otherwise.
4. NO REVOCATION. The voting agreements contained herein are coupled
with an interest and may not be revoked, except by an amendment, modification or
termination of this Agreement.
5. RESTRICTIVE LEGEND. All certificates representing Shares owned or
hereafter acquired by the Stockholders or any transferee of the Stockholders
bound by this Agreement shall have affixed thereto a legend substantially in the
following form:
"The shares of stock represented by this certificate are subject to
certain restrictions on transfer and to certain voting agreements as set
forth in a Series A Preferred Stock Purchase Agreement and various
Ancillary Agreements, as
2
<PAGE>
amended from time to time, by and among the registered owner of this
certificate, the Company, and certain other stockholders of the Company,
copies of which are available for inspection at the offices of the
Secretary of the Company."
6. TRANSFERS OF RIGHTS. Any transferee to whom Shares are
transferred by a Stockholder, whether voluntarily or by operation of law, shall
be bound by the voting obligations imposed upon the transferor under this
Agreement, to the same extent as if such transferee were a Stockholder hereunder
and no Stockholder shall transfer any Shares unless the transferee agrees in
writing to be bound by this Agreement.
7. GENERAL.
(a) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(b) SPECIFIC PERFORMANCE. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, each Purchaser shall be entitled to specific performance of the
agreements and obligations of the Stockholders hereunder and to such other
injunctive or other equitable relief as may be granted by a court of
competent jurisdiction.
(c) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
(without reference to the conflicts of law provisions thereof).
(d) NOTICES. All notices, demands, requests or other
communications which may be or are required to be given, served or sent by
any party pursuant to this Agreement shall be in writing and shall be hand
delivered (including delivery by overnight courier) or mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company, to UbiquiTel Holdings, Inc., at its principal
offices.
If to any Purchaser, to address(es) for notice set forth below such
Purchaser's signature on the applicable execution page hereof.
If to any Founder, to address(es) for notice set forth below such
Founder's signature on the applicable execution page hereof.
(e) AMENDMENTS. No amendment, modification or termination
of, or waiver under, any provision of this Agreement shall be valid unless in
writing and signed by (i) Harris, (ii) The Walter Group, and (iii)
Purchasers holding a majority of the voting power of the Shares then held by
each Purchaser Group, provided that this Agreement may be amended with
3
<PAGE>
the consent of less than all of the Purchasers only in a manner which affects
all Purchasers in the same fashion), and any such amendment, modification,
termination or waiver shall be binding on all parties hereto.
(f) COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to
be an original, and all of which together shall constitute one and the same
document. This Agreement may be executed by facsimile signatures.
[SIGNATURE PAGES FOLLOWING]
4
<PAGE>
SIGNATURE PAGE FOR STOCKHOLDERS' VOTING AGREEMENT
The foregoing agreement is hereby executed as of the date set forth on the
first page:
COMPANY:
UBIQUITEL HOLDINGS, INC.
By:
-----------------------------
Name: Donald A. Harris
Title: President and CEO
3 Bala Plaza - Suite 502
Bala Cynwyd, PA 19004
(610) 660-4920 (fax)
FOUNDERS:
----------------------------------
Donald A. Harris
130 Abrahams Lane
St. Davids, PA 19087
(610) 660-4920 (fax)
----------------------------------
James Parsons
330 Madison Avenue S.
Bainbridge Island, WA 98110
(206) 780-1414 (fax)
----------------------------------
Paul F. Judge
120 Lakeside Avenue, Suite 310
Seattle, WA 98122-6578
(206)328-0815 (fax)
5
<PAGE>
THE WALTER GROUP
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
120 Lakeside Avenue, Suite 310
Seattle, WA 98122-6578
(206) 328-0815 (fax)
US BANCORP.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
111 SW 5th Avenue - 2nd Floor
Portland, OR 97204
(503) 275-6663
PURCHASERS:
-----------------------------------
Donald A. Harris
BROOKWOOD FINANCIAL
PARTNERS, LLC
By:
----------------------------
Name: Thomas N. Trkla
Title: Chairman and CEO
55 Tozer Road
Beverly, MA 01915
(978) 927-0499 (fax)
Copy to:
James T. Easterling
Ungaretti & Harris
3500 Three First National Plaza
Chicago, IL 60602
(312) 977-4405
6
<PAGE>
LANCASTER INVESTMENT PARTNERS
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
500 N. Gulph Road - Suite 110
King of Prussia, PA 19406
(610) 783-4788 (fax)
-------------------------------------
Stephen C. Marcus
915 Exeter Crest
Villanova, PA 19085
(610) 519-1389 (fax)
-------------------------------------
Robert Berlacher
675 Church Road
Villanova, PA 19085
(610) 783-4788 (fax)
-------------------------------------
Richard C. Walling, Jr.
c/o Richard C. Walling, Jr.
Express Marine, Inc.
29th Street on the Delaware
Camden, NJ 08105
(856) 541-0338 (fax)
PORTER PARTNERS, LP
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
100 Shoreline, Suite 211B
Mill Valley, CA 94941
(415) 332-8223 (fax)
7
<PAGE>
BALLYSHANNON PARTNERS LP
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
325 Bryn Mawr Avenue
Bryn Mawr, PA 19010
(610) 935-3000 (fax)
-------------------------------------
Barry Porter
(310) 385-3714 (fax)
WESTOVER COMMUNICATIONS,
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
1733 H Street, #330-141
Blaine, WA 98230
Copy to:
Westover Communications Ltd.
17886 55 Avenue
Surray BC V35 6C8
(604) 576-4855 (fax)
SPECTRASITE COMMUNICATIONS
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
100 Regency Forest Drive - Suite 400
Cary, NC 27511
(919) 468-8522 (fax)
-------------------------------------
Mark Buechley
8
<PAGE>
-------------------------------------
Jerri Buechley
P.O. Box 394
Glide, OR 97443
(503) 210-1002 (fax)
Copy to:
Coni Rathbone
Davis Wright Tremane
1300 SW 5th Avenue, Suite 2300
Portland, OR 97201
(503) 778-5299 (fax)
New Ventures, LLC
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
211 N. Union Street, Suite 300
Alexandria, VA 22314
(703) 706-3837 (fax)
9
<PAGE>
EXHIBIT 10.10
CREDIT AGREEMENT
among
UBIQUITEL HOLDINGS, INC.,
UBIQUITEL, LLC,
VARIOUS BANKS
and
PARIBAS,
as Agent
$25,000,000
-----------------------------
Dated as of December 29, 1999
-----------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . . . .1
1.01 The Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 Minimum Amount of Each Borrowing. . . . . . . . . . . . . . . . . . . . .3
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.08 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.09 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . . . . . .9
1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.12 Replacement of Banks. . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.13 Change of Lending Office. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.02 Minimum Stated Amount . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.03 Letter of Credit Requests . . . . . . . . . . . . . . . . . . . . . . . 14
2.04 Letter of Credit Participations . . . . . . . . . . . . . . . . . . . . 14
2.05 Agreement to Repay Letter of Credit Drawings. . . . . . . . . . . . . . 16
2.06 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3. Fees; Reductions of Commitment . . . . . . . . . . . . . . . . . . . . 17
3.01 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.02 Voluntary Termination of Unutilized Commitments . . . . . . . . . . . . 18
3.03 Mandatory Reduction of Commitments. . . . . . . . . . . . . . . . . . . 18
Section 4. Prepayments; Payments; Taxes . . . . . . . . . . . . . . . . . . . . . 20
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.02 Mandatory Repayments and Commitment Reductions. . . . . . . . . . . . . 21
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . 24
4.04 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5. Conditions Precedent to Loans on the Initial Borrowing Date. . . . . . 26
5.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . . . . . . . 26
5.02 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.03 Opinions of Counse. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5.04 Corporate Documents; Proceedings. . . . . . . . . . . . . . . . . . . . 27
5.05 Plans; Shareholders' Agreements; Management Agreements;
Employment Agreements; Collective Bargaining Agreements; Debt
Agreements; Affiliate Contracts; Tax Sharing Agreements and
Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 27
5.06 Consent and Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.07 Pledge Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.08 Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.09 Material Adverse Change, etc. . . . . . . . . . . . . . . . . . . . . . 29
5.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11 Fees, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Solvency Certificate; Insurance Analyses. . . . . . . . . . . . . . . . 30
5.13 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.14 Financial Statements; Projections; Management Letter Reports. . . . . . 31
5.15 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.16 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.17 Mortgage; Title Insurance; Surveys; etc . . . . . . . . . . . . . . . . 32
Section 6. Conditions Precedent to All Credit Events. . . . . . . . . . . . . . . 33
6.01 No Default; Representations and Warranties. . . . . . . . . . . . . . . 33
6.02 Material Adverse Change, etc. . . . . . . . . . . . . . . . . . . . . . 33
6.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.04 Notice of Borrowing; Letter of Credit Request . . . . . . . . . . . . . 34
6.05 Pro Forma Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7. Representations, Warranties and Agreements . . . . . . . . . . . . . . 35
7.01 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.02 Corporate or Company Power and Authority. . . . . . . . . . . . . . . . 35
7.03 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.04 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 36
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc.. . . . . . . . . . . . . . . . . . . 36
7.06 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.07 True and Complete Disclosure. . . . . . . . . . . . . . . . . . . . . . 37
7.08 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . 38
7.09 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . . . . . . 38
7.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.11 The Security Documents. . . . . . . . . . . . . . . . . . . . . . . . . 39
7.12 Representations and Warranties in Documents . . . . . . . . . . . . . . 40
7.13 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.14 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.16 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . . . . . 41
7.17 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . . . 41
7.18 Public Utility Holding Company Act. . . . . . . . . . . . . . . . . . . 41
</TABLE>
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7.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.20 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.21 Patents, Licenses, Franchises and Formulas. . . . . . . . . . . . . . . 42
7.22 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.23 Restrictions on or Relating to Subsidiaries . . . . . . . . . . . . . . 43
7.24 Special Purpose Corporation or Limited Liability Company. . . . . . . . 43
7.25 The Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.26 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.27 Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . 44
7.28 Year 2000 Reprogramming . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 44
8.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.02 Books, Records and Inspections. . . . . . . . . . . . . . . . . . . . . 47
8.03 Maintenance of Property, Insurance. . . . . . . . . . . . . . . . . . . 47
8.04 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.05 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . . . . . 48
8.06 Compliance with Environmental Laws. . . . . . . . . . . . . . . . . . . 49
8.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.08 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . . . . . . 50
8.09 Performance of Obligations. . . . . . . . . . . . . . . . . . . . . . . 50
8.10 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.11 Interest Rate Protection. . . . . . . . . . . . . . . . . . . . . . . . 51
8.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.13 UCC Searches. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.14 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . . . 51
8.15 Year 2000 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.16 Registry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.17 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.18 Concentration Account . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.19 Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.01 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. . . . . . . . . 55
9.03 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.04 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.05 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.06 Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . 56
9.07 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . 57
9.08 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.09 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . 58
9.10 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . 59
9.11 Total Capital Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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9.12 Minimum Covered POPS. . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.13 Leverage Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.14 Minimum Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.15 Minimum Subscribers . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.16 Corporate Overhead Expenses . . . . . . . . . . . . . . . . . . . . . . 63
9.17 Net Subscriber Acquisition Cost . . . . . . . . . . . . . . . . . . . . 63
9.18 Limitation on Voluntary Payments and Modification; Limitation on
Modifications of Certificate of Incorporation, By-Laws
Certificate of Limited Partnership, Agreement of Limited
Partnership and Certain Other Agreements; etc . . . . . . . . . . . 64
9.19 Limitation on Certain Restrictions on Subsidiaries. . . . . . . . . . . 64
9.20 Limitation on Issuance of Equity Interests. . . . . . . . . . . . . . . 65
9.21 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.22 Limitation on Creation of Subsidiaries. . . . . . . . . . . . . . . . . 65
9.23 Concentration Account . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.24 Sprint Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.02 Representations, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 66
10.03 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . 66
10.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.06 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.08 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.09 Sprint Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.10 Change in Control. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11. Definitions and Accounting Terms. . . . . . . . . . . . . . . . . . . 69
11.01 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 12. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
12.01 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
12.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
12.03 Lack of Reliance on the Agent. . . . . . . . . . . . . . . . . . . . . 91
12.04 Certain Rights of the Agent. . . . . . . . . . . . . . . . . . . . . . 91
12.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.06 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.07 The Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . 92
12.08 Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.09 Resignation by the Agent . . . . . . . . . . . . . . . . . . . . . . . 92
</TABLE>
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Section 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
13.01 Payment of Expenses, etc.. . . . . . . . . . . . . . . . . . . . . . . 93
13.02 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
13.03 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
13.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 94
13.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . 96
13.06 Payments Pro Rata. . . . . . . . . . . . . . . . . . . . . . . . . . . 96
13.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . 96
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
13.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
13.10 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
13.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . 98
13.12 Amendment or Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 98
13.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
13.14 Domicile of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 99
13.15 Post-Closing Obligations . . . . . . . . . . . . . . . . . . . . . . .100
13.16 Sprint Spectrum L.P.'s Purchase Rights . . . . . . . . . . . . . . . .100
</TABLE>
SCHEDULE I Commitments
SCHEDULE II Insurance
SCHEDULE III Financial Statements
SCHEDULE IV Projections
SCHEDULE V Real Property
SCHEDULE VI ERISA
SCHEDULE VII Capitalization
SCHEDULE VIII Material Contracts
SCHEDULE IX Existing Liens
SCHEDULE X Affiliate Transactions
EXHIBIT A-1 Notice of Borrowing
EXHIBIT A-2 Notice of Conversion
EXHIBIT B-1 Term Note
EXHIBIT B-2 Revolving Note
EXHIBIT B-3 Swingline Note
EXHIBIT C Letter of Credit Request
EXHIBIT D Section 4.04(b)(ii) Certificate
EXHIBIT E Form of Opinion of Greenberg Traurig
EXHIBIT F Officers' Certificate of Credit Parties
EXHIBIT G Pledge Agreement
EXHIBIT H Security Agreement
EXHIBIT I Consent Letter
EXHIBIT J Bank Assignment and Assumption Agreement
EXHIBIT K Solvency Certificate
(v)
<PAGE>
EXHIBIT L Consent and Agreement
EXHIBIT M Cash Collateral Agreement
(vi)
<PAGE>
CREDIT AGREEMENT, dated as of December 28, 1999, among
UBIQUITEL HOLDINGS, INC., a Delaware corporation ("Holdings"), UBIQUITEL,
LLC, a Delaware limited liability company (the "Borrower"), the financial
institutions party hereto from time to time (each a "Bank" and, collectively,
the "Banks"), and PARIBAS, as agent (the "Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 11 are used
herein as therein defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Banks are willing to make available to the Borrower the
respective credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
Section 1. AMOUNT AND TERMS OF CREDIT.
1.01 THE COMMITMENTS. (a) Subject to and upon the terms and
conditions set forth herein, each Bank with a Term Loan Commitment severally
agrees to make, at any time and from time to time on and after the Initial
Borrowing Date and on or prior to the Term Loan Commitment Termination Date,
a term loan or term loans (each, a "Term Loan" and, collectively, the "Term
Loans") to the Borrower, which Term Loans (i) shall, at the option of
Borrower, be Base Rate Loans or Eurodollar Loans; PROVIDED that (x) except as
otherwise specifically provided in Section 1.10(b), all Term Loans comprising
the same Borrowing shall at all times be of the same Type and (y) no
Eurodollar Loans may be incurred prior to the Syndication Termination Date
and (ii) shall not exceed for any Bank, in initial aggregate principal
amount, that amount which equals the Term Loan Commitment of such Bank on
such date (before giving effect to any reductions thereto on such date
pursuant to Section 3.03(b)(i) or 3.03(b)(ii) but after giving effect to any
reductions thereto on or prior to such date pursuant to Section
3.03(b)(iii)). Once repaid, Term Loans incurred hereunder may not be
reborrowed.
(b) Subject to and upon the terms and conditions set forth
herein, each Bank with a Revolving Loan Commitment severally agrees at any
time and from time to time after the date on which the Total Term Loan
Commitment has been reduced to zero and prior to the Revolving Loan Maturity
Date, to make a loan or loans (each a "Revolving Loan" and, collectively, the
"Revolving Loans") to the Borrower, which Revolving Loans (i) shall, at the
option of the Borrower, be Base Rate Loans or Eurodollar Loans; PROVIDED that
(x) except as otherwise specifically provided in Section 1.10(b), all
Revolving Loans comprising the same Borrowing shall at all times be of the
same Type and (y) no Eurodollar Loans may be incurred prior to the
Syndication Termination Date, (ii) may be repaid and reborrowed in accordance
with the provisions hereof and (iii) shall not exceed for any Bank at any
time outstanding that aggregate principal amount which, when added to the
product of (x) such Bank's Percentage and (y) the sum of (I) the aggregate
amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) and (II) the aggregate
principal amount of all
<PAGE>
Swingline Loans then outstanding (exclusive of Swingline Loans
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans), equals the Revolving Loan
Commitment of such Bank at such time.
(c) Subject to and upon the terms and conditions herein set
forth, the Swingline Bank agrees to make at any time and from time to time
after the date on which the Total Term Commitment has been reduced to zero
and prior to the Swingline Expiry Date, a loan or loans to the Borrower (each
a "Swingline Loan," and collectively, the "Swingline Loans"), which Swingline
Loans (i) shall be made and maintained as Base Rate Loans; (ii) may be repaid
and reborrowed in accordance with the provisions hereof; (iii) shall not
exceed in aggregate principal amount at any time outstanding, when combined
with the aggregate principal amount of (x) all Revolving Loans then
outstanding and (y) all Letter of Credit Outstandings at such time (exclusive
of Unpaid Drawings which are repaid with the proceeds of, and simultaneously
with the incurrence of, the respective incurrence of Swingline Loans), an
amount equal to the Total Revolving Loan Commitment at such time (after
giving effect to any reductions to the Total Revolving Loan Commitment on
such date); and (iv) shall not exceed in aggregate principal amount at any
time outstanding the Maximum Swingline Amount. The Swingline Bank shall not
be obligated to make any Swingline Loans at a time when a Bank Default exists
unless the Swingline Bank has entered into arrangements satisfactory to it
and the Borrower to eliminate the Swingline Bank's risk with respect to the
Defaulting Bank's or Banks' participation in such Swingline Loans, including
by cash collateralizing such Defaulting Bank's or Banks' Percentage of the
outstanding Swingline Loans. The Swingline Bank shall not make any Swingline
Loan after receiving a written notice from the Borrower or the Required Banks
stating that a Default or an Event of Default exists and is continuing until
such time as the Swingline Bank shall have received written notice of (i)
rescission of all such notices from the party or parties originally
delivering such notice, (ii) the waiver of such Default or Event of Default
by the Required Banks, (iii) the Agent in good faith believes that such
Default or Event of Default has ceased to exist or (iv) the consent of the
Required Banks to make Swingline Loans notwithstanding the existence of such
Default or Event of Default.
(d) On any Business Day, the Swingline Bank may, in its sole
discretion, give notice to the Banks that its outstanding Swingline Loans
shall be funded with a Borrowing of Revolving Loans, PROVIDED that such
notice shall be deemed to have been automatically given upon the occurrence
of a Default or an Event of Default under Section 10.05 or upon the exercise
of any of the remedies provided in the last paragraph of Section 10, in which
case a Borrowing of Revolving Loans constituting Base Rate Loans (each such
Borrowing, a "Mandatory Borrowing") shall be made on the immediately
succeeding Business Day from all Banks with a Revolving Loan Commitment
(without giving effect to any terminations and/or reductions thereto pursuant
to the last paragraph of Section 10) PRO RATA on the basis of their
respective Percentages (determined before giving effect to any termination of
the Revolving Loan Commitments pursuant to the last paragraph of Section 10)
and the proceeds thereof shall be applied directly to the Swingline Bank to
repay the Swingline Bank for such outstanding Swingline Loans. Each such
Bank hereby irrevocably agrees to make Revolving Loans upon one Business
Day's notice pursuant to each Mandatory Borrowing in the amount and in the
manner specified in the preceding sentence and on the date specified in
writing by the Swingline Bank
2
<PAGE>
notwithstanding (i) the amount of the Mandatory Borrowing may not comply with
the minimum amount for Borrowings otherwise required hereunder, (ii) whether
any conditions specified in Section 6 are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) the date of such Mandatory
Borrowing and (v) any reduction in the Total Revolving Loan Commitment after
any such Swingline Loans were made. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower), then each
such Bank hereby agrees that it shall forthwith purchase (as of the date the
Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to such
purchase) from the Swingline Bank (without recourse or warranty) such
participations in the outstanding Swingline Loans as shall be necessary to
cause such Banks to share in such Swingline Loans ratably based upon their
respective Percentages (determined before giving effect to any termination of
the Revolving Loan Commitments pursuant to the last paragraph of Section 10);
PROVIDED that (x) all interest payable on the Swingline Loans shall be for
the account of the Swingline Bank until the date as of which the respective
participation is required to be purchased and, to the extent attributable to
the purchased participation, shall be payable to the participant from and
after such date and (y) at the time any purchase of participations pursuant
to this sentence is actually made, the purchasing Bank shall be required to
pay the Swingline Bank interest on the principal amount of participation
purchased for each day from and including the day upon which the Mandatory
Borrowing would otherwise have occurred to but excluding the date of payment
for such participation, at the rate otherwise applicable to Revolving Loans
maintained as Base Rate Loans hereunder for each day thereafter.
1.02 MINIMUM AMOUNT OF EACH BORROWING. The aggregate
principal amount of each Borrowing under a Facility hereunder shall not be
less than the Minimum Borrowing Amount for such Facility and, if greater,
shall be in integral multiples of $1,000,000 in the case of all Loans (other
than Swingline Loans) and $100,000 in the case of Swingline Loans. More than
one Borrowing may occur on the same date, but at no time shall there be
outstanding more than four Borrowings of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires
to make a Borrowing hereunder (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to
11:00 a.m. (New York time) at least one Business Day's prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of
Base Rate Loans and at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans. Each such notice (each a "Notice of Borrowing"), except as
otherwise expressly provided in Section 1.10, shall be irrevocable and shall
be given by the Borrower in the form of EXHIBIT A-1, appropriately completed
to specify (i) the aggregate principal amount of the Loans to be made
pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a
Business Day), (iii) whether the Loans being made pursuant to such Borrowing
shall constitute Term Loans or Revolving Loans and (iv) whether the Loans
being made pursuant to such Borrowing are to be initially maintained as Base
Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest
Period to be applicable thereto. Any notice received after 11:00 a.m. (New
York time)
3
<PAGE>
shall be deemed to be received on the next succeeding Business Day. The
Agent shall promptly give each Bank which is required to make Loans of the
Tranche specified in the respective Notice of Borrowing notice of such
proposed Borrowing, of such Bank's proportionate share thereof and of the
other matters specified in the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give the Swingline Bank not later than
11:00 a.m. (New York time) on the date that the Swingline Loan is to be made,
written notice (or telephonic notice confirmed in writing) of each Swingline
Loan to be made hereunder. Each such notice shall be irrevocable and specify
in each case (A) the date of Borrowing (which shall be a Business Day) and
(B) the aggregate principal amount of Swingline Loans to be made pursuant to
such Borrowing.
(ii) Without in any way limiting the obligation of the
Borrower to confirm in writing any telephonic notice permitted to be given
hereunder, the Agent, the respective Issuing Bank (in the case of Letters of
Credit) or the Swingline Bank, as the case may be, may, prior to receipt of
written confirmation, act without liability upon the basis of telephonic
notice believed by the Agent, the respective Issuing Bank (in the case of
Letters of Credit) or the Swingline Bank, as the case may be, in good faith
to be from the Chief Executive Officer/President, the Chief Financial Officer
or Controller of the Borrower. In each such case, the Agent's, such Issuing
Bank's or the Swingline Bank's record of the terms of such telephonic notice
shall be conclusive absent manifest error.
(iii) Mandatory Borrowings shall be made upon the notice
specified in Section 1.01(d), with the Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of the Mandatory Borrowings
as set forth in Section 1.01(d).
1.04 DISBURSEMENT OF FUNDS. No later than 12:00 Noon (New
York time) on the date specified in each Notice of Borrowing (or (x) in the
case of Swingline Loans, no later than the close of business on the date
specified pursuant to Section 1.03(b)(i)) or (y) in the case of Mandatory
Borrowings, not later than 12:00 Noon (New York time) on the date specified
in Section 1.01(d)), each Bank with a Commitment of the respective Tranche
will make available its PRO RATA portion (determined in accordance with
Section 1.07) of each such Borrowing requested to be made on such date (or in
the case of Swingline Loans, the Swingline Bank shall make available the full
amount thereof). All such amounts shall be made available in Dollars and in
immediately available funds at the Payment Office of the Agent, and the Agent
will make available to the Borrower at the Payment Office the aggregate of
the amounts so made available by the Banks. Unless the Agent shall have been
notified in writing by any Bank prior to the date of Borrowing that such Bank
does not intend to make available to the Agent such Bank's portion of any
Borrowing to be made on such date, the Agent may assume that such Bank has
made such amount available to the Agent on such date of Borrowing and the
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank, the Agent shall be entitled to recover
such corresponding amount on demand from such Bank. If such Bank does not
pay such corresponding amount forthwith upon the Agent's demand therefor, the
Agent shall promptly notify the Borrower, and the Borrower shall immediately
pay such corresponding
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amount to the Agent. The Agent shall also be entitled to recover on demand
from such Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrower, until the date such
corresponding amount is recovered by the Agent, at a rate per annum equal to
(i) if recovered from such Bank, the cost to the Agent of acquiring overnight
federal funds and (ii) if recovered from the Borrower, the rate of interest
applicable to the respective Borrowing, as determined pursuant to Section
1.08. Nothing in this Section 1.04 shall be deemed to relieve any Bank from
its obligation to make Loans hereunder or to prejudice any rights which the
Borrower may have against any Bank as a result of any failure by such Bank to
make Loans hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the
principal of, and interest on, the Loans made by each Bank shall be evidenced
(i) if Term Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of EXHIBIT B-1 with blanks appropriately
completed in conformity herewith (each, a "Term Note" and, collectively, the
"Term Notes"), (ii) if Revolving Loans, by a promissory note duly executed
and delivered by the Borrower substantially in the form of EXHIBIT B-2, with
blanks appropriately completed in conformity herewith (each a "Revolving
Note" and, collectively, the "Revolving Notes"), and (iii) if Swingline
Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of EXHIBIT B-3, with blanks appropriately completed
in conformity herewith (the "Swingline Note").
(b) The Term Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the Initial Borrowing Date, (iii) be in a stated
principal amount equal to the Term Loan Commitment of such Bank on the
Initial Borrowing Date and be payable in the principal amount of the Term
Loans evidenced thereby, (iv) mature on the Term Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect of
the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to voluntary repayment as provided in Section 4.01,
and mandatory repayment as provided in Section 4.02 and (vii) be entitled to
the benefits of this Agreement and be secured by the Security Documents.
(c) The Revolving Note issued to each Bank with a Revolving
Loan Commitment shall (i) be executed by the Borrower, (ii) be payable to the
order of such Bank or its registered assigns and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Revolving
Loan Commitment of such Bank and be payable in the principal amount of the
Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan Maturity
Date, (v) bear interest as provided in the appropriate clause of Section 1.08
in respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to voluntary repayment as provided in
Section 4.01, and mandatory repayment as provided in Section 4.02 and (vii)
be entitled to the benefits of this Agreement and be secured by the Security
Documents.
(d) The Swingline Note issued to the Swingline Bank shall (i)
be executed by the Borrower, (ii) be payable to the order of the Swingline
Bank or its registered assigns and be dated the Initial Borrowing Date, (iii)
be in a stated principal amount equal to the Maximum Swingline Amount and be
payable in the principal amount of the outstanding Swingline Loans
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evidenced thereby from time to time, (iv) mature on the Swingline Expiry
Date, (v) bear interest as provided in the appropriate clause of Section 1.08
in respect of the Base Rate Loans evidenced thereby, (vi) be subject to
voluntary repayment as provided in Section 4.01, and mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this
Agreement and be secured by the Security Documents.
(e) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will prior to
any transfer of any of its Notes endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation or the making of an incorrect notation shall not affect the
Borrower's obligations in respect of such Loans.
1.06 CONVERSIONS. The Borrower shall have the option to
convert, on any Business Day, all or a portion at least equal to the
applicable Minimum Borrowing Amount for such Tranche of the outstanding
principal amount of the Loans (other than Swingline Loans, which may not be
converted pursuant to this Section 1.06), made pursuant to one or more
Borrowings (so long as of the same Tranche) of one Type of Loan into a
Borrowing or Borrowings (of the same Tranche) of the other Type of Loan;
PROVIDED that:
(i) except as otherwise provided in Section 1.10(b),
Eurodollar Loans may be converted into Base Rate Loans only on the last day
of an Interest Period applicable to the Loans being converted and no such
partial conversion of Eurodollar Loans shall reduce the outstanding principal
amount of such Eurodollar Loans made pursuant to a single Borrowing to less
than the applicable Minimum Borrowing Amount for such Tranche applicable
thereto;
(ii) Base Rate Loans may only be converted into Eurodollar
Loans if no Default or Event of Default is in existence on the date of the
conversion;
(iii) no conversion pursuant to this Section 1.06 shall result
in a greater number of Borrowings than is permitted under Section 1.02; and
(iv) prior to the Syndication Termination Date, no Loan may
be converted into Eurodollar Loans.
Each such conversion shall be effected by the Borrower by giving the Agent at
its Notice Office prior to 12:00 Noon (New York time) at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in
writing) (each a "Notice of Conversion") which notice shall be in the form of
EXHIBIT A-2, appropriately completed to specify the Loans to be so converted,
the Borrowing(s) pursuant to which such Loans were made and, if to be
converted into Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Agent shall give each Bank prompt notice of any such
proposed conversion affecting any of its Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of Loans (other than
Swingline Loans) under this Agreement shall be incurred from the Banks PRO
RATA on the basis of their respective Term Loan Commitments or Revolving Loan
Commitments, as the case may be; PROVIDED that all Borrowings of Revolving
Loans made pursuant to a Mandatory Borrowing shall
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be incurred by the Borrower from the Banks PRO RATA on the basis of their
Percentages. It is understood that no Bank shall be responsible for any
default by any other Bank of its obligation to make Loans hereunder and that
each Bank shall be obligated to make the Loans provided to be made by it
hereunder regardless of the failure of any other Bank to make its Loans
hereunder.
1.08 INTEREST. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan made to it from
the date of the Borrowing thereof until the earlier of (i) the maturity
thereof (whether by acceleration or otherwise) of such Base Rate Loan and
(ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to
Section 1.06, at a rate per annum which shall at all times be equal to the
sum of the Applicable Margin plus the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan made to it from the date of
the Borrowing thereof until the earlier of (i) the maturity thereof (whether
by acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion
of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or
1.10(b), as applicable, at a rate per annum which shall, during each Interest
Period applicable thereto, be equal to the sum of the Applicable Margin plus
the Quoted Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall, in each case, bear interest at a rate per annum equal to the
greater of (x) 2% per annum in excess of the rate otherwise applicable to
Base Rate Loans of the respective Tranche of Loans from time to time and (y)
the rate which is 2% in excess of the rate borne by such Loans. Interest
which accrues under this Section 1.08(c) shall be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Day, (ii) in respect of each Eurodollar Loan on (x) the date of any
prepayment or repayment thereof (on the amount prepaid or repaid), (y) the
date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09
or 1.10(b), as applicable (on the amount converted) and (z) on the last day
of each Interest Period applicable thereto and, in the case of an Interest
Period in excess of three months, on each date occurring at three month
intervals after the first day of such Interest Period and (iii) in respect of
each Loan, at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.
(e) Upon each Interest Determination Date, the Agent shall
determine the Quoted Rate for the Interest Period applicable to Eurodollar
Loans and shall promptly notify the Borrower and the Banks thereof. Each
such determination shall, absent manifest error, be final and conclusive and
binding on all parties hereto.
(f) All computations of interest hereunder shall be made in
accordance with Section 13.07(b).
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1.09 INTEREST PERIODS. At the time it gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Eurodollar Loan (in the case of the initial Interest Period
applicable thereto) or prior to 11:00 a.m. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to such
Eurodollar Loan (in the case of any subsequent Interest Period), the Borrower
shall have the right to elect, by giving the Agent notice thereof, the
interest period (each an "Interest Period") applicable to such Eurodollar
Loan, which Interest Period shall, at the option of the Borrower, be a one,
two, three or six-month period; PROVIDED that:
(i) all Eurodollar Loans comprising a single Borrowing shall
at all times have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan
shall commence on the date of Borrowing of such Loan (including the date of
any conversion thereto from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Loan shall commence on the day
on which the next preceding Interest Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest Period shall
end on the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED, HOWEVER, that if any Interest Period for a
Eurodollar Loan would otherwise expire on a day which is not a Business Day
but is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period for a Borrowing under a Tranche shall
be selected which extends beyond the respective Maturity Date of such Tranche;
(vi) no Interest Period may be selected at any time when any
Default or Event of Default is then in existence;
(vii) no Interest Period in respect of any Borrowing of Term
Loans shall be selected which extends beyond any date upon which a mandatory
repayment of such Term Loans will be required to be made under Section
4.02(A)(b) if, after giving effect to the selection of such Interest Period,
the aggregate principal amount of such Term Loans maintained as Eurodollar
Loans which have Interest Periods expiring after such date will be in excess
of the aggregate principal amount of such Term Loans then outstanding less
the aggregate amount of such required prepayment;
(viii) no Interest Period may be selected prior to the
Syndication Termination Date; and
(ix) no Interest Period in respect of any Borrowing of
Revolving Loans shall be selected which extends beyond any date upon which a
mandatory commitment reduction of
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the Total Revolving Loan Commitment will be required pursuant to Section
3.03(c) if, after giving effect to the selection of such Interest Period, the
aggregate principal amount of Revolving Loans maintained as Eurodollar Loans
which have interest periods expiring after such date will be in excess of the
aggregate principal amount of Revolving Loans then outstanding less the
aggregate amount of such required commitment reduction.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans the Borrower has failed to elect a new Interest
Period to be applicable to such Eurodollar Loans as provided above or a
Default or Event of Default then exists, the Borrower shall be deemed to have
elected to convert such Eurodollar Loans into Base Rate Loans effective as of
the expiration date of such current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that
any Bank shall have determined (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto but, with
respect to clause (i) below, may be made only by the Agent):
(i) on any Interest Determination Date that, by reason of
any changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of
Quoted Rate; or
(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, order, guideline or request,
such as, for example, but not limited to: (A) a change in the basis of
taxation of payments to any Bank of the principal of or interest on the Notes
or any other amounts payable hereunder (except for changes in the rate of tax
on, or determined by reference to, the net income or profits of such Bank
imposed by the jurisdiction in which its principal office or applicable
lending office is located) or (B) a change in official reserve requirements
(but, in all events, excluding reserves required under Regulation D to the
extent included in the computation of the Quoted Rate) and/or (y) other
circumstances since the date of this Agreement affecting such Bank or the
interbank Eurodollar market or the position of such Bank in such market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, (y) impossible by compliance by any Bank in good faith
with any governmental request (whether or not having the force of law) or (z)
impracticable as a result of a contingency occurring after the date of this
Agreement which materially and adversely affects the interbank Eurodollar
market;
then, and in any such event, such Bank (or the Agent, in the case of clause
(i) above) shall promptly give notice (if by telephone, promptly confirmed in
writing) to the Borrower, and, except in the case of clause (i) above, to the
Agent of such determination (which notice the Agent
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shall promptly transmit to each of the other Banks). Thereafter (x) in the
case of clause (i) above, Eurodollar Loans shall no longer be available until
such time as the Agent notifies the Borrower and the Banks that the
circumstances giving rise to such notice by the Agent no longer exist, and
any Notice of Borrowing or Notice of Conversion given by the Borrower with
respect to Eurodollar Loans which have not yet been incurred (including by
way of conversion) shall be deemed rescinded by the Borrower, (y) in the case
of clause (ii) above, the Borrower shall pay to such Bank, upon receipt of
written demand therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Bank in its sole discretion shall determine) as shall be required to
compensate such Bank for such increased costs or reductions in amounts
received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing in reasonable detail the basis for the
calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding on all the parties
hereto) and (z) in the case of clause (iii) above, the Borrower shall take
one of the actions specified in Section 1.10(b) as promptly as possible and,
in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may
(and in the case of a Eurodollar Loan affected by the circumstances described
in Section 1.10(a)(iii) shall) either (i) if the affected Eurodollar Loan is
then being made initially or pursuant to a conversion, by giving the Agent
telephonic notice (confirmed in writing) on the same date that such Borrower
was notified by the affected Bank or the Agent pursuant to Section
1.10(a)(ii) or (iii), cancel the respective Borrowing or conversion, or (ii)
if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' written notice to the Agent, require the affected Bank to
convert such Eurodollar Loan into a Base Rate Loan; PROVIDED that if more
than one Bank is affected at any time, then all affected Banks must be
treated the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date
hereof, the adoption or effectiveness of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by such Bank or any corporation
controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on such Bank's or such other corporation's capital or
assets as a consequence of such Bank's Commitment or Commitments hereunder or
its obligations hereunder to a level below that which such Bank or such other
corporation could have achieved but for such adoption, effectiveness, change
or compliance (taking into consideration such Bank's or such other
corporation's policies with respect to capital adequacy), then from time to
time, upon written demand by such Bank (with a copy to the Agent),
accompanied by the notice referred to in the last sentence of this clause
(c), the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank or such other corporation for such reduction. In
determining such additional amounts, each Bank will act reasonably and in
good faith and will use reasonable averaging and attribution methods. Each
Bank, upon determining that any additional amounts will be payable pursuant
to this Section 1.10(c), will give prompt written
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notice thereof to the Borrower (a copy of which shall be sent by such Bank to
the Agent), which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(c) upon the subsequent receipt of such notice.
A Bank's reasonable good faith determination of compensation owing under this
Section 1.10(c) shall, absent manifest error, be final and conclusive and
binding on all the parties hereto.
1.11 COMPENSATION. The Borrower shall compensate each Bank,
upon its written request (which request shall set forth in reasonable detail
the basis for requesting such compensation), for all losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other
funds required by such Bank to fund its Eurodollar Loans) which such Bank may
sustain: (i) if for any reason (other than a default by such Bank or the
Agent) a Borrowing of, or conversion from or into, Eurodollar Loans does not
occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by such Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment
made pursuant to Section 4.02 or as a result of an acceleration of the Loans
pursuant to Section 10 or as a result of the replacement of a Bank pursuant
to Section 1.12 or 13.12(b)) or conversion of any of its Eurodollar Loans
occurs on a date which is not the last day of an Interest Period with respect
thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made
on any date specified in a notice of prepayment given by such Borrower; or
(iv) as a consequence of (x) any other default by such Borrower to repay its
Loans when required by the terms of this Agreement or any Note held by such
Bank or (y) any election made pursuant to Section 1.10(b). A Bank's basis
for requesting compensation pursuant to this Section, and a Bank's
calculations of the amount thereof, shall, absent manifest error, be final
and conclusive and binding on all the parties hereto.
1.12 REPLACEMENT OF BANKS. (x) If any Bank becomes a
Defaulting Bank or otherwise defaults in its obligations to make Loans or
fund Unpaid Drawings, (y) if any Bank (other than the Agent) refuses to
consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks as
provided in Section 13.12(b) or (z) upon the occurrence of any event giving
rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c),
Section 2.06 or Section 4.04 with respect to any Bank (other than the Agent)
which results in such Bank charging to the Borrower increased costs in an
amount materially in excess of those being charged by the other Banks, then
the Borrower shall have the right, if no Default or Event of Default then
exists, to replace such Bank (the "Replaced Bank") with any other Bank or
with one or more Eligible Transferee or Transferees, none of whom shall
constitute a Defaulting Bank or shall be in default in its obligations to
make Loans or fund Unpaid Drawings at the time of such replacement
(collectively, the "Replacement Banks") reasonably acceptable to the Agent,
the Swingline Bank and each Issuing Bank with outstanding Letters of Credit
(unless the respective Replacement Bank is not acquiring any Revolving Loan
Commitment); PROVIDED that:
(i) at the time of any replacement pursuant to this Section
1.12, the Replacement Bank shall enter into one or more assignment agreements
pursuant to Section
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13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be
paid by the Replacement Bank) pursuant to which the Replacement Bank shall
acquire all of the Commitments and outstanding Loans of, and participations
in Letters of Credit by, the Replaced Bank and, in connection therewith,
shall pay to (x) the Replaced Bank in respect thereof an amount equal to the
sum of (A) an amount equal to the principal of, and all accrued interest on,
all outstanding Loans of the Replaced Bank, and (B) an amount equal to such
Replaced Bank's Percentage of all Unpaid Drawings that have been funded by
(and not reimbursed to) such Replaced Bank, together with all then unpaid
interest with respect thereto at such time and (C) an amount equal to all
accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to
Section 3.01 hereof, (y) the Issuing Bank or Banks an amount equal to such
Replaced Bank's Percentage of any Unpaid Drawing (which at such time remains
an Unpaid Drawing) to the extent such amount was not theretofore funded by
such Replaced Bank and (z) the Swingline Bank an amount equal to such Bank's
Percentage of any Mandatory Borrowing to the extent such amount was not
theretofore funded by such Replaced Bank; and
(ii) all obligations of the Borrower owing to the Replaced
Bank (other than those specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently being,
paid) shall be paid in full by the Borrower to such Replaced Bank
concurrently with such replacement.
Upon the execution of the respective assignment documentation, the payment of
amounts referred to in clauses (i) and (ii) above, recordation of the
assignment on the Register by the Agent pursuant to Section 8.16 and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Notes executed by the Borrower, the Replacement Bank shall become
a Bank hereunder and the Replaced Bank shall cease to constitute a Bank
hereunder with respect to the Loans and Commitments so transferred, except
with respect to indemnification provisions under this Agreement, which shall
survive as to such Replaced Bank and the Percentages of the Banks shall be
automatically adjusted at such time to the extent necessary to give effect to
such replacement.
1.13 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon
the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), 1.10(c), 2.06 or 4.04 with respect to such Bank, it
will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending
office for any Loans or Letters of Credit affected by such event; provided,
that such designation is made on such terms that, in the sole judgment of
such Bank, such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequences of the
event giving rise to the operation of any such Section. Nothing in this
Section 1.13 shall affect or postpone any of the obligations of the Borrower
or the right of any Bank provided in Section 1.10, 2.06 or 4.04.
Section 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms
and conditions herein set forth, the Borrower may request any Issuing Bank at
any time and from time to time after the
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date on which the Total Term Loan Commitment has been reduced to zero and
prior to the tenth Business Day immediately preceding the Revolving Loan
Maturity Date to issue, for the account of the Borrower and for the benefit
of any holder (or any trustee, agent or other similar representative for any
such holders) of L/C Supportable Indebtedness, an irrevocable standby letter
of credit in a form customarily used by such Issuing Bank or in such other
form as has been approved by such Issuing Bank in support of said L/C
Supportable Indebtedness (each such letter of credit, a "Letter of Credit"
and, collectively, the "Letters of Credit"). All Letters of Credit shall be
denominated in Dollars.
(b) Each Issuing Bank (other than Paribas) may agree in its
sole discretion and Paribas hereby agrees that it will (subject to the terms
and conditions contained herein), at any time and from time to time after the
date on which the Total Term Commitment has been reduced to zero and prior to
the tenth Business Day immediately preceding the Revolving Loan Maturity
Date, following its receipt of the respective Letter of Credit Request, issue
for the account of the Borrower one or more Letters of Credit in support of
such L/C Supportable Indebtedness as is permitted to remain outstanding
without giving rise to a Default or Event of Default hereunder; PROVIDED that
the respective Issuing Bank shall be under no obligation to issue any Letter
of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or restrain such
Issuing Bank from issuing such Letter of Credit or any requirement of law
applicable to such Issuing Bank or any request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction
over such Issuing Bank shall prohibit, or request that such Issuing Bank
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon such Issuing Bank with respect to
such Letter of Credit any restriction or reserve or capital requirement (for
which such Issuing Bank is not otherwise compensated) not in effect on the
date hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Issuing Bank as of the date hereof and
which such Issuing Bank in good faith deems material to it;
(ii) such Issuing Bank shall have received a notice of the
type described in the second sentence of Section 2.03(b) from any Bank prior
to the issuance of such Letter of Credit; or
(iii) a Bank Default exists, unless such Issuing Bank has
entered into arrangements satisfactory to it and the Borrower to eliminate
such Issuing Bank's risk with respect to the Bank which is the subject of the
Bank Default, including by cash collateralizing such Bank's Percentage of the
Letter of Credit Outstandings.
(c) Notwithstanding the foregoing, (i) no Letter of Credit
shall be issued the Stated Amount of which, when added to the Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the
date of, prior to the issuance of, the respective Letter of Credit) at such
time, would exceed (x) $1,000,000 or (y) when added to the aggregate
principal amount of all Revolving Loans then outstanding and Swingline Loans
then outstanding, the Total Revolving Loan Commitment then in effect (after
giving effect to any reductions to the Total
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<PAGE>
Revolving Loan Commitment on such date) and (ii) each Letter of Credit shall
by its terms terminate on or before the earlier of (x) the date which occurs
12 months after the date of the issuance thereof (although any such Letter of
Credit may be renewable for successive periods of up to 12 months, but not
beyond the Revolving Loan Maturity Date, if agreed by, and on terms
acceptable to, the Issuing Bank) and (y) the tenth Business Day immediately
preceding the Revolving Loan Maturity Date.
2.02 MINIMUM STATED AMOUNT. The Stated Amount of each Letter
of Credit shall be not less than $500,000 or such lesser amount as is
acceptable to the Issuing Bank.
2.03 LETTER OF CREDIT REQUESTS. (a) Whenever the Borrower
desires that a Letter of Credit be issued for its account, the Borrower shall
give the Agent and the respective Issuing Bank at least 10 Business Days' (or
such shorter period as is acceptable to the respective Issuing Bank in any
given case) written notice prior to the proposed date of issuance (which
shall be a Business Day). Each notice shall be in the form of EXHIBIT C
(each a "Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be
deemed to be a representation and warranty by the Borrower that such Letter
of Credit may be issued in accordance with, and will not violate the
requirements of, Section 2.01(c). Unless the Issuing Bank has received
notice from any Bank before it issues a Letter of Credit that one or more of
the conditions specified in Section 6 are not then satisfied, or that the
issuance of such Letter of Credit would violate Section 2.01(c), then such
Issuing Bank may issue the requested Letter of Credit for the account of the
Borrower in accordance with the Issuing Bank's usual and customary practices.
2.04 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon
the issuance by the respective Issuing Bank of any Letter of Credit, such
Issuing Bank shall be deemed to have sold and transferred to each Bank with a
Revolving Loan Commitment, other than such Issuing Bank (each such Bank, in
its capacity under this Section 2.04, a "Participant"), and each such
Participant shall be deemed irrevocably and unconditionally to have purchased
and received from such Issuing Bank, without recourse or warranty, an
undivided interest and participation, to the extent of such Participant's
Percentage in such Letter of Credit, each substitute letter of credit, each
drawing made thereunder and the obligations of the Borrower under this
Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto. Upon any change in the Revolving Loan Commitments of the
Banks pursuant to Section 13.04, it is hereby agreed that, with respect to
all outstanding Letters of Credit and Unpaid Drawings, there shall be an
automatic adjustment to the participations pursuant to this Section 2.04 to
reflect the new Percentages of the assignor and assignee Bank or of all Banks
with Revolving Loan Commitments, as the case may be.
(b) In determining whether to pay under any Letter of Credit,
the Issuing Bank shall not have any obligation relative to the respective
Participants other than to confirm that any documents required to be
delivered under such Letter of Credit appear to have been delivered and that
they appear to comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by any Issuing Bank under or
in connection with any Letter of
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<PAGE>
Credit if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for such Issuing Bank any resulting liability to
the Borrower, any Bank, any Participant or any other Person.
(c) In the event that any Issuing Bank makes any payment under
any Letter of Credit and the Borrower shall not have reimbursed such amount
in full to the Issuing Bank pursuant to Section 2.05(a), such Issuing Bank
shall promptly notify the Agent, which shall promptly notify each Participant
of such failure, and each Participant shall promptly and unconditionally pay
to the Agent for the account of such Issuing Bank the amount of such
Participant's Percentage of such unreimbursed payment in Dollars and in same
day funds. If the Agent so notifies, prior to 11:00 A.M. (New York time) on
any Business Day, any Participant required to fund a payment under a Letter
of Credit, such Participant shall make available to the Agent at the Payment
Office of the Agent for the account of such Issuing Bank in Dollars such
Participant's Percentage of the amount of such payment on such Business Day
in same day funds. If and to the extent such Participant shall not have so
made its Percentage of the amount of such payment available to the Agent for
the account of such Issuing Bank, such Participant agrees to pay to the Agent
for the account of such Issuing Bank, forthwith on demand such amount,
together with interest thereon, for each day from such date until the date
such amount is paid to the Agent for the account of such Issuing Bank at the
overnight federal funds rate. The failure of any Participant to make
available to the Agent for the account of such Issuing Bank its Percentage of
any payment under any Letter of Credit shall not relieve any other
Participant of its obligation hereunder to make available to the Agent for
the account of such Issuing Bank its Percentage of any Letter of Credit on
the date required, as specified above, but no Participant shall be
responsible for the failure of any other Participant to make available to the
Agent for the account of such Issuing Bank such other Participant's
Percentage of any such payment.
(d) Whenever any Issuing Bank receives a payment of a
reimbursement obligation as to which the Agent has received for the account
of such Issuing Bank any payments from the Participants pursuant to clause
(c) above, such Issuing Bank shall pay to the Agent and the Agent shall
promptly pay each Participant which has paid its Percentage thereof, in
Dollars and in same day funds, an amount equal to such Participant's share
(based on the proportionate aggregate amount funded by such Participant to
the aggregate amount funded by all Participants) of the principal amount of
such reimbursement obligation and interest thereon accruing after the
purchase of the respective participations.
(e) The obligations of the Participants to make payments to
the Agent for the account of each Issuing Bank with respect to Letters of
Credit issued shall be irrevocable and not subject to any qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the Credit Documents;
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<PAGE>
(ii) the existence of any claim, setoff, defense or other
right which the Borrower may have at any time against a beneficiary named in
a Letter of Credit, any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), the Agent, any Participant, or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit Documents;
or
(v) the occurrence of any Default or Event of Default.
2.05 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The
Borrower hereby agrees to reimburse the respective Issuing Bank, by making
payment to the Agent in immediately available funds at the Payment Office (or
by making the payment directly to such Issuing Bank at such location as may
otherwise have been agreed upon by the Borrower and such Issuing Bank), for
any payment or disbursement made by such Issuing Bank under any Letter of
Credit (each such amount so paid until reimbursed, an "Unpaid Drawing"),
immediately after, and in any event on the date of, such payment or
disbursement, with interest on the amount so paid or disbursed by such
Issuing Bank, to the extent not reimbursed prior to 12:00 Noon (New York
time) on the date of such payment or disbursement, from and including the
date paid or disbursed to but excluding the date such Issuing Bank is
reimbursed by the Borrower therefor at a rate per annum which shall be the
Base Rate in effect from time to time plus 4-3/4% in each case with such
interest to be payable on demand.
(b) The obligations of the Borrower under this Section 2.05 to
reimburse the respective Issuing Bank with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower may have or have had
against any Bank (including in its capacity as Issuing Bank or as
Participant), including, without limitation, any defense based upon the
failure of any drawing under a Letter of Credit (each a "Drawing") to conform
to the terms of the Letter of Credit or any nonapplication or misapplication
by the beneficiary of the proceeds of such Drawing; PROVIDED, HOWEVER, that
the Borrower shall not be obligated to reimburse any Issuing Bank for any
wrongful payment made by such Issuing Bank under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross
negligence on the part of such Issuing Bank.
2.06 INCREASED COSTS. If at any time after the date hereof
any Issuing Bank or any Participant determines that the introduction of or
any change in any applicable law, rule, regulation, order, guideline or
request or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance
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<PAGE>
by such Issuing Bank or any Participant, or any corporation controlling such
Person, with any request or directive by any such authority (whether or not
having the force of law), shall either (i) impose, modify or make applicable
any reserve, deposit, capital adequacy or similar requirement against letters
of credit issued by such Issuing Bank or participated in by any Participant,
or (ii) impose on such Issuing Bank or any Participant, or any corporation
controlling such Person, any other conditions relating, directly or
indirectly, to this Agreement or any Letter of Credit; and the result of any
of the foregoing is to increase the cost to such Issuing Bank or any
Participant of issuing, maintaining or participating in any Letter of Credit,
or reduce the amount of any sum received or receivable by such Issuing Bank
or any Participant hereunder or reduce the rate of return on its capital with
respect to Letters of Credit, then, upon demand to the Borrower by such
Issuing Bank or any Participant (a copy of which demand shall be sent by such
Issuing Bank or such Participant to the Agent), the Borrower shall pay to
such Issuing Bank or such Participant such additional amount or amounts as
will compensate such Bank for such increased cost or reduction in the amount
receivable or reduction on the rate of return on its capital. Such Issuing
Bank or any Participant, upon determining that any additional amounts will be
payable pursuant to this Section 2.06, will give prompt written notice
thereof to the Borrower, which notice shall include a certificate submitted
to the Borrower by such Issuing Bank or such Participant (a copy of which
certificate shall be sent by such Issuing Bank or such Participant to the
Agent), setting forth the basis for the calculation of such additional amount
or amounts necessary to compensate such Issuing Bank or such Participant,
although failure to give any such notice shall not release or diminish the
Borrower's obligations to pay additional amounts pursuant to this Section
2.06. The certificate required to be delivered pursuant to this Section 2.06
shall, absent manifest error, be final, conclusive and binding on the
Borrower.
Section 3. FEES; REDUCTIONS OF COMMITMENT.
3.01 FEES. (a) The Borrower agrees to pay to the Agent for
distribution to each Bank with a Term Loan Commitment or a Revolving Loan
Commitment a commitment commission (the "Commitment Commission") for the
period from and including the Effective Date to and excluding the later of
(x) the date on which the Total Term Loan Commitment has been terminated in
full and (y) the Revolving Loan Maturity Date (or such earlier date as the
Total Commitment shall have been terminated) computed at a rate for each day
equal to the Applicable Commitment Commission Percentage per annum on the
daily Aggregate Unutilized Commitment of such Bank. Accrued Commitment
Commission shall be due and payable quarterly in arrears on each Quarterly
Payment Date and on the later of (x) the date on which the Total Term Loan
Commitment has been terminated in full and (y) the Revolving Loan Maturity
Date (or such earlier date upon which the Total Commitment is terminated).
(b) The Borrower agrees to pay to each Issuing Bank, for its
own account, a facing fee in respect of each Letter of Credit issued by such
Issuing Bank hereunder (the "Facing Fee"), for the period from and including
the date of issuance of such Letter of Credit to and including the date of
termination of such Letter of Credit, equal to 1/4 of 1% per annum of the
daily Stated Amount of such Letter of Credit; provided that in no event shall
the annual Facing Fee with respect to each Letter of Credit be less than
$1,000. Accrued Facing Fees shall be due and payable in arrears to the
Issuing Bank in respect of each Letter of Credit issued by it on each
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<PAGE>
Quarterly Payment Date and the first date after the termination of the Total
Revolving Loan Commitment on which no Letters of Credit remain outstanding.
(c) The Borrower agrees to pay to the Agent for distribution
to each Bank with a Revolving Loan Commitment a fee in respect of each Letter
of Credit issued hereunder (the "Letter of Credit Fee"), for the period from
and including the date of issuance of such Letter of Credit to and including
the date of termination of such Letter of Credit, computed at a rate per
annum equal to 3-3/4% of the daily Stated Amount of such Letter of Credit.
Letter of Credit Fees shall be distributed by the Agent to the Banks on the
basis of the respective Percentages as in effect from time to time. Accrued
Letter of Credit Fees shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the first date after the termination of the
Total Revolving Loan Commitment on which no Letters of Credit remain
outstanding.
(d) The Borrower hereby agrees to pay in immediately available
funds directly to the Issuing Bank upon each issuance of, drawing under,
and/or amendment of, a Letter of Credit issued by the Issuing Bank such
amount as shall at the time of such issuance, drawing or amendment be the
administrative charge which the Issuing Bank is customarily charging for
issuances of, drawings under (including wire charges) or amendments of,
letters of credit issued by it or such alternative amounts as may have been
agreed upon in writing by the Borrower and the Issuing Bank.
(e) The Borrower shall pay to the Agent when and as due, for
its own account, such fees as may be agreed to in writing from time to time
between the Borrower and the Agent.
(f) All computations of Fees shall be made in accordance with
Section 13.07(b).
3.02 VOLUNTARY TERMINATION OF UNUTILIZED COMMITMENTS. (a)
Upon at least five Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) to the Agent at its Notice Office (which
notice the Agent shall promptly transmit to each of the Banks), the Borrower
shall have the right, without premium or penalty, to terminate the Total
Unutilized Revolving Loan Commitment in whole or in part; PROVIDED that (i)
each such reduction shall apply proportionately to reduce the Revolving Loan
Commitment of each Bank with such a Commitment and (ii) any partial reduction
pursuant to this Section 3.02 shall be in an aggregate principal amount of at
least the applicable Minimum Borrowing Amount and, if greater, in integral
multiples of at least $500,000 in the case of reductions to the Total
Unutilized Revolving Loan Commitment.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 13.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Agent at its Notice Office (which notice the
Agent shall promptly transmit to each of the Banks), to terminate all of the
Revolving Loan Commitment and/or the Term Loan Commitment of such Bank, so
long as all Loans, together with accrued and unpaid interest, Fees and all
other amounts, owing to such Bank are repaid concurrently with the
effectiveness of such termination pursuant to Section 4.01(b) and the
Borrower shall pay to the Agent at such time an amount in cash and/or Cash
Equivalents
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<PAGE>
equal to such Bank's applicable Percentage of the outstanding Letters of
Credit (which cash and/or Cash Equivalents shall be held by the Agent as
security for the obligations of the Borrower hereunder in respect of the
outstanding Letters of Credit pursuant to a cash collateral agreement to be
entered into in form and substance reasonably satisfactory to the Agent, (at
which time Annex I shall be deemed modified to reflect such changed amounts),
and at such time, unless the respective Bank continues to act as a Bank with
respect to Term Loans or has a Revolving Loan Commitment or a Term Loan
Commitment hereunder, such Bank shall no longer constitute a "Bank" for
purposes of this Agreement, except with respect to indemnifications and
similar provisions under this Agreement, which shall survive as to such
repaid Bank.
3.03 MANDATORY REDUCTION OF COMMITMENTS. (a) The Total
Commitment (and the Term Loan Commitment and the Revolving Loan Commitment of
each Bank with such a Commitment) shall terminate on January 15, 2000 unless
the Effective Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Term Loan Commitment (and the Term
Loan Commitment of each Bank with such a Commitment) shall (i) be reduced on
each date on which a Borrowing of Term Loans is effected by an amount equal
to the amount of such Borrowing of Term Loans made on such date, (ii)
terminate in its entirety on the Term Loan Commitment Termination Date (after
giving effect to the making of the Term Loans on such date) and (iii) prior
to the termination of the Total Term Loan Commitment as provided in clause
(ii) above, be reduced from time to time to the extent required by Section
4.02.
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Bank) shall be permanently reduced by the
amount set forth opposite each date set forth below (to the extent any day
set forth below is not a Business Day then the required date of the
commitment reduction shall be the immediately preceding Business Day):
<TABLE>
<CAPTION>
Revolving Loan Commitment Reduction Date Amount
---------------------------------------- ------
<S> <C>
March 31, 2004 $1,500,000
June 30, 2004 1,500,000
September 30, 2004 1,500,000
December 31, 2004 1,500,000
March 31, 2005 1,625,000
June 30, 2005 1,625,000
September 30, 2005 1,625,000
December 31, 2005 1,625,000
</TABLE>
(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment of each Bank
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<PAGE>
with such a Commitment) shall be reduced at the time any payment is required
to be made on the principal amount of Term Loans (or would be required to be
made of Term Loans then outstanding) pursuant to Section 4.02(B)(a), by an
amount equal to the maximum amount of Term Loans that would be required to be
repaid pursuant to Section 4.02(B)(a) assuming that Term Loans were
outstanding in an aggregate principal amount equal to the Total Term Loan
Commitment.
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Bank with such a Commitment) shall be
reduced at the time any payment is required to be made on the principal
amount of Revolving Loans (or would be required to be made if Revolving Loans
were then outstanding) pursuant to Section 4.02(B)(a), by an amount equal to
the maximum amount of Revolving Loans that would be required to be repaid
pursuant to Section 4.02(B)(a) assuming that Revolving Loans were outstanding
in an aggregate principal amount equal to the Total Revolving Loan Commitment.
(f) Each reduction to the Total Term Loan Commitment and the
Total Revolving Loan Commitment, pursuant to this Section 3.03 shall be
applied proportionately to reduce the Term Loan Commitment or the Revolving
Loan Commitment, as the case may be, of each Bank with such a Commitment.
Section 4. PREPAYMENTS; PAYMENTS; TAXES.
4.01 VOLUNTARY PREPAYMENTS. (a) The Borrower shall have the
right to prepay Loans, without premium or penalty, in whole or in part from
time to time on the following terms and conditions:
(i) the Borrower shall give the Agent prior to 11:00 a.m.
(New York time) at its Notice Office at least five Business Days' prior
written notice (and on the date of such prepayment in the case of Swingline
Loans) of its intent to prepay the Loans, whether Term Loans, Revolving Loans
or Swingline Loans shall be prepaid, the amount of such prepayment and the
Types of Loans to be prepaid and, in the case of Eurodollar Loans, the
specific Borrowing or Borrowings pursuant to which made, which notice the
Agent shall promptly transmit to each of the Banks;
(ii) each prepayment shall be in an aggregate principal
amount of at least $2 million and, if greater, in integral multiples of
$500,000, in the case of all Loans (other than Swingline Loans), and
$100,000, in the case of Swingline Loans; PROVIDED that no partial prepayment
of Eurodollar Loans made pursuant to any Borrowing shall reduce the
outstanding Loans made pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount;
(iii) no prepayments of Eurodollar Loans made pursuant to this
Section 4.01 may be made on a day other than the last day of an Interest
Period applicable thereto;
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(iv) each prepayment in respect of any Loans made pursuant to
a Borrowing shall be applied PRO RATA among such Loans;
(v) each prepayment of Loans pursuant to this Section 4.01
shall be applied to reduce the then remaining Scheduled Repayments in inverse
order of maturity.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 13.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Agent at its Notice Office (which notice the
Agent shall promptly transmit to each of the Banks) to repay all Loans,
together with accrued and unpaid interest, Fees and all other amounts owing
to such Bank (or owing to such Bank with respect to each Tranche which gave
rise to the need to obtain such Bank's individual consent) in accordance with
said Section 13.12(b) so long as (A) in the case of the repayment of
Revolving Loans of any Bank with a Revolving Loan Commitment pursuant to this
clause (b) the Revolving Loan Commitment of such Bank is terminated
concurrently with such repayment pursuant to Section 3.02(a) (at which time
Schedule I shall be deemed modified to reflect the changed Commitments), and
(B) in the case of the repayment of Loans of any Bank the consents required
by Section 13.12(b) in connection with the repayment pursuant to this clause
(b) shall have been obtained.
4.02 MANDATORY REPAYMENTS AND COMMITMENT REDUCTIONS.
(A) Requirements:
(a) On any day on which the sum of (x) the aggregate
outstanding principal amount of the Revolving Loans, (y) the aggregate amount
of all Swingline Loans and (z) Letter of Credit Outstandings at such time,
exceeds the Total Revolving Loan Commitment as then in effect, the Borrower
shall prepay the principal of Swingline Loans and after the Swingline Loans
have been repaid in full, the principal of Revolving Loans in an amount equal
to such excess. If, after giving effect to the prepayment of all outstanding
Swingline Loans and Revolving Loans, the aggregate amount of the Letter of
Credit Outstandings exceeds the Total Revolving Loan Commitment as then in
effect, the Borrower shall pay to the Agent at its Payment Office on such
date an amount of cash or Cash Equivalents equal to the amount of such
excess, such cash or Cash Equivalents to be held as security for all
Obligations of the Borrower hereunder with respect to the Letter of Credit
Outstandings in a cash collateral account established and maintained
(including the investments made pursuant thereto) by the Agent pursuant to a
cash collateral agreement in form and substance satisfactory to the Agent
(the "Letter of Credit Cash Collateral Account").
(b) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02(A), the Borrower shall be
required to repay on each date set forth below (to the extent any day set
forth below is not a Business Day then the required date of repayment shall
be the immediately preceding Business Day) the principal amount of Term
Loans, to the extent then outstanding, set forth below opposite such date
(each such repayment as the same may be reduced as provided in Sections 4.01
and 4.02(B), a "Scheduled Repayment"):
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<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
March 31, 2005 $ 625,000
June 30, 2005 625,000
September 30, 2005 625,000
December 31, 2005 625,000
March 31, 2006 2,500,000
June 30, 2006 2,500,000
September 30, 2006 2,500,000
December 31, 2006 2,500,000
</TABLE>
(c) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on the date of the
receipt thereof by Holdings or any of its Subsidiaries, an amount equal to:
(i) 100% of the cash proceeds (net of underwriting
discounts and commissions and all other reasonable costs associated with
such transaction) from any sale or issuance after the Effective Date of
equity of Holdings or any Subsidiary of Holdings (excluding the Initial
Equity), and
(ii) 100% of the cash proceeds (net of underwriting
discounts and commissions, loan fees and all other reasonable costs
associated with such transaction) from any incurrence of any Indebtedness
by Holdings or any Subsidiary of Holdings (other than Indebtedness
permitted by Section 9.05 as said Section is in effect on the Effective
Date),
shall be applied as provided in Section 4.02(B).
(d) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, no later than 90 days
after the last day of each fiscal year of Holdings, an amount equal to 75% of
Excess Cash Flow of Holdings and its Subsidiaries for the relevant Excess
Cash Flow Payment Period shall be applied as provided in Section 4.02(B).
(e) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on each date on or after
the Effective Date on which Holdings or any Subsidiary of Holdings receives
cash proceeds from any sale of assets or other dispositions (including
capital stock and partnership interests and securities other than capital
stock and partnership interests the proceeds from the sale of which is
recaptured under Section 4.02(A)(c), but excluding (1) sales of inventory in
the ordinary course of business and (2) the sale of obsolete, worn-out or
uneconomic equipment so long as the aggregate amount of Net Sale Proceeds
excluded pursuant to this clause (2) does not exceed $100,000 in the
aggregate for all such asset sales in any fiscal year of the Borrower), an
amount equal to 100% of the Net Sale Proceeds thereof shall be applied as
provided in Section 4.02(B).
(f) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on each date on or after
the Effective Date of the receipt thereof by
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Holdings or any Subsidiary of Holdings, an amount equal to 100% of the cash
proceeds of any Recovery Event (net of reasonable costs incurred in
connection with such Recovery Event (including the estimated marginal
increase in income taxes which will be payable as a result of such Recovery
Event by Holdings or any Subsidiary of Holdings)) shall be applied as
provided in Section 4.02(B); PROVIDED that such proceeds not in excess of
$100,000 in the aggregate for all Recovery Events occurring during one fiscal
year of the Borrower shall not be required to be so applied on such date to
the extent that the Borrower delivers a certificate to the Agent on or prior
to such date stating that such proceeds shall be used to replace or restore
any properties or assets in respect of which such proceeds were paid within a
period specified in such certificate not to exceed 180 days after the date of
receipt of such proceeds (which certificate shall set forth estimates of the
proceeds to be so expended); and PROVIDED FURTHER, that if all or any portion
of such proceeds not so applied pursuant to Section 4.02(B) are not so used
within the period specified in the proviso, such remaining portion shall be
applied on the last day of such specified period as provided in Section
4.02(B).
(g) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, all then outstanding Loans of a Tranche shall be
repaid in full on the Maturity Date for such Tranche.
(B) Application:
(a) Each mandatory repayment of Loans pursuant to Section
4.02(A)(c) through (f), inclusive, shall be applied:
(i) first, to prepay the principal of outstanding Term Loans
(or, if there are no outstanding Term Loans, to reduce the Total Term Loan
Commitment), which repayments of Term Loans (and mandatory reductions to the
Total Term Loan Commitment) shall be applied to reduce the then remaining
Scheduled Repayments in the inverse order of maturity;
(ii) second, to prepay the principal of outstanding Swingline
Loans with a corresponding reduction to the Total Revolving Loan Commitment;
(iii) third, to prepay the principal of outstanding Revolving
Loans with a corresponding reduction to the Total Revolving Loan Commitment;
(iv) fourth, to cash collateralize Letter of Credit
Outstandings by depositing cash in the Letter of Credit Cash Collateral
Account in an amount equal to such Letter of Credit Outstandings (it being
understood that the Total Revolving Loan Commitment shall be reduced by the
amount of cash collateral required to be deposited by this clause (iv)); and
(v) fifth, to reduce the remaining Total Revolving Loan
Commitment (after giving effect to any reductions thereto pursuant to the
application of preceding clauses (ii)-(iv)), with the amount of such
reduction to be deemed to be an application of proceeds for the purposes of
this Section 4.02(B)(a) even though cash is not actually applied.
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(b) Notwithstanding anything to the contrary contained in this
Section 4.02 or elsewhere in this Agreement (including, without limitation,
in Section 13.12), the Borrower shall have the option, in its sole
discretion, to give the Banks with outstanding Term Loans the option to waive
a mandatory repayment of such Loans pursuant to Section 4.02, in each case,
upon the terms and provisions set forth in this Section 4.02. If the
Borrower elects to exercise the option referred to in the preceding sentence,
the Borrower shall give to the Agent written notice of its intention to give
the Banks the right to waive a mandatory repayment at least five Business
Days prior to such repayment, which notice the Agent shall promptly forward
to all Banks with outstanding Term Loans (indicating in such notice the
amount of such repayment to be applied to each such Bank's outstanding
Revolving Loans). The Borrower's offer to permit such Banks to waive any
such mandatory repayment may apply to all or part of such repayment, PROVIDED
that any offer to waive part of such repayment must be made ratably to such
Banks on the basis of their outstanding Term Loans. In the event any such
Bank desires to waive such Bank's right to receive any such mandatory
repayment, in whole or in part, such Bank shall so advise the Agent no later
than the close of business two Business Days after the date of such notice
from the Agent, which notice shall also include the amount such Bank desires
to receive in respect of such repayment. If any Bank does not reply to the
Agent within the two Business Days, it will be deemed not to have waived any
part of such repayment. If any Bank does not specify an amount it wishes to
receive, it will be deemed to have accepted 100% of the total payment. In
the event that any such Bank waives all or part of such right to receive any
such mandatory repayment, the Agent shall apply 100% of the amount so waived
by such Bank to the Revolving Loans, Total Term Loan Commitment and other
Loans and Commitments in accordance with Section 4.02(B) as if there were no
Term Loans outstanding.
(c) With respect to each repayment of Loans required by this
Section 4.02, the Borrower may designate the Types of Loans which are to be
repaid and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings of the respective Tranche pursuant to which made; PROVIDED that:
(i) repayments of Eurodollar Loans pursuant to this Section 4.02 may only be
made on the last day of an Interest Period applicable thereto unless all
Eurodollar Loans of the respective Tranche with Interest Periods ending on
such date of required repayment and all Base Rate Loans of the respective
Tranche have been paid in full; (ii) if any repayment of Eurodollar Loans
made pursuant to a single Borrowing shall reduce the outstanding Eurodollar
Loans made pursuant to such Borrowing to an amount less than the applicable
Minimum Borrowing Amount, such Borrowing shall immediately be converted into
Base Rate Loans; and (iii) each repayment of any Loans made pursuant to a
single Borrowing shall be applied PRO RATA among such Loans. In the absence
of a designation by the Borrower as described in the preceding sentence, the
Agent shall, subject to the above, make such designation in its sole
discretion.
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made to the Agent for the account of the Bank or Banks entitled
thereto not later than 12:00 Noon (New York time) on the date when due and
shall be made in Dollars in immediately available funds at the Payment Office
of the Agent. Whenever any payment to be made hereunder or under any Note
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next
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succeeding Business Day and, with respect to payments of principal, interest
shall be payable at the applicable rate during such extension.
4.04 NET PAYMENTS. (a) All payments made by the Borrower
hereunder, or by the Borrower under any Note, will be made without setoff,
counterclaim or other defense. Except as provided in Section 4.04(b), all
such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by
any jurisdiction or by any political subdivision or taxing authority thereof
or therein with respect to such payments (but excluding, except as provided
in the second succeeding sentence, any tax imposed on or measured by the net
income of a Bank pursuant to the laws of the jurisdiction or any political
subdivision or taxing authority thereof or therein in which the principal
office or applicable lending office of such Bank is located) and all
interest, penalties or similar liabilities with respect thereto
(collectively, "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as
may be necessary so that every payment of all amounts due hereunder or under
any Note, after withholding or deduction for or on account of any Taxes, will
not be less than the amount provided for herein or in such Note. If any
amounts are payable in respect of Taxes pursuant to the preceding sentence,
then the Borrower shall be obligated to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income of
such Bank pursuant to the laws of the jurisdiction or any political
subdivision or taxing authority thereof or therein in which the principal
office or applicable lending office of such Bank is located as such Bank
shall determine are payable by such Bank in respect of such amounts so paid
to or on behalf of such Bank pursuant to the preceding sentence and in
respect of any amounts paid to or on behalf of such Bank pursuant to this
sentence. The Borrower will furnish to the Agent within 45 days after the
date of the payment of any Taxes due pursuant to applicable law certified
copies of tax receipts evidencing such payment by such Borrower. The
Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Borrower and the Agent on or prior to the Effective Date, or in the case of a
Bank that is an assignee or transferee of an interest under this Agreement
pursuant to Section 13.04 (unless the respective Bank was already a Bank
hereunder immediately prior to such assignment or transfer), on the date of
such assignment or transfer to such Bank, (i) two accurate and complete
original signed copies of Internal Revenue Service Form W-8 ECI or Form W-8
BEN (with respect to a complete exemption under an income tax treaty) (or
successor forms) certifying to such Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments to be
made under this Agreement and under any Note, or (ii) if the Bank is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot
deliver either Internal Revenue Service Form W-8 ECI or Form W-8 BEN (with
respect to a complete exemption under an income tax treaty) pursuant to
clause (i) above, (x) a certificate substantially in the form of EXHIBIT D
(any such certificate, a "Section 4.04(b)(ii) Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8 BEN (with respect to the portfolio interest exemption) (or
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successor form) certifying to such Bank's entitlement to a complete exemption
from United States withholding tax with respect to payments of interest to be
made under this Agreement and under any Note. In addition, each Bank agrees
that from time to time after the Effective Date, when a lapse in time or
change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Agent two new accurate and complete original signed copies of Internal
Revenue Service Form W-8 ECI or Form W-8 BEN (with respect to a complete
exemption under an income tax treaty), Form W-8 BEN (with respect to the
portfolio interest exemption) and a Section 4.04(b)(ii) Certificate, as the
case may be, and such other forms as may be required in order to confirm or
establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under
this Agreement and any Note, or it shall immediately notify the Borrower and
the Agent of its inability to deliver any such Form or Certificate, in which
case such Bank shall not be required to deliver any such form of certificate
pursuant to this Section 4.04(b). Notwithstanding anything to the contrary
contained in Section 4.04(a), but subject to the immediately succeeding
sentence, (x) the Borrower shall be entitled, to the extent it is required to
do so by law, to deduct or withhold income or similar taxes imposed by the
United States (or any political subdivision or taxing authority thereof or
therein) from interest, fees or other amounts payable hereunder for the
account of any Bank which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes to the extent that such Bank has not provided to the Borrower U.S.
Internal Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall be obligated pursuant to
Section 4.04(a) hereof to gross-up payments to be made to a Bank in respect
of income or similar taxes imposed by the United States if (I) such Bank has
not provided the Borrower the Internal Revenue Service Forms required to be
provided the Borrower pursuant to this Section 4.04(b) or (II) in the case of
a payment, other than interest, to a Bank described in clause (ii) above, to
the extent that such forms do not establish a complete exemption from
withholding of such taxes. Notwithstanding anything to the contrary
contained in the preceding sentence or elsewhere in this Section 4.04, the
Borrower agrees to pay additional amounts and to indemnify each Bank in the
manner set forth in Section 4.04(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any
amounts deducted or withheld by it as described in the immediately preceding
sentence as a result of any changes after the Effective Date in any
applicable law, treaty, governmental rule, regulation, guideline or order, or
in the interpretation thereof, relating to the deducting or withholding of
income or similar Taxes.
Section 5. CONDITIONS PRECEDENT TO LOANS ON THE INITIAL
BORROWING DATE. The obligation of each Bank to make Loans on the Initial
Borrowing Date is subject at the time of such Loan to the satisfaction of the
following conditions:
5.01 EXECUTION OF AGREEMENT; NOTES. On or prior to the
Initial Borrowing Date (i) the Effective Date shall have occurred and (ii)
there shall have been delivered to the Agent for the account of each of the
Banks the appropriate Term Note or Revolving Note executed by the Borrower
and for the account of the Swingline Bank, the Swingline Note executed by the
Borrower, in each case in the amount, maturity and as otherwise provided
herein.
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5.02 OFFICER'S CERTIFICATE. On the Initial Borrowing Date,
the Agent shall have received a certificate dated the Initial Borrowing Date
signed on behalf of the Borrower by the Chief Executive Officer, President or
Chief Financial Officer or any Vice President of the Borrower, stating that
all of the conditions in Sections 5.09, 5.10, 5.13, 5.15, 5.16, 6.01, 6.02,
6.03, 6.05, 6.06 and 6.07 have been satisfied on such date; PROVIDED the
certificate shall not be required to certify as to the acceptability of any
items to the Agent and/or the Banks or as to whether the Agent and/or the
Banks are satisfied with any of the matters described in said Sections.
5.03 OPINIONS OF COUNSEL. On the Initial Borrowing Date, the
Agent shall have received from: (i) Greenberg Traurig, counsel to Holdings
and its Subsidiaries, an opinion addressed to the Agent, the Collateral Agent
and each of the Banks and dated the Initial Borrowing Date covering the
matters set forth in EXHIBIT E and (ii) local counsel (satisfactory to the
Agent), legal opinions addressed to the Agent, the Collateral Agent and each
of the Banks and dated the Initial Borrowing Date covering the perfection and
priority of the security interests granted pursuant to the Security Documents
and such other matters incident to the transactions contemplated herein as
the Agent or the Required Banks shall request, with such legal opinions to be
in form and substance satisfactory to the Required Banks.
5.04 CORPORATE DOCUMENTS; PROCEEDINGS. (a) On the Initial
Borrowing Date, the Agent shall have received a certificate, dated the
Initial Borrowing Date, signed by the Chief Executive Officer, President,
Chief Financial Officer, President or any Vice President of each Credit
Party, and attested to by the Secretary or any Assistant Secretary of such
Credit Party, in the form of EXHIBIT F with appropriate insertions, together
with copies of the Certificate of Incorporation and By-Laws or Certificate of
Formation and Operating Agreement of such Credit Party and the resolutions
or, consents or similar evidence of authority of such Credit Party referred
to in such certificate, and the foregoing shall be acceptable to the Agent
and the Required Banks in their sole discretion.
(b) All corporate, limited liability company and legal
proceedings and all instruments and agreements relating to the transactions
contemplated by this Agreement and the other Documents shall be satisfactory
in form and substance to the Agent and the Required Banks, and the Agent
shall have received all information and copies of all documents and papers,
including records of corporate proceedings, limited liability company
proceedings, governmental approvals, good standing certificates and
bring-down telegrams, if any, which the Agent or the Required Banks may have
requested in connection therewith, such documents and papers where
appropriate to be certified by proper corporate or governmental authorities.
5.05 PLANS; SHAREHOLDERS' AGREEMENTS; MANAGEMENT AGREEMENTS;
EMPLOYMENT AGREEMENTS; COLLECTIVE BARGAINING AGREEMENTS; DEBT AGREEMENTS;
AFFILIATE CONTRACTS; TAX SHARING AGREEMENTS AND MATERIAL CONTRACTS. On or
prior to the Initial Borrowing Date, there shall have been delivered to the
Banks true and correct copies, certified as true and complete by an
appropriate officer of Holdings of:
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(i) all Plans (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500-series, a copy of the
most recent such report (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information), and for each Plan
that is a "single-employer plan," as defined in Section 4001(a)(15) of ERISA,
the most recently prepared actuarial valuation therefor) and any other
"employee benefit plans," as defined in Section 3(3) of ERISA, and any other
material agreements, plans or arrangements, with or for the benefit of
current or former employees of any Credit Party or any ERISA Affiliate
(provided that the foregoing shall apply in the case of any multiemployer
plan, as defined in 4001(a)(3) of ERISA, only to the extent that any document
described therein is in the possession of any Credit Party or any ERISA
Affiliate or reasonably available thereto from the sponsor or trustee of any
such plan) (collectively, the "Employee Benefit Plans");
(ii) all agreements entered into by any Credit Party
governing the terms and relative rights of its capital stock and any
agreements entered into by shareholders relating to any such entity with
respect to their capital stock (collectively, the "Shareholders' Agreements");
(iii) all agreements entered into by any Credit Party
governing the terms and relative rights of its partnership interests and any
agreements entered into by the partners relating to any such entity with
respect to their partnership interests (collectively, the "Partnership
Agreements");
(iv) all agreements with members of, or with respect, to the
management of any Credit Party other than Employment Agreements
(collectively, the "Management Agreements");
(v) any employment agreements entered into by any Credit
Party with an officer or director of any Credit Party (collectively, the
"Employment Agreements");
(vi) all collective bargaining agreements applying or
relating to any employee of any Credit Party (collectively, the "Collective
Bargaining Agreements");
(vii) all agreements evidencing or relating to Indebtedness of
any Credit Party whether or not such agreement is to remain outstanding after
giving effect to the incurrence of Loans on the Initial Borrowing Date
(collectively, the "Debt Agreements");
(viii) all tax sharing, tax allocation and other similar
agreements entered into by any Credit Party (collectively, the "Tax Sharing
Agreements");
(ix) all contracts, agreements or understandings entered into
between any Credit Party on the one hand, and any of its Affiliates, on the
other hand (collectively, the "Affiliate Contracts"); and
(x) all material contracts and licenses of any Credit Party,
that are to remain in effect after giving effect to the consummation of the
Transaction, including, without limitation, each Sprint Agreement
(collectively, the "Material Contracts");
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all of which Employee Benefit Plans, Shareholders' Agreements, Partnership
Agreements Management Agreements, Employment Agreements, Collective
Bargaining Agreements, Debt Agreements, Tax Sharing Agreements, Affiliate
Contracts and Material Contracts shall be in form and substance satisfactory
to the Agent and the Required Banks and shall be in full force and effect on
the Initial Borrowing Date.
5.06 CONSENT AND AGREEMENT. On or prior to the Initial
Borrowing Date, (i) the Consent and Agreement shall have been executed and
delivered and be in full force and effect, (ii) there shall have been
delivered to the Banks true and correct copies of the Consent and Agreement
and (iii) all terms and provisions of the Consent and Agreement shall be in
form and substance satisfactory to the Agent and the Required Banks and shall
not have been amended without the consent of the Agent and the Required Banks.
5.07 PLEDGE AGREEMENTS. (a) On the Initial Borrowing Date,
each Credit Party shall have duly authorized, executed and delivered a Pledge
Agreement substantially in the form of EXHIBIT G (as modified, supplemented
or amended from time to time, the "Pledge Agreement") and shall have
delivered to the Collateral Agent, as Pledgee thereunder, all of the Pledge
Agreement Collateral, if any, referred to therein then owned by such Credit
Party, (x) endorsed in blank in the case of promissory notes constituting
Pledge Agreement Collateral and (y) together with executed and undated
irrevocable stock powers in the case of capital stock, or other securities,
as the case may be, constituting Pledge Agreement Collateral or other
acceptable instruments of transfer and:
(i) evidence that all other actions necessary or, in the
reasonable opinion of counsel to the Agent, appropriate to perfect and
protect the first priority security interest created by the Pledge
Agreement have been taken;
(ii) acknowledgment copies of all UCC-l financing statements
filed, registered or recorded (or other evidence satisfactory to the
Agent that there has been filed, registered or recorded all financing
statements necessary and advisable to perfect the security interest of
the Secured Creditors);
(iii) consents and/or acknowledgments from the requisite persons
to permit the granting of the security interests purported to be granted
pursuant to the Pledge Agreement as the Agent shall have reasonably
requested; and
(iv) copies of lien and judgment searches as the Agent shall
reasonably request (and such termination statements or other documents as
may be necessary to release any Lien in favor of any third party not
otherwise permitted by Section 9.01).
5.08 SECURITY AGREEMENT. On the Initial Borrowing Date, the
Borrower shall have duly authorized, executed and delivered a Security
Agreement in the form of EXHIBIT H (as modified, supplemented or amended from
time to time, the "Security Agreement") covering all of the Borrower's
present and future Security Agreement Collateral, together with:
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(i) proper financing statements (Form UCC-1 or such other
financing statements or similar notices as shall be required by local law)
fully executed for filing under the UCC or other appropriate filing offices
of each jurisdiction as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests purported to be
created by the Security Agreement;
(ii) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, listing all judgment liens, tax liens
or effective financing statements that name the Borrower or any of its
Subsidiaries, or a division or other operating unit of any such Person, as
debtor and that are filed in the jurisdictions referred to in said clause
(i), together with copies of such other financing statements (none of which
shall cover the Collateral except to the extent evidencing Permitted Liens or
for which the Collateral Agent shall receive termination statements (Form
UCC-3 or such other termination statements as shall be required by local law)
fully executed for filing);
(iii) evidence of the completion of all other recordings and
filings of, or with respect to, the Security Agreement as may be necessary
or, in the opinion of the Collateral Agent, desirable to perfect the security
interests intended to be created by such Security Agreement; and
(iv) evidence that all other actions necessary or, in the
opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Security Agreement have
been taken.
5.09 MATERIAL ADVERSE CHANGE, ETC. Nothing shall have
occurred (and the Banks shall have become aware of no facts or conditions not
previously known) which the Agent or the Required Banks shall determine (a)
could reasonably be expected to have a material adverse effect on the rights
or remedies of the Banks or the Agent, or on the ability of any Credit Party
to perform their obligations to the Agent and the Banks under this Agreement
or any other Credit Document, (b) could reasonably be expected to have a
materially adverse effect on the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole or
(c) indicates the inaccuracy in any material respect of the information
previously provided to the Agent or the Banks (taken as a whole) in
connection with their analysis of the transactions contemplated hereby or
indicates that the information previously provided omitted to disclose any
material information.
5.10 LITIGATION. On the Initial Borrowing Date, no litigation
by any entity (private or governmental) shall be pending or threatened with
respect to this Agreement, any other Document or any documentation executed
in connection herewith or with respect to the transactions contemplated
hereby, or which the Agent or Required Banks shall determine could reasonably
be expected to have a materially adverse effect on the Transaction or on the
performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of Holdings and
its Subsidiaries taken as a whole.
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5.11 FEES, ETC. On each of the Effective Date and on or prior
to the Initial Borrowing Date, the Borrower shall have paid in full to the
Agent and the Banks all costs, fees and expenses (including, without
limitation, all reasonable legal fees and expenses) payable to the Agent and
the Banks to the extent then due pursuant hereto or as otherwise agreed
between the Borrower and the Agent.
5.12 SOLVENCY CERTIFICATE; INSURANCE ANALYSES. On the Initial
Borrowing Date, the Borrower shall cause to be delivered to the Agent and the
Banks: (i) a certificate from the chief financial officer of Holdings, in
the form of EXHIBIT K hereto, supporting the conclusions after giving effect
to the Transaction and the incurrence of all financings contemplated herein
that each Credit Party, and all Credit Parties taken as a whole, as the case
may be, are not insolvent and will not be rendered insolvent by the
Indebtedness incurred in connection therewith, will not be left with
unreasonably small capital with which to engage in their respective
businesses and will not have incurred debts beyond their ability to pay such
debts as they mature and become due and (ii) evidence (including, without
limitation, certificates with respect to each insurance policy listed on
Schedule II) of insurance, complying with the requirements of Section 8.03,
with respect to the business and properties of Holdings and its Subsidiaries,
in scope, form and substance satisfactory to the Agent and the Required Banks
and naming each of the Collateral Agent, the Agent and the Banks as an
additional insured and the Collateral Agent as loss payee and stating that
such insurance shall not be cancelled or revised without 30 days' prior
written notice by the insurer to the Collateral Agent.
5.13 APPROVALS. All necessary governmental and third party
approvals in connection with the Transaction and the transactions
contemplated by the Documents and otherwise referred to herein or therein
(including, but not limited to, those approvals required in respect of
existing permits, landlord consents and transfers of contract rights) shall
have been obtained and remain in effect, and all applicable waiting periods
shall have expired without any action being taken by any competent authority
which restrains, prevents or imposes, in the sole judgment of the Agent or
the Required Banks, adverse conditions upon the consummation of the
Transaction or the other transactions contemplated by the Documents and
otherwise referred to herein or therein. Additionally, there shall not exist
any judgment, order, injunction or other restraint issued or filed or a
hearing seeking injunction relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the consummation
of the Transaction, the transactions contemplated by the Documents, the
making of the Loans or the issuance of Letters of Credit.
5.14 FINANCIAL STATEMENTS; PROJECTIONS; MANAGEMENT LETTER
REPORTS. (a) On or prior to the Initial Borrowing Date, the Banks shall have
received the pro forma (after giving effect to the Transaction and the
related financing thereof) consolidated balance sheet of Holdings as at the
Initial Borrowing Date, which financial statements shall be prepared in
accordance with generally accepted accounting principles consistent with past
practices and shall be in form and substance satisfactory to the Agent and
the Required Banks, and shall not disclose any material adverse differences
in the business, properties, assets, liabilities, results of operations,
condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole from that previously disclosed to the Agent and
the Required Banks.
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(b) On the Initial Borrowing Date, the Banks shall have
received detailed consolidated financial projections, certified by the Chief
Financial Officer of Holdings, for Holdings and its Subsidiaries, which
include the projected results of Holdings, after giving effect to the
Transaction and the other transactions contemplated herein, for the period
commencing on the Initial Borrowing Date and ending after the Term Loan
Maturity Date (the "Projections"), which Projections, and the supporting
assumptions and explanations thereto, and the accounting practices and
procedures to be utilized by Holdings following the Initial Borrowing Date,
shall be satisfactory in form and substance to the Agent and the Required
Banks and shall be as set forth on Schedule IV hereto.
(c) On or prior to the Initial Borrowing Date, the Agent shall
have received a copy of any "management letter" received by Holdings or any
of its Subsidiaries from its certified public accountants.
5.15 INDEBTEDNESS. On the Initial Borrowing Date and after
giving effect to the Loans incurred on the Initial Borrowing Date and the
other transactions contemplated hereby, neither Holdings nor any of its
Subsidiaries shall have any Indebtedness or preferred stock outstanding
except for the Loans, the Senior Subordinated Notes and the Preferred Stock.
5.16 FUNDING. (a) On or prior to the Initial Borrowing Date,
Holdings shall have received cash equity contributions in an aggregate amount
of not less than $17 million (the "Initial Equity") from the issuance of the
Preferred Stock. Holdings shall have contributed all Initial Equity to the
Borrower in exchange for common limited liability company interests.
(b) On or prior to the Initial Borrowing Date, the Borrower
shall have received at least $8 million in gross proceeds from the issuance
of the Senior Subordinated Notes and there shall have been delivered to the
Banks true and correct copies of all Purchase Agreement Documents (certified
as such by an appropriate officer of the Borrower), and all of the terms and
conditions of such Purchase Agreement Documents (including, without
limitation, the maturity, subordination provisions, covenants, events of
default and interest rate) shall be in form and substance satisfactory to the
Agent and the Required Banks.
(c) On or prior to the Initial Borrowing Date, the Borrower
shall have utilized the full amount of cash proceeds received from the equity
and the Senior Subordinated Notes described in Sections 5.16(a) and (b) to
make payments owing in connection with the Transaction or for the purposes
described in the next sentence prior to or concurrently with the utilization
of any proceeds of the Loans for such purposes. To the extent the amount of
cash proceeds received from the equity and the Senior Subordinated Notes is,
on or prior to the Initial Borrowing Date, in excess of amounts required to
pay Transaction Fees and Expenses, to finance Capital Expenditures in
connection with the Borrower's build-out of the Service Area Network and
other general corporate and working capital purposes, the excess thereof
shall be deposited into a cash collateral account (the "Cash Collateral
Account") pursuant to a cash collateral agreement in the form of EXHIBIT M
(as modified, supplemented or amended from time to time, the "Cash Collateral
Agreement").
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(d) On or prior to the Initial Borrowing Date, there shall
have been delivered to the Banks true and correct copies of all Equity
Financing Documents and all of the terms and conditions of such Equity
Financing Documents (including, without limitation, with respect to the terms
of the Preferred Stock, Borrower Membership Interests, distributions, voting
and redemption rights) shall be in form and substance satisfactory to the
Agent and the Required Banks.
5.17 MORTGAGE; TITLE INSURANCE; SURVEYS; ETC. On the Initial
Borrowing Date, the Collateral Agent shall have received:
(a) fully executed counterparts of a mortgage or deed or trust
or similar documents in form and substance satisfactory to the Required Banks
(as may be amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof, each, a "Mortgage" and collectively,
"Mortgages"), which Mortgages shall cover all of the Real Property owned or
leased by Holdings or any of its Subsidiaries as designated on Schedule V
(each, a "Mortgaged Property" and collectively, the "Mortgaged Properties"),
together with evidence that counterparts of the Mortgages have been delivered
to the title insurance company insuring the Lien of the Mortgages for
recording in all places to the extent necessary or, in the opinion of the
Collateral Agent, desirable to effectively create a valid and enforceable
first priority mortgage lien on each Mortgaged Property in favor of the
Collateral Agent (or such other trustee as may be required or desired under
local law) for the benefit of the Secured Creditors;
(b) mortgagee title insurance policies in connection with the
Mortgaged Properties issued by Fidelity National Title Insurance Company of
New York or such other title insurers satisfactory to the Agent and the
Required Banks, (the "Mortgage Policies") in amounts satisfactory to the
Agent and the Required Banks assuring the Collateral Agent that the
respective Mortgages on such Mortgaged Properties are valid and enforceable
first priority mortgage liens on the respective Mortgaged Properties, free
and clear of all defects and encumbrances except Permitted Encumbrances and
such Mortgage Policies shall otherwise be in form and substance satisfactory
to the Agent and the Required Banks and shall include, as appropriate, an
endorsement for future advances under this Agreement, the Notes and the
Mortgages and for any other matter that the Agent or the Required Banks in
their discretion may reasonably request, shall not include an exception for
mechanics' liens, and shall provide for affirmative insurance and such
reinsurance (including direct access agreements) as the Agent or the Required
Banks in their discretion may reasonably request;
(c) surveys in form and substance reasonably satisfactory to
the Collateral Agent of each Mortgaged Property dated a recent date
acceptable to the Collateral Agent, certified in a manner satisfactory to the
Collateral Agent by a licensed professional surveyor satisfactory to the
Collateral Agent; and
(d) agreements from certain landlords of Real Property leased
by Holdings or any of its Subsidiaries acknowledging, among other things, the
Collateral Agent's security interests in property maintained on the leased
premises and waiving its own security interest, if any, thereon
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<PAGE>
and the Collateral Agent's authority to obtain access to such property and
covering such other matters as the Collateral Agent may reasonably request.
5.18 SPRINT AGREEMENTS. On or prior to the Effective Date,
(i) the Sprint Agreements shall be in full force and effect, (ii) the
Required Banks shall be satisfied with all terms and conditions of the Sprint
Agreements and (iii) all rights of the manager under the Sprint Agreements
shall have been assigned to the Borrower pursuant to documentation in form
and substance reasonably satisfactory to the Required Banks.
Section 6. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The
obligation of each Bank to make Loans (including Loans made on the Initial
Borrowing Date) and the obligation of an Issuing Bank to issue any Letter of
Credit, is subject, at the time of each such Credit Event (except as
hereinafter indicated), to the satisfaction of the following conditions:
6.01 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time
of each such Credit Event and also after giving effect thereto (i) there
shall exist no Default or Event of Default and (ii) all representations and
warranties contained herein and in the other Credit Documents shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on the date of the making of
such Credit Event.
6.02 MATERIAL ADVERSE CHANGE, ETC. Nothing shall have
occurred since December 1, 1999 which (i) could reasonably be expected to
have a material adverse effect on the rights or remedies of the Banks or the
Agent, or on the ability of any Credit Party to perform its obligations to
the Banks under this Agreement or any other Credit Document or (ii) which
could reasonably be expected to have a materially adverse effect on the
performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of Holdings and
its Subsidiaries taken as a whole.
6.03 LITIGATION. At the time of each such Credit Event and
also after giving effect thereto, no litigation by any entity (private or
governmental) shall be pending or threatened with respect to this Agreement
or any other Credit Document executed in connection herewith or the
transactions contemplated hereby or which the Required Banks shall determine
could reasonably be expected to have a materially adverse effect on the
performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of Holdings and
its Subsidiaries taken as a whole.
6.04 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. (a)
Prior to the making of each Loan (other than a Swingline Loan or a Mandatory
Borrowing), the Agent shall have received a Notice of Borrowing meeting the
requirements of Section 1.03. Prior to the making of each Swingline Loan,
the Swingline Bank shall have received the notice referred to in Section
1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the
Issuing Bank shall have received a Letter of Credit Request meeting the
requirements of Section 2.03.
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<PAGE>
6.05 PRO FORMA COMPLIANCE. At the time of each Credit Event,
the Borrower shall have delivered to each of the Banks a certificate of its
chief financial officer demonstrating that the Borrower would have complied
with the financial covenants set forth in Sections 9.09, 9.10, 9.11 and 9.13,
to the extent then applicable, at the end of the immediately preceding fiscal
quarter on a pro forma basis as if the Term Loans, Revolving Loans, Swingline
Loans or Letters of Credit had been incurred or issued at the beginning of
the period for which such financial covenants were tested at the end of such
immediately preceding fiscal quarter and determined as if all such
Indebtedness had been outstanding from the first day of the relevant
calculation period (and the interest expense associated with such
Indebtedness, shall be determined at the rates which would have been
applicable had such debt been outstanding for the whole such period).
6.06 UTILIZATION OF THE INITIAL FUNDING. At the time of the
initial Credit Event, the Borrower shall have delivered to each of the Banks
a certificate of its chief financial officer certifying that all of the
Initial Equity and the cash proceeds received from the issuance of the Senior
Subordinated Notes has been used in accordance with Section 5.16(c) and such
certificate shall provide details satisfactory to the Required Banks with
respect to such expenditures.
6.07 AGGREGATE OUTSTANDING AMOUNTS. At the time of each
Credit Event and after giving effect thereto, the aggregate outstanding
principal amount of Loans plus the aggregate amount of Letter of Credit
Outstandings shall not exceed during any fiscal quarter ending on a date set
forth below, the amount set forth below opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
-------------------- ------
<S> <C>
March 31, 2000 $ 5,000,000
June 30, 2000 7,000,000
September 30, 2000 10,000,000
December 31, 2000 12,000,000
March 31, 2001 15,000,000
June 30, 2001 18,000,000
September 30, 2001 22,000,000
December 31, 2001 and
thereafter 25,000,000
</TABLE>
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by each of Holdings and the Borrower
to each of the Banks that all the conditions specified in Section 5 and in
this Section 6 and applicable to such Credit Event exist as of that time.
All of the Notes, certificates, legal opinions and other documents and papers
referred to in Section 5 and in this Section 6, unless otherwise specified,
shall be delivered to the Agent at the Notice Office for the account of each
of the Banks and, except for the Notes, in sufficient counterparts for each
of the Banks and, unless otherwise specified, shall be in form and substance
satisfactory to the Banks.
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Section 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In
order to induce the Banks to enter into this Agreement and to make the Loans,
and issue (or participate in) the Letters of Credit as provided herein, each
of Holdings and the Borrower make the following representations, warranties
and agreements as to itself and as to each of its Subsidiaries, as of the
Initial Borrowing Date (both before and after giving effect to the Credit
Events occurring on such date, the Transaction and the other transactions
contemplated by the Documents, and all references to each of Holdings and the
Borrower herein and elsewhere in this Agreement, shall, unless otherwise
specifically indicated, be references to each of Holdings and the Borrower
after giving effect to the Transaction) and as of the date of each subsequent
Credit Event which representations, warranties and agreements shall survive
the execution and delivery of this Agreement and the Notes and any subsequent
Credit Event, with the occurrence of each Credit Event on or after the
Initial Borrowing Date being deemed to constitute a representation and
warranty that the matters specified in this Section 7 are true and correct on
and as of the Initial Borrowing Date and on the date of each such Credit
Event.
7.01 CORPORATE STATUS. Each of Holdings and its Subsidiaries
(i) is a duly organized and validly existing corporation or limited liability
company in good standing under the laws of the jurisdiction of its
organization, (ii) has the corporate or company power and authority to own
its property and assets and to transact the business in which it is engaged
and presently proposes to engage and (iii) is duly qualified and is
authorized to do business and is in good standing in each jurisdiction where
the ownership, leasing or operation of property or the conduct of its
business requires such qualifications except for failures to be so qualified
which, in the aggregate, could not reasonably be expected to have a material
adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.
7.02 CORPORATE OR COMPANY POWER AND AUTHORITY. Each of
Holdings and its Subsidiaries has the corporate or company power to execute,
deliver and perform the terms and provisions of each of the Documents to
which it is party and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of each of such Documents.
Each of Holdings and its Subsidiaries has duly executed and delivered each of
the Documents to which it is party, and each of such Documents constitutes
its legal, valid and binding obligation enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by general equitable principles (regardless of whether
the issue of enforceability is considered in a proceeding in equity or at
law).
7.03 NO VIOLATION. Neither the execution, delivery or
performance by Holdings or any of its Subsidiaries of the Documents to which
it is a party, nor compliance by it with the terms and provisions thereof,
(i) will contravene any provision of any applicable law, statute, rule or
regulation or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict with or result in any breach
of any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation
to create or impose) any Lien (except pursuant to the Security Documents)
upon any of the property or assets of Holdings or any of its Subsidiaries
pursuant to the terms of
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<PAGE>
any indenture, mortgage, deed of trust, credit agreement or loan agreement,
or any other agreement, contract or instrument to which Holdings or its
Subsidiaries is a party or by which it or any of its property or assets is
bound or to which it may be subject or (iii) will violate any provision of
the Certificate of Incorporation, By-Laws, limited liability company
agreement (or similar organizational documents) of Holdings or any of its
Subsidiaries.
7.04 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made on or prior to the Initial
Borrowing Date and are in full force and effect), or exemption by, any
governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with, (i) the execution,
delivery and performance of any Document or (ii) the legality, validity,
binding effect or enforceability of any such Document.
7.05 FINANCIAL STATEMENTS; FINANCIAL CONDITION; UNDISCLOSED
LIABILITIES; PROJECTIONS; ETC. (a) The pro forma (after giving effect to
the Transaction and the related financing thereof) consolidated balance sheet
of Holdings as at the Initial Borrowing Date, copies of which financial
statements have heretofore been furnished to each Bank, present a good faith
estimate of the pro forma financial condition of Holdings and its
Subsidiaries (after giving effect to the Transaction) on a consolidated basis
at the date thereof). Such financial statements have been prepared in
accordance with generally accepted accounting principles and practices
consistently applied except to the extent provided in the notes to said
financial statements. Since December 1, 1999, there has been no material
adverse change in the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.
(b) On and as of the Initial Borrowing Date, on a pro forma
basis after giving effect to the Transaction and all other transactions
contemplated by the Documents and to all Indebtedness (including, without
limitation, the Loans) being incurred in connection with the Transaction, and
Liens created, and to be created, by each Credit Party in connection
therewith: (a) the sum of the assets (including all contribution and
subrogation rights and other intangible assets), at a fair valuation, of each
Credit Party will exceed its debts; (b) no Credit Party has incurred or
intends to, or believes that it will, incur debts beyond its ability to pay
such debts as such debts mature; and (c) each Credit Party will have
sufficient capital with which to conduct its business. For purposes of this
Section 7.05(b) "debt" means any liability on a claim, and "claim" means (i)
right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, subordinated, disputed,
undisputed, secured or unsecured.
(c) Except as fully reflected in the financial statements and
the notes related thereto described in Section 7.05(a), there were as of the
Initial Borrowing Date (and after giving effect to the Transaction and the
other transactions contemplated hereby and by the Documents)
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<PAGE>
no liabilities or obligations with respect to Holdings or any of its
Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent
or otherwise and whether or not due) which, either individually or in
aggregate, could reasonably be expected to be material to Holdings and its
Subsidiaries taken as a whole. As of the Initial Borrowing Date, neither
Holdings nor any of its Subsidiaries knows of any basis for the assertion
against Holdings or any of its Subsidiaries of any liability or obligation of
any nature whatsoever that is not fully reflected in the financial statements
and the notes related thereto described in Section 7.05(a) which, either
individually or in the aggregate, could reasonably be expected to be material
to Holdings and its Subsidiaries taken as a whole. As of the Initial
Borrowing Date (and after giving effect to the Transaction) none of Holdings
or any of its Subsidiaries will have any outstanding Indebtedness or
preferred stock other than (i) the Loans, (ii) the Senior Subordinated Notes
and (iii) the Preferred Stock.
(d) On and as of the Initial Borrowing Date, the Projections
have been prepared in good faith by the Borrower and there are no statements
or conclusions in any of the Projections which are based upon or include
information known to Holdings and the Borrower to be misleading or which fail
to take into account material information regarding the matters reported
therein. On the Initial Borrowing Date, Holdings and the Borrower believe
that the Projections were reasonable and attainable (although actual results
may differ from the Projections and no representation is made that the
Projections will in fact be attained).
7.06 LITIGATION. There are no actions, suits or proceedings
pending or, to the best knowledge of Holdings or any of its Subsidiaries,
threatened (i) with respect to any Document, or (ii) that are reasonably
likely to materially and adversely affect the performance, business, assets,
nature of assets, liabilities, operations, properties, condition (financial
or otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.
7.07 TRUE AND COMPLETE DISCLOSURE. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf
of Holdings or any Subsidiary of Holdings in writing to any Bank (including,
without limitation, all information contained in the Documents) for purposes
of or in connection with this Agreement or any transaction contemplated
herein is, and all other such factual information (taken as a whole with all
information previously furnished) hereafter furnished by or on behalf of
Holdings or any Subsidiary of Holdings in writing to any Bank will be, true
and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact.
7.08 USE OF PROCEEDS; MARGIN REGULATIONS. (a) All proceeds
of the Loans incurred by the Borrower shall be used to finance Capital
Expenditures in connection with the Borrower's build-out of the Service Area
Network and for other general corporate and working capital purposes.
(b) No part of the proceeds of any Loan will be used to
purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof nor the occurrence of any
38
<PAGE>
other Credit Event will violate or be inconsistent with the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
7.09 TAX RETURNS AND PAYMENTS. Each of Holdings and its
Subsidiaries has timely filed or caused to be timely filed (including
pursuant to any valid extensions of time for filing) with the appropriate
taxing authority, all returns, statements, forms and reports for taxes (the
"Returns") required to be filed by or with respect to the income, properties
or operations of Holdings and/or any of its Subsidiaries. The Returns
accurately reflect in all material respects all liability for taxes of
Holdings and its Subsidiaries as a whole for the periods covered thereby.
Each of Holdings and its Subsidiaries have paid all material taxes payable by
them which have become due other than those contested in good faith and for
which adequate reserves have been established in accordance with generally
accepted accounting principles. There is no material action, suit,
proceeding, investigation, audit, or claim now pending or, to the best
knowledge of Holdings or any of its Subsidiaries, threatened by any authority
regarding any taxes relating to Holdings or any of its Subsidiaries. As of
the Initial Borrowing Date, neither Holdings nor any of its Subsidiaries has
entered into an agreement or waiver or been requested to enter into an
agreement or waiver extending any statute of limitations relating to the
payment or collection of taxes of Holdings or any of its Subsidiaries, or is
aware of any circumstances that would cause the taxable years or other
taxable periods of Holdings or any of its Subsidiaries not to be subject to
the normally applicable statute of limitations. Neither Holdings nor any of
its Subsidiaries has provided, with respect to themselves or property held by
them, any consent under Section 341 of the Code. None of Holdings or any of
its Subsidiaries has incurred, or will incur, any material tax liability in
connection with the Transaction or any other transactions contemplated
hereby.
7.10 COMPLIANCE WITH ERISA. Schedule VII sets forth each
Plan; each Plan (and each related trust, insurance contract or fund) is in
substantial compliance with its terms and with all applicable laws,
including, without limitation, ERISA and the Code; each Plan (and each
related trust, if any) which is intended to be qualified under Section 401(a)
of the Code has received a determination letter from the Internal Revenue
Service to the effect that it meets the requirements of Sections 401(a) and
501(a) of the Code; no Reportable Event has occurred; no Plan which is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent
or in reorganization; no Plan has an Unfunded Current Liability; no Plan
which is subject to Section 412 of the Code or Section 302 of ERISA has an
accumulated funding deficiency, within the meaning of such sections of the
Code or ERISA, or has applied for or received a waiver of an accumulated
funding deficiency or an extension of any amortization period, within the
meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all
contributions required to be made with respect to a Plan have been timely
made; neither Holdings nor any Subsidiary of Holdings nor any ERISA Affiliate
has incurred any material liability (including any indirect, contingent or
secondary liability) to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such
liability under any of the foregoing sections with respect to any Plan; no
condition exists which presents a material risk to Holdings or any Subsidiary
of Holdings or any ERISA Affiliate of incurring a liability to or on account
of a Plan pursuant to the foregoing provisions of ERISA and the Code; no
proceedings have been instituted to terminate or appoint a trustee to
administer any Plan which is subject to Title IV of
39
<PAGE>
ERISA; no action, suit, proceeding, hearing, audit or investigation with
respect to the administration, operation or the investment of assets of any
Plan (other than routine claims for benefits) is pending, expected or
threatened; using actuarial assumptions and computation methods consistent
with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of
Holdings, its Subsidiaries and its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event
of a complete withdrawal therefrom, as of the close of the most recent fiscal
year of each such Plan ended prior to the date of the most recent Credit
Event, would not exceed $50,000; each group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or
has covered employees or former employees of Holdings, any Subsidiary of
Holdings, or any ERISA Affiliate has at all times been operated in compliance
with the provisions of Part 6 of subtitle B of Title I of ERISA and Section
4980B of the Code; no lien imposed under the Code or ERISA on the assets of
Holdings or any Subsidiary of Holdings or any ERISA Affiliate exists or is
likely to arise on account of any Plan; and Holdings and its Subsidiaries may
cease contributions to or terminate any employee benefit plan maintained by
any of them without incurring any material liability.
7.11 THE SECURITY DOCUMENTS. (a) The provisions of the
Security Agreement are effective to create in favor of the Collateral Agent
for the benefit of the Secured Creditors a legal, valid and enforceable
security interest in all right, title and interest of the respective Credit
Parties in the Collateral described therein and the Collateral Agent, for the
benefit of the Secured Creditors, has a fully perfected Lien on, and security
interest in, all right, title and interest of the respective Credit Parties,
in all of the Collateral described therein, subject to no other Liens other
than Permitted Liens. The recordation of the Security Agreement in the
United States Patent and Trademark Office together with filings on Form UCC-1
made pursuant to the Security Agreement will be effective, under federal and
state law, to perfect the security interest granted to the Collateral Agent
in the trademarks and patents covered by the Security Agreement and the
filing of the Security Agreement with the United States Copyright Office
together with filings on Form UCC-1 made pursuant to the Security Agreement
will be effective under federal and state law to perfect the security
interest granted to the Collateral Agent in the copyrights covered by the
Security Agreement. Each of the Credit Parties party to the Security
Agreement has good and merchantable title to all Collateral described
therein, free and clear of all Liens except those described above in this
clause (a).
(b) The security interests created in favor of the Collateral
Agent, as Pledgee for the benefit of the Secured Creditors, under the Pledge
Agreements constitute first perfected security interests in the Pledged
Securities described in the Pledge Agreements, subject to no security
interests of any other Person. No filings or recordings are required in
order to perfect (or maintain the perfection or priority of) the security
interests created in the Pledged Securities and the proceeds thereof under
the Pledge Agreements.
(c) The Mortgages create, as security for the obligations
purported to be secured thereby, a valid and enforceable perfected security
interest in and Lien on all of the Mortgaged Properties in favor of the
Collateral Agent (or such other trustee as may be required or desired under
local law) for the benefit of the Secured Creditors, superior to and prior to
the rights of all third persons (except that the security interest created in
the Mortgaged Properties may be subject
40
<PAGE>
to the Permitted Encumbrances related thereto) and subject to no other Liens
(other than Permitted Liens). Schedule V contains a true and complete list
of each parcel of Real Property owned or leased by the Borrower and each of
its Subsidiaries on the Initial Borrowing Date, and the type of interest
therein held by the Borrower and/or its Subsidiaries. Each of the Borrower
and its Subsidiaries has good and marketable title at the time of the grant
thereof and at all times thereafter to all Mortgaged Properties free and
clear of all Liens except those described in the first sentence of this
subsection (c).
7.12 REPRESENTATIONS AND WARRANTIES IN DOCUMENTS. All
representations and warranties set forth in the Documents are true and
correct in all material respects at the time as of which such representations
and warranties were made and on the Initial Borrowing Date.
7.13 PROPERTIES. None of Holdings or its Subsidiaries owns
any real property. Any material Leaseholds leased by Holdings or any of its
Subsidiaries, as of the Initial Borrowing Date, and the nature of the
interest therein, is correctly set forth in Schedule V. The Real Property
leased by Holdings or its Subsidiaries is leased pursuant to valid and
enforceable leases, which are in full force and effect. All rents and
additional rents due to date under each of such Leases have been paid, and
all other obligations of the lessees thereunder have been performed. Neither
Holdings or its Subsidiaries has received notice of any default under any of
the Leases. Each of the leased Real Properties is in a state of good
maintenance and repair and is adequate and suitable for the purposes for
which it is presently being used. Neither Holdings or its Subsidiaries are a
party to any other real property leases. Holdings and its Subsidiaries will
procure executed Landlord Lender Agreements (as provided by the Agent) from
the landlords in any current and future leases.
7.14 CAPITALIZATION. (a) On the Initial Borrowing Date and
after giving effect to the Transaction, the authorized capital stock of
Holdings consists of (i) 150,000,000 shares of Common Stock, of which
3,417,000 shares are issued and outstanding and 17,008,500 shares are
reserved for issuance upon the conversion of the Preferred Stock, (ii)
16,000,000 shares of Nonvoting Common Stock, all of which are issued and
outstanding, and (iii) 125,000,000 shares of Preferred Stock, of which
17,008,500 shares are issued and outstanding; and all of which are owned by
persons and in the amounts set forth on Schedule VII hereto.
(b) On the Initial Borrowing Date and after giving effect to
the Transaction, the membership interests of the Borrower and all owners
thereof, shall be as set forth on Schedule VII.
(c) Except as set forth on Schedule VII, neither Holdings nor
any of its Subsidiaries has any outstanding securities convertible into or
exchangeable for any of its equity interests or outstanding rights to
subscribe for or to purchase, or warrants or options for the purchase, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its partnership or
other equity interests, as the case may be.
(d) On the Initial Borrowing Date (i) all outstanding shares
of Common Stock and Preferred Stock and (ii) all outstanding Borrower
Membership Interests have been duly and
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<PAGE>
validly issued, are fully paid and nonassessable and are free of any
preemptive rights. In connection with the issuance and sale of all such
Common Stock and Preferred Stock, it is not necessary to register such
securities under the Securities Act.
7.15 SUBSIDIARIES. On the Initial Borrowing Date, the
Borrower is the only direct or indirect subsidiary of Holdings.
7.16 COMPLIANCE WITH STATUTES, ETC. Each of Holdings and its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and
the ownership of its property (including applicable statutes, regulations,
orders and restrictions relating to environmental standards and controls),
except with respect to each of the foregoing such noncompliance as could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.
7.17 INVESTMENT COMPANY ACT. None of Holdings nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended.
7.18 PUBLIC UTILITY HOLDING COMPANY ACT. None of Holdings nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
7.19 ENVIRONMENTAL MATTERS. (a) Holdings and each of its
Subsidiaries have complied with, and on the date of such Credit Event are in
compliance with, in all respects, all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws except such
noncompliances which, in the aggregate, could not reasonably be expected to
have a material adverse effect on the performance, business, assets, nature
of assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.
There are no past, pending or, to the best knowledge of Holdings, threatened
material Environmental Claims against Holdings or any of its Subsidiaries or
any Real Property currently owned or operated by Holdings or any of its
Subsidiaries. There are no facts, circumstances, conditions or occurrences
concerning the business or operations of Holdings or any of its Subsidiaries
or any Real Property owned or operated at any time by Holdings or any of its
Subsidiaries or, to the knowledge of Holdings, any property adjoining any
such Real Property that could reasonably be expected (i) to form the basis of
an Environmental Claim against Holdings or any of its Subsidiaries or any
Real Property owned or operated by Holdings or any of its Subsidiaries or
(ii) to cause such Real Property to be subject to any restrictions on the
ownership, occupancy, use or transferability of such Real Property under any
Environmental Law except such Environmental Claims and restrictions which
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the performance, business, assets, nature of
assets, liabilities, operations,
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<PAGE>
properties, condition (financial or otherwise) or prospects of Holdings and
its Subsidiaries taken as a whole.
(b) Neither Holdings nor any of its Subsidiaries has, at any
time, generated, used, treated, stored, transported or released Hazardous
Materials on, to or from any Real Property at any time owned, leased or at
any time operated by Holdings or any of its Subsidiaries other than in
compliance in all material respects with Environmental Laws.
(c) There are not now and never have been any underground
storage tanks located on any Real Property owned or operated by Holdings or
any of its Subsidiaries.
(d) No Real Property owned or operated at any time by Holdings
or any of its Subsidiaries is located on any site listed on, or proposed in
the Federal Register for listing on, the Superfund National Priorities List,
or listed on the Comprehensive Environmental Response Compensation and
Liability Information System or their state equivalents.
7.20 LABOR RELATIONS. Neither Holdings nor any of its
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a material adverse effect on Holdings and its Subsidiaries
taken as a whole. There is (i) no significant unfair labor practice
complaint pending against Holdings or any of its Subsidiaries or, to the best
knowledge of Holdings, threatened against any of them, before the National
Labor Relations Board, and no significant grievance or significant
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against Holdings or any of its Subsidiaries or, to
the best knowledge of Holdings, threatened against any of them and (ii) no
significant strike, labor dispute, slowdown or stoppage pending against
Holdings or any of its Subsidiaries or, to the best knowledge of Holdings,
threatened against Holdings or any of its Subsidiaries.
7.21 PATENTS, LICENSES, FRANCHISES AND FORMULAS. (a)
Holdings, together with its Subsidiaries, has a license to use or otherwise
has the right to use, free and clear of pending or threatened Liens, all the
material patents, patent applications, trademarks, service marks, trade
names, trade secrets, copyrights, proprietary information, computer programs,
data bases, licenses, franchises and formulas, or rights with respect to the
foregoing (collectively, "Intellectual Property"), and has obtained all
licenses and other rights of whatever nature, necessary for the present
conduct of its business, without any known conflict with the rights of others
which, or the failure to obtain which, as the case may be, could reasonably
be expected to have a material adverse effect on the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries taken
as a whole.
(b) Holdings, together with its Subsidiaries, has the right to
practice under and use all of its Intellectual Property.
(c) Neither Holdings nor any of its Subsidiaries has knowledge
of any claim by any third party contesting the validity, enforceability, use
or ownership of the Intellectual Property, or of any existing state of facts
that would support a claim that use by Holdings or any of its Subsidiaries of
any such Intellectual Property has infringed or otherwise violated any
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Intellectual Property right of any other Person and that to the best
knowledge of Holdings and its Subsidiaries no claim is threatened except for
such claims that could not individually or in the aggregate reasonably be
expected to have a material adverse affect on the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries taken
as a whole.
7.22 INDEBTEDNESS. Neither Holdings nor any of its
Subsidiaries has any Indebtedness (other than the Loans and the Senior
Subordinated Notes). Schedule VII sets forth a true and complete list of all
capital stock or membership interests of Holdings and each of its
Subsidiaries as of the Initial Borrowing Date after giving effect to the
Transaction and the other transactions contemplated hereby.
7.23 RESTRICTIONS ON OR RELATING TO SUBSIDIARIES. There does
not exist any encumbrance or restriction on the ability of (i) any Subsidiary
of Holdings to pay dividends or make any other distributions on its capital
stock, partnership interests, or any other interest or participation in its
profits owned by Holdings or any Subsidiary of Holdings, or to pay any
Indebtedness owed to Holdings or a Subsidiary of Holdings, (ii) any
Subsidiary of Holdings to make loans or advances to Holdings or any of the
Holdings' Subsidiaries or (iii) Holdings or any Subsidiary of Holdings to
transfer any of its properties or assets to Holdings or any Subsidiary of
Holdings, except for such encumbrances or restrictions existing under or by
reason of (x) applicable law, (y) this Agreement, the other Credit Documents
or the Senior Subordinated Loan Documents or (z) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of Holdings or a Subsidiary of Holdings.
7.24 SPECIAL PURPOSE CORPORATION OR LIMITED LIABILITY COMPANY.
Each of Holdings and the Borrower was formed solely to enter into the Sprint
Agreements and effect the Transaction and operate the Service Area Network,
and except in connection therewith (and as contemplated by this Agreement),
as at the Effective Date has no significant assets or liabilities and has
engaged in no business activities.
7.25 THE TRANSACTION. All aspects of the Transaction have
been effected in accordance with the Documents and all applicable law. At
the time of consummation thereof, all consents and approvals of, and filings
and registrations with, and all other actions in respect of, all governmental
agencies, authorities or instrumentalities required in order to consummate
the Transaction shall have been obtained, given, filed or taken and are in
full force and effect (or effective judicial relief with respect thereto has
been obtained). All applicable waiting periods with respect thereto have or,
prior to the time when required, will have, expired without, in all such
cases, any action being taken by any competent authority which restrains,
prevents or imposes material adverse conditions upon the consummation of the
Transaction. Additionally, at the time of consummation thereof, there does
not exist any judgment, order or injunction prohibiting or imposing material
adverse conditions upon the consummation of the Transaction.
7.26 MATERIAL CONTRACTS. All Material Contracts of Holdings
and each of its Subsidiaries as of the Initial Borrowing Date (including, but
not limited to, all of the Sprint Agreements which are designated as such on
Schedule VIII) are listed on Schedule VIII.
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7.27 SENIOR SUBORDINATED NOTES. The subordination provisions
of the Senior Subordinated Notes and the senior subordinated guaranties
relating to such notes are enforceable against Holdings Subsidiaries and the
holders thereof, as the case may be, and the Loans and other Obligations
hereunder and obligations arising pursuant to the Interest Rate Protection or
Other Hedging Agreements are within the definition of "Senior Debt" included
in such subordination provisions.
7.28 YEAR 2000 REPROGRAMMING. Any reprogramming required to
permit the proper functioning, in and following the year 2000, of Holdings'
or any of its Subsidiaries', or, to the knowledge of Holdings, Sprint PCS (i)
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which Holdings' or Sprint
PCS's systems interface) and the testing of all such systems and equipment,
as so reprogrammed, shall be completed on or prior to the Initial Borrowing
Date. The costs to Holdings of such reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 (including, without
limitation, reprogramming errors and the failure of others' systems or
equipment) could not reasonably be expected to have a material adverse effect
on the performance, business, assets, nature of assets, liabilities,
operations, properties, condition (financial or otherwise) or prospects of
Holdings and its Subsidiaries taken as a whole. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of Holdings and its Subsidiaries
are, and to the knowledge of Holdings, the computer and management
information systems of Sprint PCS are, and with ordinary course upgrading and
maintenance will continue to be for the term of this Agreement, sufficient to
permit Holdings and its Subsidiaries to conduct its business without such
conduct resulting in a material adverse effect on the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries taken
as a whole.
Section 8. AFFIRMATIVE COVENANTS. Each of Holdings and the
Borrower covenants and agrees that on and after the Effective Date and until
the Total Commitment and all Letters of Credit have terminated and the Loans,
Notes and Unpaid Drawings, together with interest, Fees and all other
Obligations incurred hereunder and thereunder, are paid in full:
8.01 INFORMATION COVENANTS. Holdings will furnish, or cause
to be furnished, to the Agent:
(a) MONTHLY REPORTS. Within 30 days after the end of each
fiscal month other than the last fiscal month of any final quarter of
Holdings, the consolidated and consolidating balance sheets of Holdings and
its Subsidiaries as at the end of such month and the related consolidated and
consolidating statements of earnings for such month and for the elapsed
portion of the fiscal year ended with the last day of such month, in each
case setting forth comparative figures for the corresponding month and
elapsed portion of such fiscal year for the prior fiscal year and comparable
budgeted figures for such period, all of which shall be certified by the
chief financial officer or controller of Holdings, subject to normal year-end
audit adjustments.
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(b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the
close of each of the first three quarterly accounting periods in each fiscal
year of Holdings, the consolidated and consolidating balance sheets of
Holdings and its Subsidiaries as at the end of such quarterly period and the
related consolidated and consolidating statements of earnings and
stockholders' equity and statement of cash flows for such quarter, in each
case for such quarterly period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, in each case, setting forth
comparative figures for the related periods in the prior fiscal year and
comparable budgeted figures for such period, all of which shall be certified
by the chief financial officer or controller of Holdings, subject to normal
year-end audit adjustments and shall be accompanied by a management
discussion and analysis of the results of operations and financial condition
with respect to such period.
(c) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the
close of each fiscal year of Holdings, the consolidated and consolidating
balance sheets of Holdings and its Subsidiaries as at the end of such fiscal
year and the related consolidated and consolidating statements of earnings
and stockholders' equity and statement of cash flows for such fiscal year and
setting forth comparative figures for the preceding fiscal year and
comparable budgeted figures for such period and certified, (x) in the case of
the consolidating statements, by the chief financial officer of Holdings and
(y) in the case of the consolidated financial statements of Holdings and its
Subsidiaries, by any of the "big five" or other independent certified public
accountants of recognized national standing reasonably acceptable to the
Required Banks, together with a signed opinion of such accounting firm (which
opinion shall not be qualified in any respect) stating that in the course of
its regular audit of the financial statements of Holdings which audit was
conducted in accordance with generally accepted auditing standards, such
accounting firm obtained no knowledge of any Default or Event of Default
which has occurred and is continuing or, if in the opinion of such accounting
firm such a Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof and shall be accompanied by a management
discussion and analysis of the results of operations and financial condition
with respect to such period.
(d) MANAGEMENT LETTERS. Promptly after the receipt thereof by
Holdings or any of its Subsidiaries, a copy of any "management letter"
received by Holdings or any of its Subsidiaries from its certified public
accountants.
(e) BUDGETS. As soon as available but in no event later than
30 days after the first day of the fiscal year of Holdings, a budget for
Holdings and its Subsidiaries in form customarily prepared by Holdings
(including budgeted statements of earnings and sources and uses of cash and
balance sheets) for each calendar month of such fiscal year and on an annual
basis for the next succeeding fiscal year prepared in reasonable detail with
appropriate presentation and discussion of the principal assumptions upon
which such budgets are based, accompanied by the statement of the chief
financial officer or controller of Holdings to the effect that, to the best
of his knowledge, the budget is a reasonable estimate for the periods covered
thereby.
(f) OFFICER'S CERTIFICATES. At the time of the delivery of
the financial statements provided for in Section 8.01(a), (b) and (c), a
certificate of the chief financial officer of Holdings
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to the effect that no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which certificate, (x)
in the case of certificates delivered pursuant to Section 8.01(b) or (c),
shall set forth the calculations required to establish whether Holdings and
its Subsidiaries were in compliance with the provisions of Sections 3.03,
4.02, 9.02, 9.04, 9.05, 9.06 and 9.08 through 9.16, inclusive at the end of
such fiscal quarter or year, as the case may be, and (y) in the case of
certificates delivered pursuant to Section 8.01(c), the amount of Excess Cash
Flow for the relevant Excess Cash Flow Payment Period.
(g) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any
event within two Business Days after an officer of Holdings or any of its
Subsidiaries obtains knowledge thereof, notice of (i) the occurrence of any
event which constitutes a Default or Event of Default, (ii) any litigation or
governmental investigation or proceeding pending (x) against Holdings or its
Subsidiaries which could reasonably be expected to materially and adversely
affect the performance, business, assets, nature of assets, liabilities,
operations, properties, condition (financial or otherwise) or prospects of
Holdings and its Subsidiaries taken as a whole or (y) with respect to any
Document and (iii) any other event which could reasonably be expected to
materially and adversely affect the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.
(h) OTHER REPORTS AND FILINGS. Promptly upon transmission
thereof, copies of any financial information, proxy materials and other
information and reports, if any, which any Credit Party (x) has filed with
the Securities and Exchange Commission (the "SEC ") or (y) has delivered to
holders of, or any agent or trustee with respect to, Indebtedness of any
Credit Party in its capacity as such a holder, agent, or trustee.
(i) ENVIRONMENTAL MATTERS. Promptly upon, and in any event
within two Business Days after an officer of Holdings or of any of its
Subsidiaries obtains knowledge thereof, notice of any of the following
environmental matters (i) any pending or threatened material Environmental
Claim against Holdings or any of its Subsidiaries or any Real Property owned
or operated at any time by Holdings or any of its Subsidiaries; (ii) any
condition or occurrence on or arising from any Real Property owned or
operated at any time by Holdings or any of its Subsidiaries that (a) could
reasonably be anticipated to result in a material noncompliance by Holdings
or any of its Subsidiaries with any applicable Environmental Law, or (b)
could reasonably be anticipated to form the basis of a material Environmental
Claim against Holdings or any of its Subsidiaries or any Real Property owned
or operated by Holdings or any of its Subsidiaries; (iii) any condition or
occurrence on any Real Property owned or operated by Holdings or any of its
Subsidiaries or any property adjoining such Real Property that could
reasonably be anticipated to cause such Real Property to be subject to any
material restrictions on the ownership, occupancy, use or transferability of
such Real Property under any Environmental Law; and (iv) the taking of any
removal or remedial action in response to a material Release or material
threatened Release or the actual or alleged presence of any Hazardous
Material on or from any Real Property owned or operated at any time by
Holdings or any of its Subsidiaries in each case as required by any
Environmental Law or any governmental or other administrative
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agency. All such notices shall describe in reasonable detail the nature of
the claim, investigation, condition, occurrence or removal or remedial action
and Holdings or such Subsidiary's response thereto. In addition, Holdings
will provide the Banks with copies of all material communications with any
government or governmental agency relating to material Environmental Claims,
all material communications with any person relating to material
Environmental Claims, and such detailed reports of any Environmental Claim as
may reasonably be requested by the Required Banks.
(j) ANNUAL MEETINGS WITH BANKS. Within 120 days after the
close of each fiscal year of Holdings, Holdings shall, at the request of the
Agent or Required Banks, hold a meeting (at a mutually agreeable location and
time) with all Banks who choose to attend such meeting at which meeting shall
be reviewed the financial results of the previous fiscal year and the
financial condition of Holdings and its Subsidiaries and the budgets
presented for the current fiscal year of Holdings and its Subsidiaries.
(k) SPRINT AGREEMENTS. Promptly upon delivery or receipt
thereof, all material notices delivered by the Borrower or any of its
Affiliates pursuant to the Sprint Agreements to any of Sprint Corporation or
any of its Affiliates and any material notices delivered by Sprint
Corporation or any of its Affiliates to the Borrower or any of its Affiliates
and at least three Business Days prior to the execution and delivery thereof,
any amendments, modifications, or termination of any, and any new, Sprint
Agreement.
(l) OTHER INFORMATION. From time to time, such other
information or documents (financial or otherwise) with respect to any Credit
Party, as the Agent or the Required Banks may reasonably request.
8.02 BOOKS, RECORDS AND INSPECTIONS. Holdings will, and will
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and correct entries, in conformity with United States
generally accepted accounting principles and all requirements of law, shall
be made of all dealings and transactions in relation to its business and
activities. Holdings will, and will cause each of its Subsidiaries to,
permit officers and designated representatives of the Agent or any Bank to
visit and inspect, under guidance of officers of Holdings or of such
Subsidiary, any of the properties of Holdings or such Subsidiary, and to
examine the books of account of Holdings or such Subsidiary and discuss the
affairs, finances and accounts of Holdings or of such Subsidiary with, and be
advised as to the same by, its and their officers, all at such reasonable
times and intervals and to such reasonable extent as the Agent or such Bank
may request.
8.03 MAINTENANCE OF PROPERTY, INSURANCE. (a) Schedule II
sets forth a true and complete listing of all insurance maintained by
Holdings and each of its Subsidiaries as of the Effective Date. Holdings
will, and will cause each of its Subsidiaries to, (i) keep all material
property useful and necessary in its business in good working order and
condition (ordinary wear and tear excepted), (ii) maintain with financially
sound and reputable insurance companies insurance on all its property in at
least such amounts and against at least such risks as are described on
Schedule II, and (iii) furnish to each Bank, upon written request, full
information as
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to the insurance carried. The provisions of this Section 8.03 shall be
deemed to be supplemental to, but not duplicative of, the provisions of any
of the Security Documents that require the maintenance of insurance.
(b) Holdings will at all times keep, and will cause each of
its Subsidiaries to keep, its property insured in favor of the Collateral
Agent, and all policies (including mortgage policies) or certificates (or
certified copies thereof) with respect to such insurance (and any other
insurance maintained by Holdings or its Subsidiaries (other than employee
benefit insurance)) (i) shall be endorsed to the Collateral Agent's
satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as loss payee and naming the
Collateral Agent, the Agent and each Bank as an additional insured) with
respect to Collateral, (ii) shall state that such insurance policies shall
not be cancelled or revised without 30 days' prior written notice thereof by
the respective insurer to the Collateral Agent, (iii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Collateral Agent, (iv) shall contain the standard
noncontributory mortgagee clause endorsement in favor of the Collateral Agent
with respect to hazard insurance coverage, (v) shall provide that any losses
shall be payable notwithstanding (A) any act or neglect of Holdings or any of
its Subsidiaries, (B) the occupation or use of the properties for purposes
more hazardous than those permitted by the terms of the respective policy if
such coverage is obtainable at commercially reasonable rates and is of the
kind from time to time customarily insured against by Persons owning or using
similar property and in such amounts as are customary, (C) any foreclosure or
other proceeding relating to the insured properties or (D) any change in the
title to or ownership or possession of the insured properties and (vi) shall
be deposited with the Collateral Agent. If Holdings or any of its
Subsidiaries shall fail to maintain insurance in accordance with this Section
8.03, or if Holdings or any of its Subsidiaries shall fail to endorse and
deposit all policies or certificates with respect thereto, the Collateral
Agent shall have the right (but shall be under no obligation) to procure such
insurance and Holdings agrees, to reimburse the Collateral Agent for all
costs and expenses of procuring such insurance.
8.04 CORPORATE FRANCHISES. Holdings will do, and will cause
each of its Subsidiaries to do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its rights,
franchises, licenses and patents necessary for the operation of its
respective businesses; PROVIDED, HOWEVER, that nothing in this Section 8.04
shall prevent the withdrawal by Holdings or any Subsidiary of Holdings of its
qualification as a foreign corporation in any jurisdiction where such
withdrawal could not reasonably be expected to have a material adverse effect
on the performance, business, assets, nature of assets, liabilities,
properties, operations, condition (financial or otherwise) or prospects of
Holdings and its Subsidiaries taken as a whole.
8.05 COMPLIANCE WITH STATUTES, ETC. Holdings will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property except such noncompliances as
could not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the
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performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of or Holdings
and its Subsidiaries taken as a whole.
8.06 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) Holdings will
comply, and will cause each of its Subsidiaries to comply, in all material
respects with all Environmental Laws applicable to ownership or use of the
Real Property, will promptly pay or cause Holdings to pay all costs and
expenses incurred in such compliance, and will keep or cause to be kept all
such Real Properties free and clear of any Liens imposed pursuant to such
Environmental Laws. None of Holdings nor any Subsidiary of Holdings will
generate, use, treat, store, release or dispose of, or permit the generation,
use, treatment, storage, Release or disposal of Hazardous Materials on any
Real Property, or transport or permit the transportation of Hazardous
Materials to or from any Real Property, other than in compliance with
applicable law.
(b) At the request of the Agent or the Required Banks at any
time and from time to time during the existence of this Agreement: (i) if an
Event of Default exists under this Agreement, (ii) upon the reasonable belief
by the Agent that Holdings or any of its Subsidiaries has breached any
representation or covenant herein with respect to any environmental matters
and such breach is continuing, or (iii) in the event notice is provided under
Section 8.01(i) herein, Holdings will provide, at its sole cost and expense
(or will cause the Borrower to provide at its sole cost and expense), an
environmental site assessment report reasonable in scope concerning any Real
Property of Holdings or its Subsidiaries, prepared by an environmental
consulting firm approved by the Agent and the Required Banks, indicating the
presence or Release of Hazardous Materials on or from any of the Real
Property and the potential cost of any removal or remedial action in
connection with any Hazardous Materials on such Real Property. If Holdings
fails to provide the same after thirty days' notice, the Agent may order the
same, and Holdings shall grant and hereby grants to the Agent and the Banks
and their agents access to such Real Property and specifically grants the
Agent and the Banks an irrevocable non-exclusive license to undertake such an
assessment all at Holdings' expense.
8.07 ERISA. As soon as possible and, in any event, within ten
(10) days after Holdings, any Subsidiary of Holdings or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following,
Holdings will deliver to each of the Banks a certificate signed on behalf of
Holdings by the chief financial officer of Holding setting forth the full
details as to such occurrence and the action, if any, that Holdings, such
Subsidiary or such ERISA Affiliate is required or proposes to take, together
with any notices required or proposed to be given to or filed by Holdings,
such Subsidiary, the Plan administrator or such ERISA Affiliate to or with
the PBGC or any other government agency, or a Plan participant and any
notices received by Holdings, such Subsidiary or ERISA Affiliate from the
PBGC or any other government agency, or a Plan participant with respect
thereto: that a Reportable Event has occurred (except to the extent that
Holdings has previously delivered to the Banks a certificate and notices (if
any) concerning such event pursuant to the next clause hereof); that a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA is subject to the advance reporting requirement
of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1)
thereof), and an event described in subsection .62, .63, .64, .65, .66, .67
or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with
respect to
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such Plan within the following 30 days; that an accumulated funding
deficiency, within the meaning of Section 412 of the Code or Section 302 of
ERISA, has been incurred or an application may be or has been made for a
waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period
under Section 412 of the Code or Section 303 or 304 of ERISA with respect to
a Plan; that any contribution required to be made with respect to a Plan has
not been timely made; that a Plan has been or may beterminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Plan has an
Unfunded Current Liability; that proceedings may be or have been instituted
to terminate or appoint a trustee to administer a Plan which is subject to
Title IV of ERISA; that a proceeding has been instituted pursuant to Section
515 of ERISA to collect a delinquent contribution to a Plan; that Holdings,
any Subsidiary of Holdings or any ERISA Affiliate will or may incur any
liability (including any indirect, contingent, or secondary liability) to or
on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan
under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or
502(i) or 502(1) of ERISA or with respect to a group health plan (as defined
in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section
4980B of the Code; or that Holdings or any Subsidiary of Holdings may incur
any material liability pursuant to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides benefits to retired employees
or other former employees (other than as required by Section 601 of ERISA) or
any Plan. Holdings will deliver to each of the Banks copies of any records,
documents or other information that must be furnished to the PBGC with
respect to any Plan pursuant to Section 4010 of ERISA. Holdings will also
deliver to each of the Banks a complete copy of the annual report (on
Internal Revenue Service Form 5500-series) of each Plan (including, to the
extent required, the related financial and actuarial statements and opinions
and other supporting statements, certificates, schedules and information)
required to be filed with the Internal Revenue Service. In addition to any
certificates or notices delivered to the Banks pursuant to the first sentence
hereof, copies of annual reports and any records, documents or other
information required to be furnished to the PBGC or any other government
agency and any material notices received by Holdings, any Subsidiary of
Holdings or any ERISA Affiliate with respect to any Plan, shall be delivered
to the Banks no later than ten (10) days after the date such annual report
has been filed with the Internal Revenue Service or such records, documents
and/or information has been furnished to the PBGC or any other government
agency or such notice has been received by Holdings, the Subsidiary or the
ERISA Affiliate, as applicable.
8.08 END OF FISCAL YEARS; FISCAL QUARTERS. Holdings will
cause its, and will cause each of its Subsidiaries', fiscal years to end on
December 31 and each of its, and each of its Subsidiaries', first three
fiscal quarters to end on March 31, June 30 and September 30.
8.09 PERFORMANCE OF OBLIGATIONS. Holdings will, and will
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement and other debt
instrument by which it is bound, except such non-performances as could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.
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8.10 PAYMENT OF TAXES. Holdings will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date
on which penalties would otherwise attach thereto, and all lawful claims
which, if unpaid, might become a lien or charge upon any properties of
Holdings or any of its Subsidiaries not otherwise permitted under Section
9.01; PROVIDED that neither Holdings nor any of its Subsidiaries shall be
required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with generally accepted
accounting principles.
8.11 INTEREST RATE PROTECTION. The Borrower shall no later
than 60 days following the date on which the Total Term Loan Commitment has
been reduced to zero enter into arrangements acceptable to the Agent
establishing a fixed or maximum interest rate acceptable to the Agent for an
aggregate notional amount of at least 50% of the outstanding principal amount
of Indebtedness other than the Senior Subordinated Notes on such date for a
period of at least three years.
8.12 USE OF PROCEEDS. All proceeds of the Loans shall be used
as provided in Section 7.08.
8.13 UCC SEARCHES. On or prior to the 60th day following the
Initial Borrowing Date, Holdings shall deliver to the Agent (at Holdings' own
cost) copies of Request for Information or Copies (UCC-11), or equivalent
reports for the purpose of verifying that all financing statements necessary
or, in the opinion of the Collateral Agent desirable, to perfect the security
interests purported to be created by the Security Agreement shall have been
properly recorded and filed.
8.14 INTELLECTUAL PROPERTY RIGHTS. Holdings will, and will
cause each of its Subsidiaries to, make all filings in connection with the
transfer of the Intellectual Property rights. Holdings will, and will cause
each of its Subsidiaries to, maintain in full force and effect all
Intellectual Property rights necessary or appropriate to the business of
Holdings or any Subsidiary of Holdings and take no action (including, without
limitation, the licensing of Intellectual Property), or fail to take an
action, as the case may be, in connection with such Intellectual Property
rights which could reasonably be expected to result in a material adverse
effect on the performance, business, assets, nature of assets, liabilities,
properties, operations, condition (financial or otherwise) or prospects of
Holdings and its Subsidiaries taken as a whole. Holdings will, and will
cause each of its Subsidiaries to, diligently prosecute all pending
applications filed in connection with seeking or seeking to perfect the
Intellectual Property rights and take all other reasonable actions necessary
for the protection and maintenance of the Intellectual Property rights
necessary or appropriate to the business of Holdings or any Subsidiary of
Holdings at all times from and after the Initial Borrowing Date other than
any such actions the failure of which, in the aggregate, could not reasonably
be expected to have a material adverse effect on the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries taken
as a whole.
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<PAGE>
8.15 YEAR 2000 REPORTING. Holdings will provide the Agent and
any Bank with such information about its year 2000 computer readiness
(including, without limitation, information as to contingency plans, budgets
and testing results) as the Agent or such Bank shall reasonably request.
8.16 REGISTRY. The Borrower hereby designates the Agent to
serve as the Borrower's agent, solely for purposes of this Section 8.16, to
maintain a register (the "Register") on which it will record the Commitments
from time to time of each of the Banks, the Loans made by each of the Banks
and each repayment in respect of the principal amount of the Loans of each
Bank. Failure to make any such recordation, or any error in such recordation
shall not affect the Borrower's obligations in respect of such Loans. With
respect to any Bank, the transfer of the Commitments of such Bank and the
rights to the principal of, and interest on, any Loan made pursuant to such
Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Agent with respect to ownership of such
Commitments and Loans and prior to such recordation all amounts owing to the
transferor with respect to such Commitments and Loans shall remain owing to
the transferor. The registration of an assignment or transfer of all or part
of any Commitments and Loans shall be recorded by the Agent on the Register
only upon the acceptance by the Agent of a properly executed and delivered
assignment and assumption agreement pursuant to Section 13.04(b). Coincident
with the delivery of such an assignment and assumption agreement to the Agent
for acceptance and registration of assignment or transfer of all or part of a
Loan, or as soon thereafter as practicable, the assigning or transferor Bank
shall surrender the Note evidencing such Loan, and thereupon one or more new
Notes in the same aggregate principal amount shall be issued to the assigning
or transferor Bank and/or the new Bank. The Borrower agrees to indemnify the
Agent from and against any and all losses, claims, damages and liabilities of
whatsoever nature which may be imposed on, asserted against or incurred by
the Agent in performing its duties under this Section 8.16.
8.17 FURTHER ACTIONS. (a) Each Credit Party shall grant to
the Collateral Agent, for the benefit of the Secured Creditors, a security
interest in any Real Property owned or leased by any such Credit Party and
any other assets (exclusive of vehicles) of such Credit Party not already
subject to a Mortgage or other Security Document upon the acquisition
thereof. Each Credit Party shall take all actions requested by the Agent or
the Required Banks (including, without limitation, the execution of UCC-1
Financing Statements, obtaining of mortgage policies, title surveys and real
estate appraisals satisfying the requirements of all applicable laws) in
connection with the granting and perfection of such security interests.
Without limiting the foregoing, each Credit Party specifically agrees to
provide the Collateral Agent with written notice advising the Collateral
Agent that a Credit Party has entered into a Leasehold. Such notice shall be
delivered in the manner set forth in Section 13.03 of this Agreement, and
shall be delivered within three (3) Business Days of the execution of the
Leasehold by the Credit Party. The notice shall include a full and complete
copy of the instrument creating the Leasehold, together with all associated
documents (including, without limitation, a copy of the underlying lease for
the real property, if applicable), and a legal description of the Leasehold
adequate to enable the Collateral Agent to effectively file a UCC-1 Financing
Statement covering the fixtures, equipment and other Collateral located on or
affixed to the Leasehold.
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<PAGE>
(b) The security interests required to be granted pursuant to
clause (a) above shall be granted pursuant to mortgages, deeds of trust and
security agreements, in each case satisfactory in form and substance to the
Agent and the Required Banks, which mortgages and security agreements shall
create valid and enforceable perfected security interests prior to the rights
of all third Persons and subject to no other Liens except Permitted Liens.
The mortgages and other instruments related thereto and security agreements
shall be duly recorded or filed in such manner and in such places and at such
times as are required by law to establish, perfect, preserve and protect the
Liens, in favor of the Collateral Agent for the benefit of the Secured
Creditors, required to be granted pursuant to such documents and all taxes,
fees and other charges payable in connection therewith shall be paid in full
by the Borrower. At the time of the execution and delivery of the additional
documents, the Borrower shall cause to be delivered to the Collateral Agent
such opinions of counsel, mortgage policies, title surveys, real estate
appraisals, certificates of title and other related documents as may be
reasonably requested by the Agent or the Required Banks to assure themselves
that this Section 8.17 has been complied with.
8.18 CONCENTRATION ACCOUNT. On or prior to the Initial
Borrowing Date, Holdings shall, and shall have caused each of its
Subsidiaries to, have duly authorized, executed and delivered a Concentration
Account Consent Letter in such form as approved by the Collateral Agent (each
as modified, amended or supplemented from time to time in accordance with the
terms thereof and hereof, a "Concentration Account Consent Letter") with the
Collateral Agent and the Concentration Account Bank, acknowledging that the
Concentration Account listed on a notice sent to the Collateral Agent at the
time of creation of such account maintained at the Concentration Account Bank
is under the exclusive dominion and control of the Collateral Agent and that
all moneys, instruments and other securities deposited in such Concentration
Account are to be held by the Concentration Account Bank for the benefit of
the Collateral Agent subject to the right of the account parties to utilize
such deposited amounts in accordance with the Concentration Account Consent
Letter. Each Credit Party represents and warrants that it does not now
maintain, and will not in the future maintain, any other bank account with
any bank other than the applicable Concentration Account; PROVIDED, HOWEVER,
that each such Credit Party shall be permitted to establish new Concentration
Accounts pursuant to the terms of the Security Agreement.
8.19 OWNERSHIP OF SUBSIDIARIES. Holdings shall at all times
directly own 100% of the membership interests of the Borrower.
Section 9. NEGATIVE COVENANTS. Each of Holdings and the
Borrower hereby covenants that on and after the Effective Date and until the
Total Commitment and all Letters of Credit have terminated and the Loans,
Notes and Unpaid Drawings, together with interest, Fees and all other
Obligations incurred hereunder and thereunder, are paid in full:
9.01 LIENS. Holdings will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets (real or personal, tangible or
intangible) of Holdings or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of
54
<PAGE>
accounts receivable with recourse to Holdings or any of its Subsidiaries), or
assign any right to receive income or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute; PROVIDED that the provisions of this Section
9.01 shall not prevent Holdings or any of its Subsidiaries from creating,
incurring, assuming or permitting the existence of the following (liens
described below are herein referred to as "Permitted Liens"):
(i) inchoate Liens with respect to Holdings or any of its
Subsidiaries for taxes not yet due or Liens for taxes being contested in good
faith and by appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting principles;
(ii) Liens in respect of property or assets of the Borrower
or any of its Subsidiaries imposed by law, which were incurred in the
ordinary course of business and do not secure Indebtedness for borrowed
money, such as carriers', warehousemen's, materialmen's, mechanics' and
landlords' liens and other similar Liens arising in the ordinary course of
business, and (x) which do not in the aggregate materially detract from the
value of Holdings' or any of its Subsidiaries' property or assets or
materially impair the use thereof in the operation of the business of
Holdings or its Subsidiaries or (y) which are being contested in good faith
by appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property or assets subject to any such Lien;
(iii) Liens of Holdings or its Subsidiaries in existence on
the Initial Borrowing Date which are listed, and the property subject thereto
described, on Schedule IX, together with any refinancing, renewal or
extension thereof, provided that the outstanding principal balance of such
Indebtedness secured thereby is not increased above the amount outstanding
immediately prior to such refinancing, renewal or extension and the Liens do
not extend to any additional assets;
(iv) Liens created pursuant to the Security Documents;
(v) Liens on property of the Borrower and its Subsidiaries
subject to, and securing only, Capitalized Lease Obligations to the extent
such Capitalized Lease Obligations are permitted by Section 9.05(iii);
PROVIDED that such Liens only serve to secure the payment of Indebtedness
arising under such Capitalized Lease Obligation and the Lien encumbering the
asset giving rise to the Capitalized Lease Obligation does not encumber any
other asset of Holdings or any of its Subsidiaries;
(vi) Liens (other than any Lien imposed by ERISA) on property
of the Borrower or any of its Subsidiaries incurred or deposits made in the
ordinary course of business in connection with (x) workers' compensation,
unemployment insurance and other types of social security or (y) to secure
the performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); PROVIDED that the aggregate amount of
cash and the fair market value of the property encumbered by Liens described
in this clause (vi)(y) shall not exceed $200,000;
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<PAGE>
(vii) Liens placed upon equipment or machinery used in the
ordinary course of the business of the Borrower or any of its Subsidiaries
within 60 days following the time of purchase thereof by the Borrower or any
of its Subsidiaries and improvements and accretions thereto to secure
Indebtedness incurred to pay all or a portion of the purchase price thereof
or any Indebtedness incurred to refinance such Indebtedness, PROVIDED that
(x) the aggregate principal amount of all Indebtedness secured by Liens
permitted by this clause (vii) does not exceed at any one time outstanding
the amounts permitted pursuant to 9.05 (iii) with respect to all machinery
and equipment and (y) in all events, the Lien encumbering the equipment or
machinery so acquired and improvements and accretions thereto does not
encumber any other asset of the Borrower or any of its Subsidiaries;
(viii) Liens arising from precautionary UCC-1 financing
statement filings regarding operating leases entered into by the Borrower or
any of its Subsidiaries in the ordinary course of business; and
(ix) inchoate Liens (where there has been no execution or
levy and no pledge or delivery of collateral) arising from and out of
judgments or decrees in existence at such time not constituting an Event of
Default.
9.02 CONSOLIDATION, MERGER, PURCHASE OR SALE OF ASSETS, ETC.
Holdings will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets, or enter into any partnerships, joint ventures or sale-leaseback
transactions, or purchase or otherwise acquire (in one or a series of related
transactions) any part of the property or assets (other than purchases or
other acquisitions by the Borrower or any of its Subsidiaries of inventory,
materials and equipment in the ordinary course of business) of any Person,
except that:
(i) Capital Expenditures by the Borrower and its
Subsidiaries shall be permitted to the extent not in violation of Section
9.08;
(ii) so long as there shall not exist a Default or Event of
Default (both before and after giving effect to such sale), the Borrower and
its Subsidiaries may sell obsolete, worn-out or uneconomic equipment so long
as the aggregate amount of Net Sale Proceeds from such sales pursuant to this
clause (ii) in any one fiscal year does not exceed $200,000;
(iii) each of the Borrower and its Subsidiaries may lease (as
lessee) real or personal property to the extent permitted by Sections 9.04
and 9.08;
(iv) investments may be made to the extent permitted by
Section 9.06;
(v) each of the Borrower and its Subsidiaries may make sales
of inventory in the ordinary course of business; and
(vi) the Transaction shall be permitted as contemplated by
the Documents.
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<PAGE>
To the extent the Required Banks waive the provisions of this Section 9.02
with respect to the sale of any Collateral (to the extent the Required Banks
are permitted to waive such provisions in accordance with Section 13.12), or
any Collateral is sold as permitted by this Section 9.02, such Collateral
shall be sold free and clear of the Liens created by the Security Documents,
and the Agent and Collateral Agent shall be authorized to take any actions
deemed appropriate in order to effect the foregoing.
9.03 DIVIDENDS. Holdings will not, nor will Holdings permit
any of its Subsidiaries to, declare or pay any Dividends with respect to
Holdings or any of its Subsidiaries, except that: (i) any Subsidiary of the
Borrower may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of
the Borrower, (ii) the Borrower may pay cash Dividends to Holdings at times
and in amounts necessary for Holdings to make required federal, state or
local tax payments payable by Holdings, PROVIDED that, (x) immediately after
the receipt of such cash Dividends, Holdings uses the proceeds thereof to
make such required tax payments and (y) any refund shall be promptly returned
by Holdings to the Borrower, and (iii) the Borrower may pay dividends to
Holdings in an amount not to exceed $16,000 so long as the proceeds therefrom
are used to purchase Nonvoting Common Stock.
9.04 LEASES. Neither Holdings nor its Subsidiaries will incur
any expense (including, without limitation, operating expenses, any property
taxes paid as additional rent or lease payments, every sum or charge paid or
payable under the terms of any lease) under any agreement to rent or lease
any real or personal property (or any extension or renewal thereof)
(excluding Capitalized Lease Obligations and any expense in connection with
tower site leases entered into by the Borrower with Spectrasite in the
ordinary course of business) except the Borrower may incur such expenses in
an aggregate amount not to exceed $100,000 in any fiscal year.
9.05 INDEBTEDNESS. Holdings will not, and will not permit any
of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(ii) Indebtedness of the Borrower or any of its Subsidiaries
under any Interest Rate Protection or Other Hedging Agreement or under any
similar type of agreement to the extent such is entered into to satisfy the
requirements of Section 8.11;
(iii) Indebtedness of the Borrower and its Subsidiaries
evidenced by Capitalized Lease Obligations to the extent permitted pursuant
to Section 9.08 and Indebtedness secured by Liens permitted by Section
9.01(vii); PROVIDED that the aggregate amount of Indebtedness evidenced by
Capitalized Lease Obligations under all Capital Leases when aggregated with
the amount of Indebtedness secured by Liens permitted by Section 9.01(vii)
(I) incurred during any one year shall not exceed $100,000 and (II)
outstanding at any one time shall not exceed $1,000,000; and
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<PAGE>
(iv) Indebtedness evidenced by the Purchase Agreement
Documents in a principal amount not to exceed $8 million less the amount of
principal repayments thereof and subordinated guaranties with respect thereto
in the form agreed to on the Effective Date and from parties also
guaranteeing the Obligations on a senior basis.
9.06 ADVANCES, INVESTMENTS AND LOANS. Holdings will not, and
will not permit any of its Subsidiaries to, directly or indirectly lend money
or credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents, except that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold
receivables owing to any of them, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
terms;
(ii) Holdings and its Subsidiaries may acquire and hold cash
and Cash Equivalents; PROVIDED that (I) all such cash or Cash Equivalents
(other than up to $100,000) shall be held by Holdings or such Subsidiary in
the Concentration Account in accordance with the terms of the Concentration
Account Consent Letter; PROVIDED FURTHER, that at any time that any Revolving
Loans or Swingline Loans are outstanding, the aggregate amount of cash and
Cash Equivalents permitted to be held by Holdings and its Subsidiaries shall
not exceed (exclusive of amounts held in the Cash Collateral Account pursuant
to the Cash Collateral Agreement) $200,000 for any period of three
consecutive Business Days and (II) all proceeds from the issuance of the
Senior Subordinated Notes and the Initial Equity on or prior to the Initial
Borrowing Date not used to pay Transaction Fees and Expenses, to finance
Capital Expenditures in connection with the Borrower's build-out of the
Service Area Network and other general corporate and working capital purposes
shall be maintained in a cash collateral account pursuant to the Cash
Collateral Agreement and only released therefrom in accordance with the Cash
Collateral Agreement.
(iii) the Borrower may enter into interest rate protection
agreements to the extent such is entered into to satisfy the requirements of
Section 8.11;
(iv) the Borrower and its Subsidiaries may make Capital
Expenditures to the extent permitted by Section 9.08;
(v) the Transaction shall be permitted in accordance with
the provisions of Section 5;
(vi) the Borrower and its Subsidiaries may endorse negotiable
instruments for collection in the ordinary course of business;
(vii) the Borrower and its Subsidiaries may make loans and
advances in the ordinary course of business consistent with past practices to
their respective employees for
58
<PAGE>
moving, travel and emergency expenses and other similar expenses, so long as
the aggregate principal amount thereof at any one time outstanding
(determined without regard to any write-downs or write-offs of such loans and
advances) shall not exceed $200,000; and
(viii) Dividends may be paid to the extent permitted by Section
9.03.
9.07 TRANSACTIONS WITH AFFILIATES. Except for those
transactions listed on Schedule X, Holdings will not, and will not permit any
of its Subsidiaries to, enter into any transaction or series of related
transactions, whether or not in the ordinary course of business, with any
Affiliate of Holdings unless such transaction or series of related
transactions is in writing and on terms that are no less favorable to
Holdings or such Subsidiary, as the case may be, than those that would be
available in a comparable transaction in arm's-length dealings with an
unrelated third party; except that (i) Holdings and its Subsidiaries may
effect the Transaction, (ii) loans and advances made in accordance with
Section 9.06(vii) shall be permitted, (iii) Holdings and the Borrower may pay
customary fees to non-officer directors of the Borrower; (iv) the Borrower
and its Subsidiaries may enter into the Employment Agreements, and (v)
Dividends may be paid in accordance with Section 9.03. In no event may any
management, closing or similar fees be paid or payable by Holdings or any of
its Subsidiaries to any Affiliate of Holdings.
9.08 CAPITAL EXPENDITURES. (a) Holdings will not and will not
permit any of its Subsidiaries to, make or commit to make any expenditure for
fixed or capital assets (including, without limitation, expenditures for
maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles and including Capitalized Lease
Obligations (collectively, "Capital Expenditures"), except that the Borrower
and its Subsidiaries may make Capital Expenditures so long as the aggregate
amount thereof does not exceed during any fiscal year, the amount set forth
below opposite such date:
<TABLE>
<CAPTION>
Fiscal Year Ended Amount
----------------- ------
<S> <C>
December 31, 2000 $23,000,000
December 31, 2001 4,500,000
December 31, 2002 3,500,000
and thereafter
</TABLE>
(b) Notwithstanding anything to the contrary contained in
Section 9.08(a), to the extent that Capital Expenditures incurred during any
period set forth in Section 9.08(a) are less than the amount set forth
opposite such period above, 100% of such unused amount may be carried forward
to the immediately succeeding fiscal year and utilized to make Capital
Expenditures in excess of the amount permitted above in the following fiscal
year; PROVIDED, THAT, (x) amounts carried forward from the immediately
preceding fiscal year, if any, shall be utilized in full during the next
fiscal year to incur Capital Expenditures before the relevant amount set
forth opposite such next fiscal year shall be utilized to incur Capital
Expenditures during such fiscal year and (y) no amounts once carried forward
to the next fiscal year may be carried forward again to any fiscal year
thereafter.
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9.09 FIXED CHARGE COVERAGE RATIO. Holdings will cause the
Borrower not to permit, and the Borrower will not permit, the Fixed Charge
Coverage Ratio for any fiscal quarter ending on a date set forth below, to be
less than the ratio set forth below opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
June 30, 2003 1.00:1.00
September 30, 2003 1.10:1.00
and thereafter
</TABLE>
9.10 INTEREST COVERAGE RATIO. Holdings will cause the
Borrower not to permit, and the Borrower will not permit, the ratio of its
Consolidated EBITDA for any fiscal quarter ending on a date set forth below
to its Consolidated Interest Expense for such fiscal quarter, to be less than
the ratio set forth opposite such date below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 2003 1.25:1.00
June 30, 2003 1.50:1.00
September 30, 2003 1.75:1.00
December 31, 2003 2.00:1.00
June 30, 2004 2.75:1.00
December 31, 2004 3.50:1.00
and thereafter
</TABLE>
9.11 TOTAL CAPITAL RATIOS. (A) CONSOLIDATED INDEBTEDNESS TO
TOTAL CAPITAL. Holdings will cause the Borrower not to permit, and the
Borrower will not permit, the ratio of its Consolidated Indebtedness as at
the end of any fiscal quarter ended on a date set forth below to Total
Capital to be greater than:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 2000 0.40:1.00
June 30, 2000 0.40:1.00
September 30, 2000 0.40:1.00
December 31, 2000 0.55:1.00
March 31, 2001 0.60:1.00
June 30, 2001 0.65:1.00
and thereafter
</TABLE>
(B) CONSOLIDATED SENIOR INDEBTEDNESS TO TOTAL CAPITAL.
Holdings will cause the Borrower not to permit, and the Borrower will not
permit, the ratio of its Consolidated Senior Indebtedness as at the end of
any fiscal quarter ended on a date set forth below to its Total Capital to be
greater than:
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<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 2000 0.30:1.00
June 30, 2000 0.30:1.00
September 30, 2000 0.30:1.00
December 31, 2000 0.30:1.00
March 31, 2001 0.35:1.00
June 30, 2001 0.40:1.00
September 30, 2001 0.45:1.00
December 31, 2001 0.50:1.00
and thereafter
</TABLE>
9.12 MINIMUM COVERED POPS. The percentage of the population
(based on the most recent data released by the Census Bureau or any other
source reasonably satisfactory to the Agent) of potential Subscribers in
geographic areas where the Borrower has completed the construction of
facilities necessary to permit Subscribers in such area to utilize the
Borrower's wireless services at the end of any fiscal quarter set forth below
(the "Covered Population") shall not be less than the percentage of the
population (based on the most recent data released by the Census Bureau or
any other source reasonably satisfactory to the Agent) set forth opposite
such date below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Percentage
-------------------- ----------
<S> <C>
September 30, 2000 45.0%
December 31, 2000 60.0%
March 31, 2001 65.0%
June 30, 2001 65.0%
September 30, 2001 65.0%
December 31, 2001 70.0%
March 31, 2002 70.0%
June 30, 2002 70.0%
September 30, 2002 70.0%
December 31, 2002 72.5%
March 31, 2003 72.5%
June 30, 2003 72.5%
September 30, 2003 75.0%
and thereafter
</TABLE>
9.13 LEVERAGE RATIOS. (A) CONSOLIDATED INDEBTEDNESS TO
ANNUALIZED CONSOLIDATED EBITDA. Holdings will cause the Borrower not to
permit, and the Borrower will not permit, the ratio of Consolidated
Indebtedness as at the end of any fiscal quarter ended on a date set forth
below to Annualized Consolidated EBITDA for any fiscal quarter ending on a
date set forth below to be greater than the ratio set forth opposite such
date below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 2003 7.50:1.00
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<PAGE>
June 30, 2003 6.50:1.00
September 30, 2003 5.50:1.00
December 31, 2003 5.00:1.00
and thereafter
</TABLE>
(B) CONSOLIDATED INDEBTEDNESS TO ANNUALIZED ADJUSTED
CONSOLIDATED EBITDA. Holdings will cause the Borrower not to permit, and the
Borrower will not permit, the ratio of Consolidated Indebtedness as at the
end of any fiscal quarter ended on a date set forth below to Annualized
Adjusted Consolidated EBITDA for any fiscal quarter ending on a date set
forth below to be greater than the ratio set forth opposite such date.
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
September 30, 2001 12.00:1.00
December 31, 2001 9.00:1.00
March 31, 2002 6.00:1.00
June 30, 2002 5.00:1.00
September 30, 2002 4.50:1.00
December 31, 2002 4.00:1.00
and thereafter
</TABLE>
(C) CONSOLIDATED SENIOR INDEBTEDNESS TO ANNUALIZED
CONSOLIDATED EBITDA. Holdings will cause the Borrower not to permit, and the
Borrower will not permit, the ratio of Consolidated Senior Indebtedness as at
the end of any fiscal quarter ended on a date set forth below to Annualized
Consolidated EBTIDA for any fiscal quarter ending on a date set forth below,
to be greater than the ratio set forth opposite such date below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
December 31, 2002 12.00:1.00
March 31, 2003 6.00:1.00
June 30, 2003 5.00:1.00
September 30, 2003 4.00:1.00
December 31, 2003 3.50:1.00
and thereafter
</TABLE>
(D) CONSOLIDATED SENIOR INDEBTEDNESS TO ANNUALIZED ADJUSTED
CONSOLIDATED EBITDA. Holdings will cause the Borrower not to permit, and the
Borrower will not permit, the ratio of Consolidated Senior Indebtedness as at
the end of any fiscal quarter ended on a date set forth below to Annualized
Adjusted Consolidated EBIDTA for any fiscal quarter ending on a date set
forth below, to be greater than the ratio set forth opposite such date below:
62
<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
September 30, 2001 9.00:1.00
December 31, 2001 7.00:1.00
March 31, 2002 4.00:1.00
June 30, 2002 3.50:1.00
September 30, 2002 3.25:1.00
December 31, 2002 3.00:1.00
and thereafter
</TABLE>
9.14 MINIMUM REVENUES. Holdings will cause the Borrower not
to permit, and the Borrower will not permit, its Annualized Revenues for any
fiscal quarter ending on a date set forth below to be less than the number
set forth opposite such date set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
-------------------- ------
<S> <C>
September 30, 2000 $1,700,000
December 31, 2000 3,300,000
March 31, 2001 4,800,000
June 30, 2001 6,800,000
September 30, 2001 8,700,000
December 31, 2001 10,500,000
March 31, 2002 12,500,000
June 30, 2002 14,200,000
September 30, 2002 16,000,000
December 31, 2002 17,800,000
March 31, 2003 19,700,000
June 30, 2003 21,800,000
September 30, 2003 23,600,000
December 31, 2003 25,400,000
</TABLE>
9.15 MINIMUM SUBSCRIBERS. Holdings will cause the Borrower
not to permit, and the Borrower will not permit, the number of its
Subscribers at the end of any month occurring during a fiscal quarter ended
on a date set forth below to be less than the number of Subscribers set forth
opposite such date set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
-------------------- ------
<S> <C>
September 30, 2000 2,500
December 31, 2000 5,500
March 31, 2001 8,000
June 30, 2001 11,000
September 30, 2001 13,400
December 31, 2001 16,200
March 31, 2002 18,700
June 30, 2002 21,800
September 30, 2002 24,400
</TABLE>
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<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
-------------------- ------
<S> <C>
December 31, 2002 26,900
March 31, 2003 29,800
June 30, 2003 32,800
September 30, 2003 35,700
December 31, 2003 38,600
and thereafter
</TABLE>
9.16 CORPORATE OVERHEAD EXPENSES. Holdings will not, and will
not permit any of its Subsidiaries to, make any Corporate Overhead Expenses,
except Corporate Overhead Expenses may be made so long as the aggregate
amount thereof does not exceed during any fiscal quarter set forth below, the
amount set forth below opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
-------------------- ------
<S> <C>
March 31, 2000 $300,000
June 30, 2000 300,000
September 30, 2000 300,000
December 31, 2000 300,000
March 31, 2001 325,000
June 30, 2001 325,000
September 30, 2001 325,000
December 31, 2001 325,000
March 31, 2002 350,000
and thereafter
</TABLE>
9.17 NET SUBSCRIBER ACQUISITION COST. Holdings will cause the
Borrower not to permit, and the Borrower will not permit, the Net Subscriber
Acquisition Cost for any fiscal quarter to exceed the amount set forth
opposite such date below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
-------------------- ------
<S> <C>
September 30, 2000 $525
December 31, 2000 525
March 31, 2001 575
June 30, 2001 575
September 30, 2001 600
December 31, 2001 600
March 31, 2002 625
June 30, 2002 625
September 30, 2002 650
December 31,2002 650
March 31,2003 650
June 30, 2003 650
September 30, 2003 650
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
-------------------- ------
<S> <C>
December 31, 2003 650
</TABLE>
9.18 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATION;
LIMITATION ON MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS
CERTIFICATE OF LIMITED PARTNERSHIP, AGREEMENT OF LIMITED PARTNERSHIP AND
CERTAIN OTHER AGREEMENTS; ETC. Holdings will not, and will not permit any of
its Subsidiaries to
(i) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption (including pursuant to any
change of control provision) or acquisition for value of (including, without
limitation, by way of depositing with the trustee with respect thereto money
or securities before due for the purpose of paying when due), the Senior
Subordinated Notes or the Preferred Stock;
(ii) amend or modify, or permit the amendment or modification
of, any provision of the Documents or any agreement relating to any of the
foregoing, or the Senior Subordinated Loan Documents except for amendments
which provide for less restrictive provisions with respect to Holdings and
its Subsidiaries;
(iii) amend, modify or change its Certificate of Incorporation
(including, without limitation, by the filing or modification of any
certificate of designation), By-Laws, operating agreement or any agreement
entered into by it, with respect to its capital stock, or enter into any new
agreement with respect to its capital stock;
(iv) amend, modify or change its Certificate of Formation or
limited liability company agreement or any agreement entered into by it, with
respect to its membership interests, or enter into any new agreement with
respect to its membership interests;
(v) amend, modify or change, terminate, or enter into any
new Shareholders' Agreement;
(vi) amend, modify, change or terminate any Tax Sharing
Agreement or enter into any new Tax Sharing Agreement;
(vii) amend, modify or change, or enter into any new
Management Agreement, Employee Benefit Plan or Employment Agreement except if
the aggregate cost to Holdings and its Subsidiaries as a result of such
amendments, modifications, changes to such plans and agreements and new plans
and agreements is not reasonably likely to have a material adverse effect on
the performance, business, property, assets, nature of assets, liabilities,
condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole;
(viii) amend, modify, change or terminate any Sprint Agreement
in any material respect or enter into any new agreement with Sprint
Corporation or any of its Affiliate.
9.19 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES.
Holdings will not, and will not permit any of its Subsidiaries to, directly
or indirectly, create or otherwise cause or suffer
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to exist or become effective any encumbrance or restriction on the ability of
any Subsidiary of Holdings to (i) pay dividends or make any other
distributions on its capital stock to Holdings or any Subsidiary of Holdings
or any other interest or participation in its profits owned by Holdings or
any Subsidiary of Holdings, or pay any Indebtedness owed to Holdings or a
Subsidiary of Holdings, (ii) make loans or advances to Holdings or any of
Holdings' Subsidiaries or (iii) transfer any of its properties or assets to
Holdings or the Borrower, except for such encumbrances or restrictions
existing under or by reason of (w) applicable law, (x) this Agreement, the
other Credit Documents and the Senior Subordinated Loan Documents (y)
customary provisions restricting subletting or assignments of any lease
governing a leasehold interest of Holdings or a Subsidiary of Holdings or (z)
the asset transfer restrictions imposed by purchase money financing permitted
pursuant to Section 9.05(iii) hereof.
9.20 LIMITATION ON ISSUANCE OF EQUITY INTERESTS. (a) Holdings
will not permit any of its Subsidiaries to issue any membership interests or
other equity interests or any options or warrants to purchase, or instruments
convertible into, membership interests or other equity interests, except for
issuances of Borrower Membership Interests to Holdings so long as such
issuances are pledged in accordance with the Pledge Agreement.
(b) Holdings will not issue any capital stock except shares of
Common Stock issued in exchange for cash where, after giving effect to such
issuance, no Event of Default will exist and immediately after such issuance
Holdings complies with Section 4.01(A)(c)(i).
9.21 BUSINESS. Holdings shall engage in no business and have
no assets other than owning the membership interests of the Borrower. The
Borrower will not, and will not permit any of its Subsidiaries, to engage
(directly or indirectly) in any business other than a Permitted Business.
9.22 LIMITATION ON CREATION OF SUBSIDIARIES. Holdings will
not, and will not permit any of its Subsidiaries to, establish, create or
acquire any new Subsidiary.
9.23 CONCENTRATION ACCOUNT. Holdings will not, and will not
permit any of its Subsidiaries to, directly or indirectly, open, maintain or
otherwise have any checking, savings or other deposit accounts at any bank or
other financial institution where cash or Cash Equivalents is or may be
deposited or maintained with any Person, other than the Concentration Account.
9.24 SPRINT AGREEMENTS. Holdings will not, and will not
permit any of its Subsidiaries to (i) exercise any of its remedies under the
Sprint Management Agreement, including, but not limited to, its remedies
under Section 11.5 of the Sprint Management Agreement and (ii) build-out
material New Areas under and as defined in the Sprint Management Agreement.
Section 10. EVENTS OF DEFAULT. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
10.01 PAYMENTS. The Borrower shall (i) default in the payment
when due of any principal of any Loan or any Note or any Unpaid Drawing or
(ii) default, and such default shall
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continue unremedied for two or more Business Days, in the payment when due of
any interest on any Loan or Note or Unpaid Drawing, or any Fees or any other
amounts owing by it hereunder or thereunder; or
10.02 REPRESENTATIONS, ETC. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or
in any certificate delivered pursuant hereto or thereto shall prove to be
untrue in any material respect on the date as of which made or deemed made; or
10.03 COVENANTS. Any Credit Party shall (i) default in the
due performance or observance by it of any term, covenant or agreement
contained in Section 8.01(g)(i), 8.08, 8.11, 8.16, 8.17, 9 or 13.15, or (ii)
default in the due performance or observance by it of any other term,
covenant or agreement contained in this Agreement, and such default shall
continue unremedied for a period of 15 days after written notice thereof to
the Borrower by the Agent or any Bank; or
10.04 DEFAULT UNDER OTHER AGREEMENTS. Holdings or any of its
Subsidiaries shall (i) default in any payment of any Indebtedness (other than
the Indebtedness referred to in Section 10.01) beyond the period of grace
(not to exceed 10 days), if any, provided in the instrument or agreement
under which such Indebtedness was created, (ii) default in the observance or
performance of any agreement or condition relating to any Indebtedness (other
than the Indebtedness referred to in Section 10.01) or contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such holder or holders)
to cause (determined without regard to whether any notice is required), any
Indebtedness to become due prior to its stated maturity and such default
shall not have been cured or waived, or (iii) any Indebtedness (other than
the Indebtedness referred to in Section 10.01) of Holdings or any of its
Subsidiaries shall be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment, prior to the
stated maturity thereof; PROVIDED that it shall not constitute an Event of
Default pursuant to this Section 10.04 unless the aggregate amount of all
Indebtedness referred to in the preceding clauses (i) through (iii) above
exceeds $500,000 at any one time; or
10.05 BANKRUPTCY, ETC. Holdings or any of its Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy," as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against Holdings or any of its Subsidiaries and the petition is not
controverted within 10 days, or is not dismissed or discharged, within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of Holdings or any of its Subsidiaries, or Holdings or
any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to Holdings or any of its
Subsidiaries, or there is commenced against Holdings or any of its
Subsidiaries any such
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<PAGE>
proceeding which remains undismissed or undischarged for a period of 60 days,
or Holdings or any of its Subsidiaries is adjudicated insolvent or bankrupt;
or any order of relief or other order approving any such case or proceeding
is entered; or Holdings or any of its Subsidiaries suffers any appointment of
any custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of 60 days; or Holdings or any
of its Subsidiaries makes a general assignment for the benefit of creditors;
or any corporate action is taken by Holdings or any of its Subsidiaries for
the purpose of effecting any of the foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412
of the Code or Section 302 of ERISA or a waiver of such standard or extension
of any amortization period is sought or granted under Section 412 of the Code
or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to
subparagraph (b)(1) thereof) and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably
expected to occur with respect to such Plan within the following 30 days, any
Plan which is subject to Title IV of ERISA shall have had or is likely to
have a trustee appointed to administer such Plan, any Plan which is subject
to Title IV of ERISA is, shall have been or is likely to be terminated or to
be the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made with respect
to a Plan has not been timely made, Holdings or any Subsidiary of Holdings or
any ERISA Affiliate has incurred or is likely to incur any liability to or on
account of a Plan or under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975
of the Code or on account of a group health plan (as defined in Section
607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of
the Code, Holdings or any Subsidiary of Holdings has incurred or is likely to
incur liabilities pursuant to one or more employee welfare benefit plans (as
defined in Section 3(1) of ERISA) that provide benefits to retired employees
or other former employees (other than as required by Section 601 of ERISA) or
Plans, a "default," within the meaning of Section 4219(c)(5) of ERISA, shall
occur with respect to any Plan; any applicable law, rule or regulation is
adopted, changed or interpreted, or the interpretation or administration
thereof is changed, in each case after the date hereof, by any governmental
authority or agency or by any court (a "Change in Law"), or, as a result of a
Change in Law, an event occurs following a Change in Law, with respect to or
otherwise affecting any Plan; (b) there shall result from any such event or
events the imposition of a lien, the granting of a security interest, or a
liability or a material risk of incurring a liability; and (c) such lien,
security interest or liability, individually, and/or in the aggregate, in the
opinion of the Required Banks, has had, or could reasonably be expected to
have, a material adverse effect upon the business, operations, condition
(financial or otherwise) or prospects of Holdings or any Subsidiary of
Holdings; or
10.07 SECURITY DOCUMENTS. At any time after the execution and
delivery thereof, any of the Security Documents shall cease to be in full
force and effect or shall cease to give the Collateral Agent for the benefit
of the Secured Creditors the Liens, rights, powers and privileges purported
to be created thereby (including, without limitation, a perfected security
interest in, and Lien on, all of the Collateral), in favor of the Collateral
Agent, superior to and prior to the rights
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of all third Persons (except as permitted by Section 7.11), and subject to no
other Liens (except as permitted by Section 7.11), or any Credit Party shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any of the
Security Documents and such default shall continue beyond any grace period
specifically applicable thereto pursuant to the terms of such Security
Document; or
10.08 JUDGMENTS. One or more judgments or decrees shall be
entered against Holdings or any of its Subsidiaries involving in the
aggregate for Holdings and its Subsidiaries a liability (not paid or fully
covered by a reputable insurance company) in excess of $500,000 for all such
judgments and decrees and any such judgments or decrees shall not be
satisfied, vacated, discharged or stayed or bonded pending appeal for any
period of 30 consecutive days; or
10.09 SPRINT AGREEMENTS. At any time (i) any provision of the
Sprint Agreements or the Consent and Agreement shall cease to be in full
force and effect or Sprint Corporation or any of its Affiliates shall deny or
disaffirm its obligations under any such agreement, (ii) Sprint PCS shall
exercise its right to purchase the Operating Assets under Section 11.6.1 of
the Sprint Management Agreement, (iii) Sprint PCS shall exercise its rights
with respect to the Disaggregated License under Section 11.6.2 of the Sprint
Management Agreement, (iv) an Event of Termination shall occur or any event
that if not cured or notice were to be given of such event would constitute
an Event of Termination under the Sprint Management Agreement shall occur
(whether or not waived) or (v) Sprint PCS shall amend or modify any Program
Requirements (as defined in the Sprint Management Agreement), guidelines or
policies set forth in the Sprint Agreements which the Required Banks
determine could reasonably be expected to have a material adverse effect on
the performance, business, property, assets, nature of assets, liabilities,
condition or prospects of Holdings and its Subsidiaries; or
10.10 CHANGE IN CONTROL. There shall be a Change in Control;
then, and in any such event, and at any time thereafter, if any Event
of Default shall then be continuing, the Agent, upon the written request of
the Required Banks, shall by written notice to the Borrower, take any or all
of the following actions, without prejudice to the rights of the Agent, any
Bank or the holder of any Note to enforce its claims against any Credit Party
(PROVIDED that, if an Event of Default specified in Section 10.05 shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Agent to the Borrower as specified in clauses (i) and
(ii) below shall occur automatically without the giving of any such notice):
(i) declare the Total Commitment terminated, whereupon all Commitments of
each Bank shall forthwith terminate immediately and any Fees shall forthwith
become due and payable without any other notice of any kind; (ii) declare the
principal of and any accrued interest in respect of all Loans and the Notes
and all Obligations owing hereunder and thereunder to be, whereupon the same
shall become, forthwith due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by each Credit
Party; (iii) terminate any Letter of Credit which may be terminated in
accordance with its terms; (iv) direct the Borrower to pay (and the Borrower
agrees that upon receipt of such notice, or upon the occurrence of an Event
of Default specified in Section 10.05, it will pay) to the Collateral Agent
at the Payment Office such additional amount of cash, to be held as security
by the Collateral
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Agent for the benefit of the Banks in a cash collateral account established
and maintained by the Collateral Agent pursuant to a cash collateral
agreement in form and substance satisfactory to the Collateral Agent, as is
equal to the aggregate Stated Amount of all Letters of Credit then
outstanding; (v) exercise any rights or remedies under any of the Guaranties;
and (vi) enforce, as Collateral Agent, all of the Liens and security
interests created pursuant to the Security Documents.
Section 11. DEFINITIONS AND ACCOUNTING TERMS.
11.01 DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Additional Collateral" shall mean all property (whether real
or personal) in which security interests are granted (or purported to be
granted) (and continue to be in effect at the time of determination) pursuant
to Section 8.17.
"Additional Security Documents" shall mean all mortgages,
pledge agreements, security agreements and other security documents entered
into pursuant to Section 8.17 with respect to Additional Collateral.
"Adjusted Consolidated EBITDA" for any period shall mean
Consolidated EBITDA adjusted by adding thereto the amount of Subscriber
Acquisition Costs for such period.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period plus the sum of the amount of all net
non-cash charges (including, without limitation, depreciation, amortization,
deferred tax expense, non-cash interest expense and other non-cash charges)
included in arriving at Consolidated Net Income for such period less the sum
of the amount of all net non-cash gains or losses (exclusive of items
reflected in Adjusted Working Capital) and gains or losses from sales of
assets (other than sales of inventory in the ordinary course of business)
included in arriving at Consolidated Net Income for such period.
"Adjusted Working Capital" shall mean Consolidated Current
Assets (excluding cash and Cash Equivalents) minus Consolidated Current
Liabilities.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with, such Person; PROVIDED, HOWEVER, that for
purposes of Section 5.05 and 9.07, an Affiliate of Holdings shall include any
Person that directly or indirectly (including through limited partner or
general partner interests) owns more than 5% of any class of capital stock of
Holdings and for all purposes of this Agreement, neither the Agent, the
Collateral Agent, any Bank or any of their respective Affiliates, shall be
considered an Affiliate of the Borrower or any of its Subsidiaries. A Person
shall be deemed to control another Person if such Person possesses, directly
or indirectly, the power to direct or
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cause the direction of the management and policies of such other Person,
whether through the ownership of voting securities, by contract or otherwise.
"Affiliate Contracts" shall have the meaning provided in
Section 5.05.
"Agent" shall mean Paribas in its capacity as Agent for the
Banks hereunder, and shall include any successor to the Agent appointed
pursuant to Section 12.09.
"Aggregate Unutilized Commitment" with respect to any Bank at
any time shall mean the sum of (i) such Bank's Unutilized Revolving Loan
Commitment at such time, plus (ii) such Bank's Term Loan Commitment at such
time.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Annualized Adjusted Consolidated EBITDA" for any period shall
mean Adjusted Consolidated EBITDA times a fraction, the numerator of which is
four and the denominator of which is the number of fiscal quarters of
Holdings and its Subsidiaries in such period.
"Annualized Consolidated EBITDA" for any period shall mean
Consolidated EBITDA times a fraction, the numerator of which is four and the
denominator of which is the number of fiscal quarters of Holdings and its
Subsidiaries in such period.
"Annualized Revenue" for any period shall mean Consolidated
Revenues for such period times a fraction the numerator of which is four and
the denominator of which is the number of fiscal quarters of Holdings and its
Subsidiaries in such period.
"Applicable Commitment Commission Percentage" shall mean, for
any day, a percentage per annum equal to (i) if the Aggregate Unutilized
Commitment on such day is greater than or equal to $16,500,000, 1.75%, (ii)
if the Aggregate Unutilized Commitment on such day is less than $16,500,000
and greater than or equal to $8,250,000, 1.25%, and (iii) if the Aggregate
Unutilized Commitment on such day is less than $8,250,000, 0.75%, of the
Aggregate Unutilized Commitment.
"Applicable Margin" shall mean a percentage per annum equal to
(i) (A) in the case of Term Loans which are maintained as Base Rate Loans,
3.00% and (B) in the case of Revolving Loans which are maintained as Base
Rate Loans, 2.75% less the applicable Leverage Reduction Discount, if any,
and (ii) (A) in the case of Term Loans which are maintained as Eurodollar
Loans, 4.00%, and (B) in the case of Revolving Loans which are maintained as
Eurodollar Loans, 3.75% less the applicable Leverage Reduction Discount, if
any.
"Bank" shall mean each financial institution listed on Schedule
I, as well as any institution which becomes a "Bank" hereunder pursuant to
Section 13.04.
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"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing or to
fund its portion of any unreimbursed payment under Section 2.04(c) or (ii) a
Bank having notified in writing the Borrower and/or the Agent that it does
not intend to comply with its obligations under Section 1.01 or 2, including
in either case as a result of any takeover of such Bank by any regulatory
authority or agency.
"Bankruptcy Code" shall have the meaning provided in
Section 10.05.
"Base Rate" shall mean the higher of (i) 1/2 of 1% in excess of
the Federal Funds Rate and (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean (i) each Swingline Loan and (ii)
any Loan designated or deemed designated as such by the Borrower at the time
of the incurrence thereof or conversion thereto.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrower Membership Interests" shall mean the limited
liability company membership interests in the Borrower.
"Borrowing" shall mean the borrowing of one Type of Loan of a
single Tranche from all the Banks having Commitments with respect to such
Tranche (or from the Swingline Bank in the case of Swingline Loans) on a PRO
RATA basis on a given date (or resulting from a conversion or conversions on
such date) having in the case of Eurodollar Loans the same Interest Period;
PROVIDED that Base Rate Loans incurred pursuant to Section 1.10(b) shall be
considered part of the related Borrowing of Eurodollar Loans.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day
which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) above and which is also a day
for trading by and between banks in the New York interbank Eurodollar market.
"Capital Expenditures" shall have the meaning provided in
Section 9.08.
"Capital Lease," as applied to any Person, shall mean any lease
of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with generally accepted accounting principles, is
accounted for as a capital lease on the balance sheet of that Person.
"Capitalized Lease Obligations" of any Person shall mean all
rental obligations under Capital Leases which, under GAAP, are or will be
required to be capitalized on the books
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of such Person, in each case taken at the amount thereof accounted for as
Indebtedness in accordance with such principles.
"Cash Collateral Account" shall have the meaning provided in
Section 5.16.
"Cash Collateral Agreement" shall have the meaning provided in
Section 5.16.
"Cash Equivalents" shall mean, as to any Person, (i) securities
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (PROVIDED that the full faith and
credit of the United States is pledged in support thereof) having maturities
of not more than six months from the date of acquisition, (ii) time deposits
and certificates of deposit of any commercial bank organized under the laws
of the United States, any State thereof or the District of Columbia having,
or which is the principal banking subsidiary of a bank holding company
organized under the laws of the United States, any State thereof, or the
District of Columbia having, capital, surplus and undivided profits
aggregating in excess of $200,000,000 and having a long-term unsecured debt
rating of at least "A" or the equivalent thereof from Standard & Poor's
Corporation ("S&P") or "A2" or the equivalent thereof from Moody's Investors
Service, Inc. ("Moody's"), with maturities of not more than six months from
the date of acquisition by such Person, (iii) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued
by any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's and in each case maturing not more than six months after the date of
acquisition by such Person, (v) investments in money market funds
substantially all of whose assets are comprised of securities of the types
described in clauses (i) through (iv) above.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.C. Section 9601 ET SEQ.
"Change in Control" means the occurrence of one or more of the
following: (i) Holdings shall cease to directly own at least 100% of the
aggregate member interests of the Borrower or shall cease to be the sole
managing member of the Borrower, (ii) any Person or "group" (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act, as in
effect on the Effective Date), other than existing shareholders of Holdings
as of the date hereof, shall acquire, directly or indirectly, beneficial
ownership of 50% or more, on a fully diluted basis, of the economic or voting
interest in Holdings' capital stock, (iii) Donald A. Harris shall have
acquired any interest in or otherwise participated in any way, including
without limitation as a director, officer or employee, with any Person or any
Affiliate of such Person which is party to any management agreement or
similar agreement as a "Manager" (as such term is defined in such management
agreement or similar agreement) with respect to Sprint Spectrum L.P. or any
of its Affiliates, other than Holdings or any of its Subsidiaries, (iv) there
shall occur a "Change in Control" (as defined in the Sprint Management
Agreement), (v) Sprint PCS shall have sold, transferred or disposed of the
Sprint PCS Network, (vi) any Person, entity or "group" (within the
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meaning of Section 13(d) or 14(d) of the Securities Exchange Act) shall have
acquired beneficial ownership of 51% or more of any outstanding class of
capital stock of Sprint Corporation or Sprint PCS, having ordinary voting
power in the election of directors, (vii) the Board of Directors of Sprint
Corporation or Sprint PCS shall cease to consist of Continuing Directors,
(viii) Sprint Spectrum L.P., SprintCom, Inc., Sprint Communications Company,
L.P. or Wireless Co. shall cease to be Wholly-Owned Subsidiaries of Sprint
Corporation, and (ix) Sprint PCS shall exercise its rights under Section
11.6.3 of the Sprint Management Agreement; PROVIDED, HOWEVER, that any
transaction in which MCI WorldCom or any of its Affiliates acquires or enters
into a business combination with Sprint Corporation or any of its Affiliates
shall not constitute a Change of Control for purposes herein.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the date of this Agreement, and to any subsequent provision of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or personal)
with respect to which any security interests have been granted (or purport to
be granted) pursuant to any Security Document, including, without limitation,
all Pledge Agreement Collateral, all Security Agreement Collateral, all
Mortgaged Properties and all cash and Cash Equivalents delivered as
collateral pursuant to this Agreement or any other Credit Document.
"Collateral Agent" shall mean the Agent acting as collateral
agent for the Secured Creditors pursuant to the Security Documents.
"Collective Bargaining Agreements" shall have the meaning
provided in Section 5.05.
"Commitment" shall mean, with respect to each Bank, such Bank's
Term Loan Commitment and Revolving Loan Commitment, if any.
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"Common Stock" shall mean the common stock of Holdings, with
par value per share of $.001.
"Concentration Account" shall mean a separate account which
shall be established and maintained with the Concentration Account Bank for
the benefit of the Secured Creditors by the Borrower and each of its
Subsidiaries and in which the Collateral Agent has a security interest
pursuant to the Concentration Account Consent Letter.
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"Concentration Account Bank" shall mean PNC Bank, N.A. or such
other bank that may become a Concentration Account Bank in accordance with
the provisions of the Security Agreement.
"Concentration Account Consent Letter" shall have the meaning
provided in Section 8.18.
"Consent and Agreement" shall mean the Consent and Agreement in
the form of EXHIBIT L.
"Consolidated Current Assets" shall mean the consolidated
current assets of Holdings and its Subsidiaries.
"Consolidated Current Liabilities" shall mean the consolidated
current liabilities of Holdings and its Subsidiaries, but excluding the
current portion of any long-term Indebtedness which would otherwise be
included therein.
"Consolidated EBIT" shall mean, for any period, the
Consolidated Net Income before interest income, Consolidated Interest Expense
and provision for taxes and without giving effect to any extraordinary gains
or losses, gains or losses from sales of assets (other than inventory sold in
the ordinary course of business).
"Consolidated EBITDA" for any period shall mean Consolidated
EBIT, adjusted by adding thereto the amount of all amortization of
intangibles and depreciation that were deducted in arriving at Consolidated
Net Income for such period.
"Consolidated Indebtedness" shall mean, at any time, all
Indebtedness of Holdings and its Subsidiaries determined on a consolidated
basis (excluding all Indebtedness of the type described in clause (vii) of
the definition thereof, except to the extent amounts are owing with respect
thereto upon the termination of the respective agreement constituting such
Indebtedness) plus any original issue discount attributable to such
Indebtedness.
"Consolidated Interest Expense" shall mean, for any period, the
total consolidated cash interest expense of Holdings and its Subsidiaries for
such period (calculated without regard to any limitations on the payment
thereof) payable during such period in respect of all Indebtedness of
Holdings and its Subsidiaries, on a consolidated basis, for such period
(including, without duplication, that portion of Capitalized Lease
Obligations of Holdings and its Subsidiaries representing the interest factor
for such period).
"Consolidated Net Income" shall mean, for any period, net
income of Holdings and its Subsidiaries for such period determined on a
consolidated basis (after provision for taxes); PROVIDED, HOWEVER, the net
income of any Subsidiary of Holdings, which is not a Wholly-Owned Subsidiary
and for which the investment of Holdings therein is accounted for by the
equity method of accounting, shall have its net income included in the
Consolidated Net Income of Holdings and its Subsidiaries only to the extent
of the amount of cash dividends or distributions paid by such Subsidiary to
Holdings.
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"Consolidated Revenues" shall mean, for any period, the total
consolidated gross revenues of Holdings and its Subsidiaries for such period
determined on a consolidated basis, including, without limitation, all
access, airtime, long distance, travel-out, travel-in, roaming-out,
roaming-in, and operator service revenues; PROVIDED, HOWEVER, Consolidated
Revenues shall not include revenue from handset sales.
"Consolidated Senior Indebtedness" shall mean, at any time, an
amount equal to the amount of all Consolidated Indebtedness at such time less
the outstanding principal amount of the Senior Subordinated Notes at such
time.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
indebtedness, leases, dividends, distributions or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation
of such Person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term
Contingent Obligation should not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of a Person on
the Effective Date and each other director, if such other directors
nomination for election to the Board of Directors of such Person is
recommended by a majority of the then Continuing Directors.
"Corporate Overhead Expenses" shall mean for any period of
determination all expenses of Holdings and its Subsidiaries related to
corporate and headquarters operations, including, without limitation,
salaries and benefits, travel and entertainment expenses, training expenses,
office expenses, professional fees, and miscellaneous corporate and overhead
expenses.
"Covered Population" shall have the meaning provided in
Section 9.12.
"Credit Documents" shall mean this Agreement, each Note, each
Notice of Borrowing, each Notice of Conversion, each Letter of Credit, each
Letter of Credit Request and each Security Document.
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"Credit Event" shall mean the making of any Loan or the
issuance of any Letter of Credit.
"Credit Party" shall mean Holdings and each of its Subsidiaries.
"Debt Agreements" shall have the meaning provided in Section 5.05.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is then in effect.
"Disaggregated License" shall mean that portion of the License
that the Borrower may or is required to purchase under Section 11 of the
Sprint 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 on duplex CDMA carrier (including the required guard
bands) within the range of frequencies that Sprint PCS is authorized to use
under such license, and no more than 10 MHz of such range of frequencies (at
the Borrower'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.
"Dividend" with respect to any Person shall mean that such
Person has declared or paid a dividend, distribution or returned any equity
capital to its stockholders, partners or other equity holders or authorized
or made any other distribution, payment or delivery of property (other than
common limited partnership interests of such Person) or cash to its
stockholders, partners or other equity holders in their capacity as
stockholders, partners or other equity holders, or redeemed, retired,
purchased or otherwise acquired, directly or indirectly, for a consideration
any shares of any class of its capital stock outstanding or partnership
interests on or after the Effective Date (or any options or warrants issued
by such Person with respect to its capital stock or partnership interests),
or set aside any funds for any of the foregoing purposes, or shall have
permitted any of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock or partnership
interests of such Person outstanding on or after the Effective Date (or any
options or warrants issued by such Person with respect to its capital stock
or partnership interests). Without limiting the foregoing, "Dividends" and
"Distributions" with respect to any Person shall also include all cash
payments made or required to be made by such Person with respect to any stock
or partnership interests appreciation rights, equity incentive plans or any
similar plans or setting aside of any funds for the foregoing purposes.
"Documents" shall mean the Credit Documents, the Equity
Financing Documents and the Senior Subordinated Loan Documents.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
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"Drawing" shall have the meaning provided in Section 2.05(b).
"Effective Date" shall have the meaning provided in Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution, other "accredited investor" (as defined in Regulation
D of the Securities Act) other than individuals, or a "qualified
institutional buyer" as defined in Rule 144A of the Securities Act.
"Employee Benefit Plans" shall have the meaning provided in
Section 5.05.
"Employment Agreements" shall have the meaning provided in
Section 5.05.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations or proceedings
relating in any way to any violation of, or liability under, any
Environmental Law or any permit issued, or any approval given, under any such
Environmental Law (hereafter, "Claims"), including, without limitation, (a)
any and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to
any applicable Environmental Law, and (b) any and all Claims by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, policy and rule of
common law now or hereafter in effect (including, without limitation, the EPA
guidance on asbestos abatement and removal) and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic Substances Control Act,
15 U.S.C. Section 2601 ET SEQ.; the Clean Air Act, 42 U.S.C. Section 7401
ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 3803 ET SEQ.; the
Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; the Occupational
Safety and Health Act, 29 U.S.C. Section 651 ET SEQ.; and any applicable
state and local or foreign counterparts or equivalents.
"Equity Financing Documents" shall mean all documents executed
or delivered in connection with the issuance by Holdings or any Subsidiaries
of Holdings of any common stock, preferred stock, partnership interests or
membership interests on or prior to the Initial Borrowing Date.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement, and to any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.
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"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the
Borrower would be deemed to be a "single employer" (i) within the meaning of
Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the
Borrower or a Subsidiary of the Borrower being or having been a general
partner of such person.
"Eurodollar Loan" shall mean each Loan designated as such by
the Borrower at the time of the incurrence thereof or conversion thereto.
"Event of Default" shall have the meaning provided in Section 10.
"Event of Termination" shall mean any of the events described in
Section 11.3 of the Sprint Management Agreement.
"Excess Cash Flow" shall mean, for any period, the remainder of
(i) the sum of (a) Adjusted Consolidated Net Income for such period, and (b)
the decrease, if any, in Adjusted Working Capital from the first day to the
last day of such period, minus (ii) the sum of (a) the amount of cash Capital
Expenditures (to the extent not financed with Indebtedness), made by the
Borrower on a consolidated basis during such period, (b) the amount of
permanent principal payments of Indebtedness for borrowed money of the
Borrower (other than repayments of Loans); PROVIDED that repayments of Loans
shall be deducted in determining Excess Cash Flow if such repayments were
applied to Scheduled Repayments required to be made during such period, were
made as a voluntary prepayment with internally generated funds (but in the
case of a voluntary prepayment of Revolving Loans or Swingline Loans, only to
the extent accompanied by a voluntary reduction to the Total Revolving Loan
Commitment) during such period, and (c) the increase, if any, in Adjusted
Working Capital from the first day to the last day of such period.
"Excess Cash Flow Payment Period" shall mean each fiscal year
of Holdings.
"FCC" shall mean the Federal Communications Commission.
"Facing Fee" shall have the meaning provided in Section 3.01(b).
"Facility" shall mean any of the credit facilities established
under this Agreement, I.E., the Term Loan Facility or the Revolving Loan
Facility.
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average
of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds Brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
Federal Funds brokers of recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or referred
to in Section 3.01.
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"Fixed Charge Coverage Ratio" for any period shall mean the
ratio of (x) Consolidated EBITDA less the amount of all Capital Expenditures
made by the Borrower or any of its Subsidiaries for such period to (y) Fixed
Charges for such period.
"Fixed Charges" for any period shall mean the sum of (i)
Consolidated Interest Expense for such period, (ii) the aggregate principal
amount of all scheduled payments of Indebtedness (including the principal
portion of rentals under Capitalized Lease Obligations but excluding
repayment of Revolving Loans and Swingline Loans not accompanied by a
permanent reduction to the Total Revolving Loan Commitment) required to be
made during such period and (iii) taxes paid by Holdings and its Subsidiaries
during such period.
"Hazardous Materials" means (a) petroleum or petroleum
products, radioactive materials, asbestos in any form that is friable, urea
formaldehyde foam insulation, transformers or other equipment that contain,
dielectric fluid containing levels of polychlorinated biphenyls, and radon
gas; (b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous substances," "restricted hazardous waste,"
"toxic substances," "toxic pollutants," "contaminants," or "pollutants," or
words of similar meaning and regulatory effect, under any applicable
Environmental Law; and (c) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated under applicable
Environmental Laws.
"Holdings" shall have the meaning provided in the preamble to
this Agreement.
"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money or for the deferred purchase price
of property or services other than trade payables and accrued expenses
arising in the ordinary course of business, (ii) the maximum amount available
to be drawn under all letters of credit issued for the account of such Person
and all unpaid drawings in respect of such letters of credit, (iii) all
Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or
(vii) of this definition secured by any Lien on any property owned by such
Person, whether or not such Indebtedness has been assumed by such Person,
(iv) all Capitalized Lease Obligations of such Person, (v) all obligations of
such person to pay a specified purchase price for goods or services, whether
or not delivered or accepted, I.E., take-or-pay and similar obligations, (vi)
all Contingent Obligations of such Person and (vii) all obligations under any
Interest Rate Protection or Other Hedging Agreement or under any similar type
of agreement entered into with a Person not a Bank.
"Indemnified Matters" shall have the meaning provided in
Section 13.01.
"Indemnitees" shall have the meaning provided in Section 13.01.
"Initial Borrowing Date" shall mean the date on which the
initial Credit Event occurs.
"Initial Equity" shall have the meaning provided in Section 5.16.
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"Intellectual Property" shall have the meaning provided in
Section 7.21.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection or Other Hedging Agreements" shall
have the meaning provided in the Security Documents.
"Issuing Bank" shall mean Paribas and any Bank which at the
request of the Borrower agrees, in such Bank's sole discretion, to become an
Issuing Bank for the purpose of issuing Letters of Credit pursuant to Section
2. The sole Issuing Bank on the Initial Borrowing Date is Paribas.
"L/C Supportable Indebtedness" shall mean (i) obligations of
the Borrower or any of its Subsidiaries incurred in the ordinary course of
business with respect to workers compensation, surety bonds and other similar
statutory obligations and (ii) such other obligations of the Borrower or any
of its Subsidiaries as are reasonably acceptable to the Issuing Bank and
otherwise permitted to exist pursuant to the terms of this Agreement.
"Leaseholds" of any Person means all the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Letter of Credit Cash Collateral Account" shall have the
meaning provided in Section 4.02(A)(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(c).
"Letter of Credit Outstandings" shall mean, at any time, the
sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit
and (ii) the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).
"Leverage Reduction Discount" shall mean as follows:
(i) on the Initial Borrowing Date and during any period in
which clause (ii) below does not apply, the Leverage Reduction Discount
shall be 0%;
(ii) from and after the Start Date to and including the End Date
and subject to (iii) below, the following percentage, to the extent but
only to the extent that as of the last day of the most recent fiscal
quarter ending immediately prior to such Start Date for which a
certificate has been delivered to the Banks pursuant to the next
succeeding sentence
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hereinafter the ratio of Consolidated Indebtedness as of the most
recent fiscal quarter ending immediately prior to such Start Date to
Annualized Consolidated EBITDA for such fiscal quarter shall be as set
forth below:
<TABLE>
<CAPTION>
Consolidated Indebtedness to
Basis Points Annualized Consolidated EBITDA
------------ -------------------------------
<S> <C>
25 less than 6.00:1.00 but greater
than or equal to 5.00:1.00
50 less than 5.00:1.00
</TABLE>
(iii) notwithstanding (ii) above, if at any time (a) a Default or
Event of Default shall exist, or (b) the Consolidated EBITDA for the most
recent fiscal quarter shall be less than or equal to zero, the Leverage
Reduction Discount shall be 0%.
The Leverage Reduction Discount shall be determined by the delivery of a
certificate of the Borrower, certified by the Chief Financial Officer of the
Borrower, together with the financial statements required to be delivered
pursuant to Section 8.01(b) or (c), as the case may be, which certificate
shall set forth the Leverage Reduction Discount arising from the calculation
of the ratio of Consolidated Indebtedness to Annualized Consolidated EBITDA
of the Borrower for the fiscal quarter with respect to which such certificate
is being delivered and the basis for such calculations. The Leverage
Reduction Discount so determined shall apply, except as set forth above, to
the period beginning on the date such financial statements are delivered and
ending on the earlier of (the "End Date") (i) the next date of actual
delivery of the financial statements required to be delivered pursuant to
Section 8.01(b) or (c) or (ii) the date on which such financial statements
are required to be delivered (the day of delivery of such financial
statements on which such period commences being herein referred to as the
"Start Date").
"License" means the PCS license(s) issued by the FCC described
on the Service Area Exhibit to the Sprint Management Agreement.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing or similar statement or notice filed
under the UCC or any other similar recording or notice statute, and any lease
having substantially the same effect as any of the foregoing).
"Loan" shall mean each Term Loan, each Revolving Loan and each
Swingline Loan.
"Management Agreements" shall have the meaning provided in
Section 5.05.
"Mandatory Borrowings" shall have the meaning provided in
Section 1.01(d).
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"Margin Stock" shall have the meaning provided in Regulation U.
"Material Contracts" shall have the meaning provided in
Section 5.05.
"Maturity Date" with respect to a Tranche shall mean either the
Term Loan Maturity Date, the Revolving Loan Maturity Date or the Swingline
Expiry Date, as the case may be.
"Maximum Swingline Amount" shall mean $1,000,000.
"Minimum Borrowing Amount" shall mean (i) with respect to the
Term Loan Facility, $1 million and (ii) with respect to the Revolving Loan
Facility, $500,000.
"Mortgage" shall have the meaning provided in Section 5.19(a).
"Mortgage Policies" shall have the meaning provided for in
Section 5.19(b).
"Mortgaged Properties" shall have the meaning provided in
Section 5.19(a).
"Net Sale Proceeds" shall mean for any sale of assets, the
gross cash proceeds (including any cash received by way of deferred payment
pursuant to a promissory note, receivable or otherwise, but only as and when
received) received from such sale, net of reasonable transaction costs
(including, without limitation, attorneys' fees), the amount of such gross
cash proceeds required to be used to permanently repay any Indebtedness which
is secured by the respective assets which were sold, and the estimated
marginal increase in income taxes and any stamp tax which will be payable by
the Holdings' consolidated group as a result of such sale.
"Net Subscriber Acquisition Costs" shall mean for any period
the product of (x) Subscriber Acquisition Costs for such period divided by
(y) Net Subscribers for such period.
"Net Subscribers" shall mean for any period the number of
Subscribers added during such period minus the number of Subscribers
disconnected during such period.
"Nonvoting Common Stock" shall mean the nonvoting common stock
of Holdings, with par value per share of $.001.
"Note" shall mean each Term Note, each Revolving Note and the
Swingline Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03(a).
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Agent located at
787 Seventh Avenue, New York, NY 10019, Attention: Salo Aizenberg, or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
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"Obligations" shall mean all amounts owing to the Agent, the
Collateral Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document.
"Operating Assets" shall mean the assets the Borrower or its
affiliates own and use 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 the Borrower or its affiliates use in connection
with other businesses. Examples of Operating Assets include without
limitation: switches, towers, cell sites, systems, records and retail stores.
"Other Managers" means any person or entity with which Sprint
PCS has entered into an agreement similar to the Sprint 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.
"Paribas" shall mean Paribas, a French banking organization
acting through its New York Branch.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Agent located at
787 Seventh Avenue, New York, NY 10019, Attention: Salo Aizenberg, or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the denominator of which is the
Total Revolving Loan Commitment at such time; PROVIDED that if the Percentage
of any Bank is to be determined after the Total Revolving Loan Commitment has
been terminated, then the Percentages of the Banks shall be determined
immediately prior (and without giving effect) to such termination.
"Permitted Business" shall mean a line of business in which the
Borrower and its Subsidiaries is engaged on the Initial Borrowing Date and
reasonably related extensions thereof.
"Permitted Liens" shall have the meaning provided in Section 9.01.
"Person" shall mean any individual, partnership, limited
liability company, joint venture, firm, corporation, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any pension plan, as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower, a Subsidiary of the Borrower or an
ERISA Affiliate, and each such plan for the five
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year period immediately following the latest date on which the Borrower, a
Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to
or had an obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section
5.07.
"Pledge Agreement Collateral" shall mean all "Collateral" as
defined in the Pledge Agreements.
"Pledged Equity" shall mean the membership interests of the
Borrower that are pledged pursuant to the Pledge Agreement.
"Pledged Securities" shall have the meaning assigned that term in
the Pledge Agreements.
"Preferred Stock" shall mean the Convertible Series A Preferred
Stock of Holdings, with par value per share of $.001.
"Prime Lending Rate" shall mean the rate which The Chase Manhattan
Bank announces from time to time as its prime lending rate, the Prime Lending
Rate to change when and as such prime lending rate changes. The Prime Lending
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer by Paribas or The Chase Manhattan Bank,
who may make commercial loans or other loans at rates of interest at, above or
below the Prime Lending Rate.
"Projections" shall have the meaning provided in Section 5.15.
"Purchase Agreement" shall mean the Purchase Agreement, dated as
of December 28, 1999, among Holdings, the Borrower and BET Associates, L.P.
"Purchase Agreement Documents" shall mean and include each of the
documents and other agreements entered into in connection with the issuance by
the Borrower of the Senior Subordinated Notes (including, without limitation,
the Purchase Agreement and all guarantees related thereto), as in effect on the
Effective Date and as the same may be entered into, modified, supplemented or
amended from time to time pursuant to the terms hereof and thereof.
"Quarterly Payment Date" shall mean the last Business Day of each
December, March, June and September of each fiscal year.
"Quoted Rate" shall mean (a) the offered quotation to first-class
banks in the London interbank Eurodollar market by the Agent for U.S. dollar
deposits of amounts in immediately available funds comparable to the outstanding
principal amount of the Eurodollar Loan of the Agent for which an interest rate
is then being determined with maturities comparable to the Interest Period
applicable to such Eurodollar Loan determined as of 10:00 A.M. (New York time)
on the date which is two Business Days prior to the commencement of such
Interest Period, divided (and rounded upward to the next whole multiple of 1/16
of 1%) by (b) a
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percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency funding or liabilities as
defined in Regulation D (or any successor category of liabilities under
Regulation D).
"RCRA" shall mean the Resource Conservation and Recovery Act, as
the same may be amended from time to time, 42 U.S.C. Section 6901 ET SEQ.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by Holdings or any
Subsidiary of Holdings of any cash insurance proceeds payable by reason of
theft, physical destruction or damage or any other similar event with respect to
any properties or assets of Holdings or any Subsidiary of Holdings (including,
without limitation, business interruption insurance).
"Register" shall have its meaning provided in Section 8.16.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.
"Regulation T" shall mean Regulation T of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof.
"Related Fund" shall mean, with respect to any Bank that is a fund
that invests in loans, any other fund that invests in loans and is managed by
the same investment advisor as such Bank or by an Affiliate of such investment
advisor.
"Release" means disposing, discharging, injecting, spilling,
pumping, leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing, pouring and the like, into or upon any land or water or air, or
otherwise entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.12.
"Replacement Bank" shall have the meaning provided in Section
1.12.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the
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30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of
PBGC Regulation Section 4043.
"Required Banks" shall mean Banks the sum of whose outstanding
Term Loans, Term Loan Commitments and Revolving Loan Commitments (or after the
termination thereof, the sum of outstanding Revolving Loans and Percentages of
Swingline Loans and Letter of Credit Outstandings), represent an amount greater
than 50% of the sum of all outstanding Term Loans, the Total Term Loan
Commitment and the Total Revolving Loan Commitment (or after the termination
thereof, the sum of the then total outstanding Revolving Loans and the aggregate
Swingline Loans and Letter of Credit Outstandings).
"Returns" shall have the meaning provided in Section 7.09.
"Revolving Loan Commitment" shall mean, for each Bank, the amount
set forth opposite such Bank's name on Schedule I hereto directly below the
column entitled "Revolving Loan Commitment," as same may be (x) reduced or
terminated from time to time pursuant to Section 3.02, 3.03, 4.02 and/or 10 or
(y) adjusted from time to time as a result of assignments to or from such Bank
pursuant to Section 1.12 or 13.04.
"Revolving Loan Facility" shall mean the Facility evidenced by the
Total Revolving Loan Commitment.
"Revolving Loan Maturity Date" shall mean the sixth anniversary of
the Effective Date.
"Revolving Loans" shall have the meaning provided in Section
1.01(b).
"Revolving Notes" shall have the meaning provided in Section
1.05(a)(ii).
"Scheduled Repayment" shall have the meaning provided in Section
4.02(A)(b).
"SEC" shall have the meaning provided in Section 8.01(h).
"Section 4.04(b)(ii) Certificate" shall have the meaning provided
in Section 4.04(b)(ii).
"Secured Creditors" shall mean (x) the Banks, the Agent, the
Collateral Agent and (y) any Bank which on the date hereof is, or subsequently
becomes, party to any Interest Rate Protection or Other Hedging Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
"Security Agreement" shall have the meaning provided in Section
5.08.
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"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean the Pledge Agreement, the Security
Agreement, the Cash Collateral Agreement, the Concentration Account Consent
Letter, each Additional Security Document, each Mortgage and the Consent and
Agreement.
"Senior Subordinated Notes" shall mean the Borrower's Senior
Subordinated Notes, due December 28, 2007,as in effect on the Initial Borrowing
Date and as the same may be modified, amended or supplemented from time to time
in accordance with the terms hereof and thereof.
"Service Area" means the geographic area described on the Service
Area Exhibit to the Sprint Management Agreement, except that the term does not
include any of certain new areas that the Borrower chooses not to build out.
"Service Area Network" means the network and business activities
managed by the Borrower under the Sprint Management Agreement in the Service
Area under the License.
"Shareholders' Agreements" shall have the meaning provided in
Section 5.05.
"Spectrasite" shall mean Spectrasite Communications, Inc., a
Delaware corporation.
"Sprint Agreements" shall mean the Sprint Management Agreement,
Sprint Services Agreement, the Sprint License Agreements and all other
contracts, agreements or understandings entered into between the Borrower or any
of its Subsidiaries on the one hand and Sprint Corporation or any of its
Affiliates, on the other hand.
"Sprint Communications Company, L.P." shall mean Sprint
Communications Company, L.P., a Delaware limited partnership.
"Sprint License Agreements" shall mean collectively the (i) Sprint
Trademark and Service Mark License Agreement, dated September __, 1998, among
Sprint Communications Company, L.P. and the Borrower, and (ii) Sprint Spectrum
Trademark and Service Mark Agreement, dated September __, 1998, among Sprint
Spectrum, L.P. and the Borrower.
"Sprint Management Agreement" shall mean the Sprint PCS Management
Agreement, made September __, 1998, among Sprint Spectrum L.P., WirelessCo, L.P.
and Ubiquitel L.L.C., a Washington corporation, as amended, modified or
supplemented from time to time in accordance with the provisions hereof and as
assigned to the Borrower.
"Sprint PCS" shall mean any or all of the following affiliates 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, Cox PCS
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License, L.L.C., a Delaware limited liability company and American PCS
Communications, LLC, a Delaware limited liability company. Each entity
listed above is an affiliate to each of the other listed entities.
"Sprint PCS Network" shall mean the national wireless network and
business activities to be developed by Sprint PCS, the Borrower 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, the Borrower and other
Sprint-related parties 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 services, including local exchange service, wireline long distance
service, and wireline-based Internet access.
"Sprint Services Agreement" shall mean that certain Sprint PCS
Services Agreement executed by the Borrower and Sprint Spectrum L.P. and any
documents incorporated by reference in said agreement.
"Sprint Spectrum L.P." shall mean Sprint Spectrum L.P., a Delaware
limited partnership.
"SprintCom, Inc." shall mean SprintCom, Inc., a Kansas
corporation.
"Stated Amount" of each Letter of Credit shall, at any time, mean
the maximum amount available to be drawn thereunder at such time (in each case
determined without regard to whether any conditions to drawing could then be
met).
"Subscriber Acquisition Costs" shall mean for any period all sales
and marketing expenses, including without limitation, all direct and indirect
sales person compensation and benefits, commissions, customer activation
expenses, advertising and promotion expenses and net equipment expenses (i.e.,
calculated as the sum of the cost and related handling fees of handsets sold and
less revenue received from handsets sold in connection with acquiring new
Subscribers), but exclusive of fees paid to Sprint Spectrum L.P. and its
Affiliates.
"Subscribers" shall mean the total number of subscribers to the
services of the Borrower and its Subsidiaries; PROVIDED, HOWEVER, for purposes
of Section 9.15 and 9.17, Subscribers shall not include any subscriber as of
such date which has any amounts owing to the Borrower or any of its Subsidiaries
which are past due for more than 60 days or past due for more than such shorter
period of time as the Borrower may have established for accounting or credit
policy purposes for treating a subscriber as not being in good standing.
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a
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majority of the directors of such corporation (irrespective of whether or not
at the time stock of any 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 owned by such Person and/or one or more Subsidiaries of such Person
and (ii) any partnership, association, joint venture or other entity in which
such Person and/or one or more Subsidiaries of such Person has more than a
50% equity interest at the time.
"Swingline Bank" shall mean Paribas, in its capacity as the maker
of Swingline Loans.
"Swingline Expiry Date" shall mean the date which is two Business
Days prior to the Revolving Loan Maturity Date.
"Swingline Loans" shall have the meaning provided in Section
1.01(c).
"Swingline Note" shall have the meaning provided in Section
1.05(a)(iii).
"Syndication Termination Date" shall mean the earlier of (x) 120
days after the Initial Borrowing Date or (y) the date on which the Agent, in its
sole discretion, determines (and notifies the Borrower) that the primary
syndication (and the resultant addition of institutions as Banks pursuant to
Section 13.04) has been completed.
"Tax Sharing Agreements" shall have the meaning provided in
Section 5.05.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall have the meaning provided in Section 1.01(a).
"Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Schedule I directly below the
column entitled "Term Loan Commitment," as the same may be (x) reduced or
terminated pursuant to Section 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to Section
1.12 or 13.04.
"Term Loan Commitment Termination Date" shall mean the two year
anniversary of the Effective Date.
"Term Loan Facility" shall mean the facility evidenced by Total
Term Loan Commitment.
"Term Loan Maturity Date" shall mean the seventh anniversary of
the Effective Date.
"Term Note" shall have the meaning provided in Section 1.05(a)(i).
"Total Capital" shall mean the sum of (i) Consolidated
Indebtedness and (ii) the Initial Equity.
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"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.
"Total Revolving Loan Commitment" shall mean, at any time, the sum
of the Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean, at any time, the sum of
the Term Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any
time, an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment, less (y) the sum of (A) the aggregate principal amount of Revolving
Loans and Swingline Loans then outstanding plus (B) the then aggregate amount of
Letter of Credit Outstandings.
"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being three separate Tranches,
I.E., whether Term Loans, Revolving Loans or Swingline Loans.
"Transaction" shall mean collectively, (i) the incurrence of Loans
hereunder on the Initial Borrowing Date, (ii) the issuance of Preferred Stock in
connection with the transactions contemplated hereby, (iii) the issuance of the
Senior Subordinated Notes and (iv) the payment of the Transaction Fees and
Expenses in connection therewith.
"Transaction Fees and Expenses" shall mean all fees and expenses
incurred in connection with and arising out of the Transaction and the
transactions contemplated thereby and hereby; PROVIDED, HOWEVER, that the
aggregate amount of such fees and expenses shall be acceptable to the Required
Banks.
"Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, I.E., whether a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan determined on a plan termination basis in accordance with actuarial
assumptions at such time consistent with those prescribed by the PBGC for
purposes of Section 4044 of ERISA, exceeds the fair market value of all plan
assets allocable to such liabilities under Title IV of ERISA (excluding any
accrued but unpaid contributions).
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawing" shall have the meaning provided for in Section
2.05(a).
"Unutilized Revolving Loan Commitment" for any Bank, at any time,
shall mean the Revolving Loan Commitment of such Bank at such time less the sum
of (i) the aggregate
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principal amount of Revolving Loans made by such Bank and then outstanding
and (ii) such Bank's Percentage of the Letter of Credit Outstandings.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock is at the time owned by such Person
and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such Person
and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity
interest at such time.
"Wireless Co., L.P." shall mean Wireless Co., L.P., a Delaware
limited partnership.
Section 12. THE AGENT.
12.01 APPOINTMENT. The Banks hereby designate Paribas as Agent
(for purposes of this Section 12, the term "Agent" shall include Paribas in its
capacity as Collateral Agent pursuant to the Security Documents) to act as
specified herein and in the other Credit Documents. Each Bank hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, the Agent to take such action on
its behalf under the provisions of this Agreement, the other Credit Documents
and any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The Agent
may perform any of its duties hereunder by or through its officers, directors,
agents or employees.
12.02 NATURE OF DUTIES. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. Neither the Agent nor any of its officers, directors,
agents or employees shall be liable for any action taken or omitted by it or
them hereunder or under any other Credit Document or in connection herewith
or therewith, unless caused by its or their gross negligence or willful
misconduct. The duties of the Agent shall be mechanical and administrative in
nature; the Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Bank or the holder
of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose
upon the Agent any obligations in respect of this Agreement or any other
Credit Document except as expressly set forth herein.
12.03 LACK OF RELIANCE ON THE AGENT. Independently and without
reliance upon the Agent, each Bank and the holder of each Note, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Borrower and its
Subsidiaries in connection with the making and the continuance of the Loans and
the participation in Letters of Credit and the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the creditworthiness
of the Borrower and its Subsidiaries and, except as expressly provided in this
Agreement, the Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Bank or the holder of any Note with any
credit or other information with respect thereto, whether coming into its
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possession before the making of the Loans, the participation in the Letters
of Credit or at any time or times thereafter. The Agent shall not be
responsible to any Bank or the holder of any Note for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of the Borrower or its Subsidiaries or be
required to make any inquiry concerning either the performance or observance
of any of the terms, provisions or conditions of this Agreement or any other
Credit Document, or the financial condition of the Borrower or its
Subsidiaries or the existence or possible existence of any Default or Event
of Default. In no event shall the Agent be required in contravention of
applicable law or if such action would cause it, in its sole determination,
to incur any risk or liability for which it is not adequately indemnified for
to its satisfaction.
12.04 CERTAIN RIGHTS OF THE AGENT. If the Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, the Agent shall be entitled to refrain from such act or taking such
action unless and until the Agent shall have received instructions from the
Required Banks; and the Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Bank or the holder of any
Note shall have any right of action whatsoever against the Agent as a result of
the Agent acting or refraining from acting hereunder or under any other Credit
Document in accordance with the instructions of the Required Banks.
12.05 RELIANCE. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or facsimile message, cablegram,
radiogram, legal opinion, order or other document or telephone message signed,
sent or made by any Person that the Agent believed to be the proper Person, and,
with respect to all legal matters pertaining to this Agreement and any other
Credit Document and its duties hereunder and thereunder, upon advice of counsel
selected by it.
12.06 INDEMNIFICATION. (a) To the extent the Agent is not
reimbursed and indemnified by the Borrower, the Banks will reimburse and
indemnify the Agent, in proportion to their respective "percentages" as used in
determining the Required Banks, for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses or disbursements of whatsoever kind or nature which may be
imposed on, asserted against or incurred by the Agent in performing its duties
hereunder or under any other Credit Document, in any way relating to or arising
out of this Agreement or any other Credit Document; PROVIDED that no Bank shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct.
(b) The Agent shall be fully justified in failing or refusing to
take any action hereunder and under any other Credit Document (except actions
expressly required to be taken by it hereunder or under the Credit Documents)
unless it shall first be indemnified to its satisfaction by the Banks PRO RATA
against any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.
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12.07 THE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its
obligation to make Loans under this Agreement, the Agent shall have the rights
and powers specified herein for a "Bank" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Banks," "Required Banks," "holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any Credit
Party or any Affiliate of any Credit Party as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrower or any other Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Banks.
12.08 HOLDERS. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Agent. Any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or endorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
12.09 RESIGNATION BY THE AGENT. (a) The Agent may resign from
the performance of all its functions and duties hereunder and/or under the other
Credit Documents at any time by giving 15 Business Days' prior written notice to
the Borrower and the Banks. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Agent hereunder or thereunder who shall be a commercial bank
or trust company reasonably acceptable to the Borrower (it being understood and
agreed that any Bank is deemed to be acceptable to the Borrower).
(c) If a successor Agent shall not have been so appointed within
such 15 Business Day period, the Agent, with the consent of the Borrower, shall
then appoint a successor Agent who shall serve as Agent hereunder or thereunder
until such time, if any, as the Banks appoint a successor Agent as provided
above.
(d) If no successor Agent has been appointed pursuant to clause
(b) or (c) above by the 30th Business Day after the date such notice of
resignation was given by the Agent, the Agent's resignation shall become
effective and the Banks shall thereafter perform all the duties of the Agent
hereunder and/or under any other Credit Document until such time, if any, as the
Banks appoint a successor Agent as provided above.
Section 13. MISCELLANEOUS.
13.01 PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agent (including, without
limitation, the reasonable fees and disbursements of
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White & Case LLP and local counsel) in connection with the preparation,
execution and delivery of this Agreement and the other Credit Documents and
the documents and instruments referred to herein and therein and any
amendment, waiver or consent relating hereto or thereto, of the Agent in
connection with its syndication efforts with respect to this Agreement
(including, without limitation, the reasonable fees and disbursements of
White & Case LLP) and of the Agent and each of the Banks in connection with
the enforcement of this Agreement and the other Credit Documents and the
documents and instruments referred to herein and therein (including, without
limitation, the reasonable fees and disbursements of counsel for the Agent
and for each of the Banks); (ii) pay and hold each of the Banks harmless from
and against any and all present and future stamp, excise and other similar
taxes with respect to the foregoing matters and save each of the Banks
harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable
to such Bank) to pay such taxes; and (iii) defend, protect, indemnify and
hold harmless the Agent and each Bank, and each of their respective officers,
directors, employees, representatives, attorneys and agents (collectively
called the "Indemnitees") from and against any and all liabilities,
obligations (including removal or remedial actions), losses, damages
(including foreseeable and unforeseeable consequential damages and punitive
damages), penalties, claims, actions, judgments, suits, costs, expenses and
disbursements (including reasonable attorneys' and consultants fees and
disbursements) of any kind or nature whatsoever that may at any time be
incurred by, imposed on or assessed against the Indemnitees directly or
indirectly based on, or arising or resulting from, or in any way related to,
or by reason of (a) any investigation, litigation or other proceeding
(whether or not the Agent, the Collateral Agent or any Bank is a party
thereto and whether or not any such investigation, litigation or other
proceeding is between or among the Agent, the Collateral Agent, any Bank, the
Borrower or any third person or otherwise) related to the entering into
and/or performance of this Agreement or any other Credit Document or the use
of any Letter of Credit or the proceeds of any Loans hereunder or the
consummation of any transactions contemplated herein (including, without
limitation, the Transaction) or in any other Credit Document or the exercise
of any of their rights or remedies provided herein or in the other Credit
Documents; or, (b) the actual or alleged generation, presence or Release of
Hazardous Materials on or from, or the transportation of Hazardous Materials
to or from, any Real Property owned or operated at any time by the Borrower
or any of its Subsidiaries or; (c) any Environmental Claim relating to the
Borrower or any of its Subsidiaries or any Real Property owned or at any time
operated by Holding or any of its Subsidiaries or; (d) the exercise of the
rights of the Agent and of any Bank under any of the provisions of this
Agreement or any other Credit Document or any Letter of Credit or any Loans
hereunder; or (e) the consummation of any transaction contemplated herein
(including, without limitation, the Transaction) or in any other Credit
Document (the "Indemnified Matters") regardless of when such Indemnified
Matter arises; but excluding any such Indemnified Matter to the extent based
on the gross negligence or willful misconduct of any Indemnitee.
13.02 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of an Event of Default, each Bank is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any
kind to any Credit Party or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any
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time held or owing by such Bank (including, without limitation, by branches
and agencies of such Bank wherever located) to or for the credit or the
account of each Credit Party against and on account of the Obligations and
liabilities of such Credit Party to such Bank under this Agreement or under
any of the other Credit Documents, including, without limitation, all
interests in Obligations purchased by such Bank pursuant to Section 13.06(b),
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or
not such Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
13.03 NOTICES. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the
Borrower, at its address specified opposite its signature below; if to any
Bank, at its address specified opposite its name below; and if to the Agent,
at its Notice Office; or, as to any Credit Party or the Agent, at such other
address as shall be designated by such party in a written notice to the other
parties hereto and, as to each Bank, at such other address as shall be
designated by such Bank in a written notice to each Borrower and the Agent.
All such notices and communications shall be effective when received.
13.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; PROVIDED, HOWEVER, no Credit
Party may assign or transfer any of its rights, obligations or interest
hereunder or under any other Credit Document without the prior written
consent of the Banks; and PROVIDED FURTHER, that although any Bank may
transfer, assign or grant participations in its rights hereunder, such Bank
shall remain a "Bank" for all purposes hereunder (and may not transfer or
assign all or any portion of its Commitments or Loans hereunder except as
provided in Section 13.04(b)) and the transferee, assignee or participant, as
the case may be, shall not constitute a "Bank" hereunder; and PROVIDED
FURTHER, that no Bank shall transfer or grant any participation under which
the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the final scheduled maturity of any
Loan, Note or Letter of Credit (unless such Letter of Credit is not extended
beyond the Revolving Loan Maturity Date) in which such participant is
participating, or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount
thereof, or increase the Commitments in which such participant is
participating over the amount thereof then in effect (it being understood
that a waiver of any Default or Event of Default or of a mandatory reduction
in the Total Commitment shall not constitute a change in the terms of any
Commitment, and that an increase in any Commitment shall be permitted without
the consent of any participant if the participant's participation is not
increased as a result thereof), (ii) consent to the assignment or transfer by
any Credit Party of any of its rights and obligations under this Agreement or
(iii) release all or substantially all of the Collateral under all of the
Security Documents (except as expressly provided in the Credit Documents)
supporting the Loans hereunder in which such participant is participating.
In the case of any such participation, the participant shall not have any
rights under
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this Agreement or any of the other Credit Documents (the participant's rights
against such Bank in respect of such participation to be those set forth in
the agreement executed by such Bank in favor of the participant relating
thereto) and all amounts payable by the Borrower hereunder shall be
determined as if such Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) (A) pledge its Loans and/or
Notes hereunder to a Federal Reserve Bank in support of borrowings made by
such Bank from such Federal Reserve Bank or (B) assign all or a portion of
its Loans or Commitments and related outstanding Obligations hereunder to its
parent company, principal office and/or any Affiliate of such Bank which is
at least 50% owned by such Bank or its parent company or to one or more other
Banks or to a Related Fund or (y) assign all or a portion equal to at least
$5,000,000, of such Loans or Commitments and related outstanding Obligations
hereunder to one or more Eligible Transferees each of which assignees shall
become a party to this Agreement as a Bank by execution of an assignment and
assumption agreement substantially in the form of EXHIBIT J (appropriately
completed); PROVIDED that: (i) at such time Schedule I shall be deemed
modified to reflect the Commitments of such new Bank and of the existing
Banks; (ii) new Notes will be issued to such new Bank and to the assigning
Bank upon the request of such new Bank or assigning Bank, such new Notes to
be in conformity with the requirements of Section 1.05 to the extent needed
to reflect the revised Commitments; (iii) the consent of the Agent, which
consent shall not be unreasonably withheld, shall be required in connection
with any assignment (provided, however, that no such consent by the Agent
shall be required in the case of any assignment to another Bank, any Bank's
Affiliate or Related Fund); and (iv) the Agent shall receive at the time of
each such assignment, from the assigning Bank, the payment of a
non-refundable assignment fee of $3,000. To the extent of any assignment
pursuant to this Section 13.04(b), the assigning Bank shall be relieved of
its obligations hereunder with respect to its assigned Commitments. No
transfer or assignment under this Section 13.04(b) will be effective until
recorded by the Agent on the Register pursuant to Section 8.16. At the time
of each assignment pursuant to this Section 13.04(b) to a Person which is not
already a Bank hereunder and which is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes, the respective assignee Bank shall provide to the Borrower, as the
case may be, and the Agent the appropriate Internal Revenue Service Forms
(and, if applicable, a Section 4.04(b)(ii) Certificate) required by Section
4.04(b).
13.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Agent or any Bank or any holder of any Note in exercising any
right, power or privilege hereunder or under any other Credit Document and no
course of dealing between the Borrower or any other Credit Party and the
Agent or any Bank or the holder of any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights, powers and remedies herein or
in any other Credit Document expressly provided are cumulative and not
exclusive of any rights, powers or remedies which the Agent or any Bank or
the holder of any Note would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle any Credit Party to any other or
further notice or demand in similar or other circumstances or constitute a
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waiver of the rights of the Agent or any Bank or the holder of any Note to
any other or further action in any circumstances without notice or demand.
13.06 PAYMENTS PRO RATA. (a) The Agent agrees that promptly
after its receipt of each payment from or on behalf of the Borrower in
respect of any Obligations hereunder, it shall distribute such payment to the
Banks PRO RATA based upon their respective shares, if any, of the Obligations
with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or
interest on, the Loans, Unpaid Drawings, Bank Commitment Commission or Fees,
of a sum which with respect to the related sum or sums received by other
Banks is in a greater proportion than the total of such Obligation then owed
and due to such Bank bears to the total of such Obligation then owed and due
to all of the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Banks an interest in the Obligations of the
respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all the Banks in such amount; PROVIDED that if
all or any portion of such excess amount is thereafter recovered from such
Bank, such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.
13.07 CALCULATIONS; COMPUTATIONS. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with generally accepted accounting principles in the
United States consistently applied throughout the periods involved (except as
set forth in the notes thereto or as otherwise disclosed in writing by the
Borrower to the Banks); PROVIDED that, except as otherwise specifically
provided herein, all computations of Excess Cash Flow and all computations
determining compliance with Sections 9.04 and 9.08 through 9.17, inclusive,
including the definitions used therein, shall utilize accounting principles
and policies in conformity with those used to prepare the first financial
statements delivered to the Banks pursuant to Section 8.01 unless the
Required Banks within 60 days of delivery thereof disagree with such
principles or policies, in which case the principles and policies shall be
those determined by the Required Banks.
(b) All computations of interest and Fees hereunder shall be
made on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest or Fees are payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS (OTHER
THAN THE MORTGAGES) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
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THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER
HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS. THE BORROWER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURES BELOW, SUCH
SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF
ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVE ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a)
ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM
IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Borrower and the Agent.
13.10 EFFECTIVENESS. This Agreement shall become effective on
the date (the "Effective Date") on which (a) Holdings, the Borrower and each
of the Banks shall have signed a copy hereof (whether the same or different
copies) and shall have delivered the same to the Agent at its Notice Office
or, in the case of the Banks, shall have given to the Agent telephonic
(confirmed in writing), written or facsimile transmission notice (actually
received) in accordance with Section 13.03 at such office that the same has
been signed and mailed to it and (b) all fees
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and expenses owing to the Agent pursuant to any agreements between the
Borrower and the Agent have been paid in full.
13.11 HEADINGS DESCRIPTIVE. The headings of the several
sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision
of this Agreement.
13.12 AMENDMENT OR WAIVER. (a) Neither this Agreement nor
any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties party
thereto and the Required Banks; PROVIDED that no such change, waiver,
discharge or termination shall, without the consent of each Bank (with
Obligations of the respective types being directly affected thereby): (i)
extend the scheduled maturity of any Loan or Note or extend any required
amortization under Section 4.02(A)(b) or extend any revolving loan commitment
reduction date under Section 3.03(d) or extend the stated maturity of any
Letter of Credit or Unpaid Drawing beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon
(except in connection with a waiver of applicability of any post-default
increase in interest rates), or reduce the principal amount thereof, or
increase the Commitments of any Bank over the amount thereof then in effect
(it being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Total Commitment or a mandatory prepayment shall
not constitute an increase of the Commitment of any Bank, and that an
increase in the available portion of any Commitment of any Bank shall not
constitute an increase in the Commitment of such Bank); (ii) release any
substantial portion of the Collateral (except as expressly provided in the
relevant Credit Documents); (iii) amend, modify or waive any provision of
this Section 13.12; (iv) reduce the percentage specified in, or otherwise
modify, the definition of Required Banks (it being understood that, with the
consent of the Required Banks, additional extensions of credit pursuant to
this Agreement may be included in the determination of the Required Banks on
substantially the same basis as the extensions of Term Loans and Revolving
Loan Commitments are included on the Effective Date); or (v) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement; PROVIDED FURTHER, that no such change, waiver,
discharge or termination shall: (v) without the consent of the Swingline
Bank, to amend, modify or waive any provision relating to Swingline Loans or
the rights or obligations of the Swingline Bank; or (w) increase the
Commitments of any Bank over the amount thereof then in effect (it being
understood that a waiver of any conditions precedent, covenants, Defaults or
Events of Default or of a mandatory reduction in the Total Commitment or of a
mandatory prepayment shall not constitute an increase of the Commitment of
any Bank, and that an increase in the available portion of any Commitment of
any Bank shall not constitute an increase in the Commitment of such Bank)
without the consent of such Bank; or (x) without the consent of the Issuing
Bank, amend, modify or waive any provision of Section 2 or alter its rights
or obligations with respect to Letters of Credit; or (y) without the consent
of the Agent, amend, modify or waive any provision of Section 12 or any other
provision relating to the rights or obligations of the Agent; or (z) without
the consent of the Collateral Agent, amend, modify or waive any provision of
Section 12 or any other provision relating to the rights or obligations of
the Collateral Agent.
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(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clause (a)(i) through (v), inclusive, of the first proviso to
Section 13.12(a), the consent of the Required Banks is obtained but the
consent of one or more of such other Banks whose consent is required is not
obtained, then the Borrower shall have the right to replace each such
non-consenting Bank or Banks (so long as all non-consenting Banks are so
replaced) with one or more Replacement Banks pursuant to Section 1.12 so long
as at the time of such replacement, each such Replacement Bank consents to
the proposed change, waiver, discharge or termination, PROVIDED that the
Borrower shall not have the right to replace a Bank solely as a result of the
exercise of such Bank's rights (and the withholding of any required consent
by such Bank) pursuant to clauses (v)-(y) of the second proviso to
Section 13.12(a).
(c) The obligations or rights of the Swingline Bank with
respect to Swingline Loans, including, without limitation, the terms of any
such Swingline Loans and the obligations of the other Banks to fund Mandatory
Borrowings shall not be amended or modified without the consent of the
Swingline Bank.
(d) Notwithstanding anything to the contrary contained above
in this Section 13.12, the Collateral Agent may (i) enter into amendments to
the Security Documents for the purpose of adding additional Subsidiaries of
the Borrower (or other Credit Parties) as parties thereto and (ii) enter into
security documents to satisfy the requirements of Section 8.17, in each case
without the consent of the Required Banks.
13.13 SURVIVAL. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01 shall
survive the execution and delivery of this Agreement and the Notes and the
making and repayment of the Loans.
13.14 DOMICILE OF LOANS. Each Bank may transfer and carry its
Loans at, to or for the account of any office, Subsidiary or Affiliate of
such Bank.
13.15 POST-CLOSING OBLIGATIONS. (a) The Borrower hereby
acknowledges that in connection with certain assignments hereof, the Agent or
any of the Banks may be required to obtain a rating of the Obligations and
Commitments hereunder of the Borrower and the Borrower hereby consent to such
Agent or Bank providing to the respective rating agency such information
regarding the Obligations and creditworthiness of the Borrower as is
customary practice of such rating agency.
(b) Notwithstanding anything to contrary contained in this
Agreement, it is agreed that all Schedules and Exhibits to this Agreement
will be completed, be satisfactory to the Agent and the Required Banks and
become part of this Agreement on or prior to the Initial Borrowing Date.
13.16 SPRINT SPECTRUM L.P.'S PURCHASE RIGHTS. The Banks
acknowledge and agree that Sprint Spectrum L.P. has the right in accordance
with the Consent and Agreement to purchase all Obligations, the Operating
Assets or the Pledged Equity under the terms and conditions set forth in the
Consent and Agreement. The Banks hereby consent to, and authorize
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the Agent to take, all actions required to be taken in accordance with the
Consent and Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date
first above written.
Address:
--------
3 Bala Plaza, Suite 502 UBIQUITEL HOLDINGS, INC.
Bala Cynwyd, PA 1900
Attention: Donald A. Harris
Telephone: (610) 771-2151 By:____________________________
Facsimile: (610) 660-4920 Title:
3 Bala Plaza, Suite 502 UBIQUITEL, LLC
Bala Cynwyd, PA 19004
Attention: Donald A. Harris By: Ubiquitel Holdings, Inc.,
its sole member
Telephone: (610) 771-2151
Facsimile: (610) 660-4920
By:____________________________
Title:
787 Seventh Avenue PARIBAS,
New York, NY 10019 Individually and as Agent
Attention: Salo Aizenberg
By:____________________________
Telephone: (212)841-2119 Title:
Facsimile: (212)841-2369
By:____________________________
Title:
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EXHIBIT 10.12
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is dated as of December 28,
1999 and entered into by and between UBIQUITEL HOLDINGS, INC., a Delaware
corporation (the "Company") and PARIBAS NORTH AMERICA, INC., a Delaware
corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company, Ubiquitel LLC, a Delaware limited liability company
and wholly owned subsidiary of the Company ("Ubiquitel"), Paribas, as agent, and
the other institutions from time to time party thereto are party to a Credit
Agreement (as amended, amended and restated, supplemented, restructured or
otherwise modified from time to time (in whole or in part and without limitation
as to terms, conditions or covenants and without regard to the principal amount
thereof) and in effect, including all related notes, collateral documents,
guaranties, instruments and agreements entered into in connection therewith, and
any successive restructurings, renewals, extensions or refundings thereof, the
"Credit Agreement"), dated as of the date hereof, pursuant to which Paribas and
such other institutions have agreed to provide certain credit facilities to
Ubiquitel on the terms and conditions set forth therein; and
WHEREAS, as a material inducement to the Banks for entering into the
Credit Agreement, the Company has agreed to issue and sell to the Purchaser on
the date hereof, common stock purchase warrants (the "Warrants") to purchase
574,402 shares of non-voting Common Stock, which shall represent 2.25% of the
fully diluted equity of the Company on the date hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1.
DEFINED TERMS
(a) The following terms when used in this Agreement, including its
preamble and recitals, shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Additional Shares" shall mean any shares of Common Stock issued after
the date hereof except (i) Common Stock issued upon the exercise of any
Warrant, (ii) securities issued by the Company on or prior to the Closing
Date (and securities issued upon the direct or indirect conversion or
exercise of any securities issued by the Company on or prior to the Closing
Date),
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(iii) shares of Common Stock (including shares issuable upon the exercise or
exchange of warrants or options to acquire shares of Common Stock) issued
solely to the Company's (or any of its subsidiaries') employees or directors
pursuant to a stock option or ownership plan or program or any stock issuance
arrangement adopted by the Company's Board of Directors on or prior to the
date hereof up to, and including, five percent (5%) of the Company's total
common equity determined on a Fully Diluted Basis as of the date hereof; (iv)
Equity Securities issued pursuant to Section 10 of this Agreement and (v)
shares to be issued by the Company in connection with its initial public
offering.
"Affiliate" shall mean, as applied to any Person, any other Person
directly or indirectly controlling (including, but not limited to, all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person and shall include, for purposes of determining whether
a Person is an Affiliate of the Company, any Person that directly or indirectly
(including through limited partner or general partner interests) owns more than
5% of any class of the capital stock of such Person; PROVIDED, HOWEVER, that for
purposes of Section 14(d), none of the "Agent", the "Collateral Agent" or any
"Bank" (such terms being used herein as defined in the Credit Agreement) or any
Affiliate of such Person, shall be considered an Affiliate of the Company. A
Person shall be deemed to "control" another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" shall have the meaning provided in the preamble of this
Agreement.
"Applicable Law" shall mean all provisions of laws, statutes, ordinances,
rules, regulations, permits or certificates of any Governmental Authority
applicable to such Person or any of its assets or property, and all judgments,
injunctions, orders and decrees of all courts, arbitrators or Governmental
Authorities in proceedings or actions in which such Person is a party or by
which any of its assets or properties are bound.
"Bank" shall have the meaning provided in the Credit Agreement.
"BET" shall mean BET Associates, L.P.
"Business Day" shall mean any day except Saturday, Sunday and any day
which in New York shall be a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Call Effective Date" shall mean the date which is the later of (x) the
sixth anniversary of the Closing Date and (y) the later of (i) one year after
the Put Effective Date and (ii) the date ten (10) Business Days after the date
on which there are no limitations on the Company's obligation to purchase all of
the Warrants and/or all of the Warrant Shares (pursuant to a Put Notice) of the
type described in Section 11(e).
"Call Notice" shall have the meaning provided in Section 12(a).
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"Call Option Purchase Price" shall mean, with respect to the right of the
Company to purchase any Warrants or Warrant Shares pursuant to any Call Notice
delivered under Section 12, one hundred and twenty percent (120%) of the Market
Price of a Warrant Share as of the Call Repurchase Date, multiplied by the
number of Warrants and/or Warrant Shares subject to the Call Notice, and in the
case of Warrants, multiplied by the Warrant Number in effect on the date of
delivery of the Call Repurchase Date.
"Call Repurchase Date" shall have the meaning provided in Section 12(b).
"Certificate" shall mean the Certificate of Incorporation of the Company,
as amended through the date hereof.
"Change of Control" shall have the meaning provided in the Credit
Agreement as in effect on the date hereof.
"Closing Date" shall mean the initial date of issuance of the Warrants
under this Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the 1933 Act.
"Common Stock" shall mean, collectively, the voting common stock of the
Company, par value $.001 per share and the non-voting common stock of the
Company, par value $.001 per share.
"Common Stock Per Share Market Value" shall mean the price per share of
Common Stock obtained by dividing (A) the Market Value by (B) the number of
shares of Common Stock outstanding (on a Fully-Diluted Basis) at the time of
determination.
"Company" shall have the meaning provided in the preamble of this
Agreement.
"Co-Sale Agreement" shall mean that certain Co-Sale Agreement, dated as
of November 23, 1999, by and among the Company and the shareholders party
thereto, as the same may be amended from time to time.
"Credit Agreement" shall have the meaning provided in the first recital
of this Agreement.
"Equity Securities" shall mean all shares of capital stock of the
Company, all securities convertible into or exchangeable for shares of capital
stock of the Company, and all options, warrants, and other rights to purchase or
otherwise acquire from the Company shares of such capital stock, or securities
convertible into or exchangeable for shares of such capital stock.
"Equivalent Nonvoting Security" shall mean, with respect to any security
issued or to be issued by any Person, a security of such Person that is
identical in rights and benefits to such security, except that (a) the
equivalent security shall not be entitled to vote on any matter on which holders
of voting securities of such Person are entitled to vote, other than as required
by
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Applicable Law or with respect to any amendment or repeal of any provision of
the Organizational Documents of such Person or any other agreement or instrument
pursuant to which the equivalent security was issued which provision
specifically affects such equivalent security, (b) subject to such reasonable
restrictions as any affected Regulated Holder may request (including any
restriction necessary to prevent the violation by such Regulated Holder of any
provision of Applicable Law with respect to its ownership of voting securities),
the equivalent security shall be convertible in a one-to-one ratio into the
first security and (c) the terms of the equivalent security shall include such
provisions requested by any affected Regulated Holder as are reasonable and
equitable to ensure that (i) the equivalent security is treated comparably to
the first security with respect to dividends, distributions, stock splits,
reclassifications, capital reorganizations, mergers, consolidations and other
similar events and transactions, (ii) the conversion right provided in clause
(b) above is equitably protected and (iii) the acquisition of the equivalent
security will not cause such Regulated Holder to violate Applicable Law.
"Exercise Price" shall have the meaning provided in Section 5.
"Expiration Date" shall have the meaning provided in Section 5.
"Financing" shall mean the borrowing or money by the Company and/or any
of its Subsidiaries (including the refinancing of any existing indebtedness of
the Company), the sale or issuance of additional shares of Common Stock by the
Company, transfers by the Company from its capital to its surplus accounts,
pursuant to which the Company makes available funds in the amount to satisfy in
cash all of its obligations under Section 11 hereof.
"Fully Diluted Basis" shall mean, as applied to the calculation of the
total number of shares of Common Stock outstanding at any time, after giving
effect to (a) all shares of Common Stock outstanding at the time of
determination and (b) without duplication, all shares of Common Stock issuable
upon the exercise, exchange or conversion of Equity Securities to purchase or
exchangeable or convertible into Common Stock which are outstanding at the time
of determination and then so convertible or exchangeable at a conversion or
exchange price equal to or less than the Market Price at such time.
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States of
America or foreign.
"Holder" shall mean the Purchaser (so long as it holds any Warrants or
Warrant Shares) and any other registered holder of any of the Warrants or
Warrant Shares.
"Independent Financial Expert" shall mean a nationally recognized
investment banking firm (a) that does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Company, (b) that has not been, and, at the time it is called
upon to serve as an Independent Financial Expert under this Agreement is not
(and none of whose directors, officers, employees or Affiliates is) a promoter,
director or officer of the Company, (c) that has not been retained during the
preceding two years by the Company for any purpose, and (d) that is otherwise
qualified to serve as an independent financial advisor.
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Any such Person may receive customary compensation and indemnification by the
Company for opinions or services it provides as an Independent Financial
Expert.
"Look Back Amount" shall have the meaning provided in Section 12(d).
"Look Back Event" shall have the meaning provided in Section 12(d).
"Look Back Holders" shall have the meaning provided in Section 12(d).
"Market Price" shall mean, with respect to a share of Common Stock on any
Business Day:
(a) if the Common Stock is Publicly Traded at the time of
determination, the average of the closing prices on such day of the
Common Stock on all domestic securities exchanges on which the Common
Stock is then listed, or, if there have been no sales on any such
exchange on such day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day or, if on any such
day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted on NASDAQ as of 4:00 P.M., New York time, on
such day, or if on any day such security is not quoted on NASDAQ, the
average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such
case averaged over a period of 20 days consisting of the day as of which
"Market Price" is being determined and the nineteen consecutive Business
Days prior to such day, PROVIDED that, if Market Price is being
determined as of the date of a Qualified Public Offering, Market Price as
of such date shall be the offering price for the Common Stock subject to
such Qualified Public Offering; or
(b) if the Common Stock is not Publicly Traded at the time of
determination, the Common Stock Per Share Market Value.
"Market Value" shall mean the price that would be paid for the entire
common equity of the Company on a going-concern basis in an arm's-length
transaction between a willing buyer and a willing seller (neither acting under
compulsion), using valuation techniques then prevailing in the securities
industry (but without giving effect to any discount in respect of a minority
interest and giving effect to any value attributed to the rights of the Holders
to receive dividends and distributions as provided in Section 10 hereof) and
determined in accordance with the Valuation Procedure, and assuming full
disclosure and understanding of all relevant information and a reasonable period
of time for effectuating such sale. For the purposes of determining the Market
Value, (a) the exercise price of options or warrants to acquire Common Stock
which are deemed to have been exercised for the purpose of determining the
number of shares of Common Stock outstanding on a Fully-Diluted Basis, shall be
deemed to have been received by the Company and (b)(i) the liquidation
preference or indebtedness, as the case may be, represented by securities which
are deemed exercised for or converted into Common Stock for the purpose of
determining the number of shares of Common Stock outstanding on a Fully-Diluted
Basis and
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(ii) any contractual limitation in respect of the shares of Common
Stock relating to voting rights, shall be deemed to have been eliminated or
canceled.
"NASDAQ" shall mean the National Association of Securities Dealers, Inc.,
Automated Quotation System.
"Organizational Documents" shall mean, with respect to any Person, each
instrument or other document that (a) defines the existence of such Person,
including its articles or certificate of incorporation, as filed or recorded
with an applicable Governmental Authority or (b) governs the internal affairs of
such Person, including its bylaws, in each case as amended, supplemented or
restated.
"Permitted Transferee" shall mean any Affiliate of any Holder, any
officer, director, partner, member or employee of any Holder or any Bank who may
become a party to the Credit Agreement from time to time.
"Person" or "Persons" shall mean any individual, general partnership,
limited partnership, limited liability company, limited liability partnership,
joint venture, firm, corporation, association, trust, or other enterprise or any
governmental or political subdivision or any agency, department or
instrumentality thereof.
"Preferred Stock Purchase Agreement" shall mean that certain Series A
Preferred Stock Purchase Agreement, dated as of November 23, 1999, by and among
the Company and the investors named therein.
"Publicly Traded" shall mean, with respect to any security, that such
security is (a) listed on a domestic securities exchange, (b) quoted on NASDAQ
or (c) traded in the domestic over-the-counter market, which trades are reported
by the National Quotation Bureau, Incorporated.
"Purchaser" shall have the meaning provided in the preamble of this
Agreement.
"Put Effective Date" shall mean the earliest to occur of (x) a Change of
Control and (y) the fifth anniversary of the Closing Date.
"Put Notice" shall have the meaning provided in Section 11(a).
"Put Option Purchase Price" shall mean, with respect to the exercise of
any option to sell any Warrants or Warrant Shares pursuant to any Put Notice
delivered under Section 11 hereof by any Holder of Warrants or Warrant Shares,
the Market Price (without duplication, plus the value attributed, on a per share
basis, to the rights of the Holders to receive dividends and distributions as
provided in Section 10 hereof determined in accordance with the Valuation
Procedure) as of the Put Repurchase Date, multiplied by the number of Warrants
and Warrant Shares subject to the Put Notice, and in the case of Warrants
subject to such Put Notice, multiplied by the Warrant Number in effect on the
date of delivery of the Put Notice.
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"Put Repurchase Date" shall mean, with respect to the exercise of any put
option pursuant to Section 11 of this Agreement, a date designated by the
Company which is not more than thirty (30) days after the date the Company
delivers its notice to the Holder or Holders exercising its or their put rights
pursuant to Section 11(c)(i) hereof.
"Qualified Public Offering" shall mean any widely distributed sale of the
Common Stock of the Company to the public pursuant to an offering registered
under the 1933 Act pursuant to which the Company realizes gross sale proceeds of
at least $30,000,000.
"Registration Rights Agreement" shall mean that certain Rights Agreement,
dated as of November 23, 1999, by and among the Company and the shareholders
party thereto, as the same may be amended from time to time.
"Regulated Holder" shall have the meaning provided in Section 8.
"Regulation Y" shall have the meaning provided in Section 8.
"Reorganization" shall have the meaning provided in Section 9(g).
"Requisite Holders" shall mean Holders holding Warrants and/or Warrant
Shares representing at least a majority of all Warrant Shares issued or issuable
upon exercise of Warrants outstanding on the date of determination.
"Section 14(e) Transaction" shall have the meaning provided in Section
14(e).
"Series A Preferred Stock" shall have the meaning provided in Section
13(b).
"Subsidiary" shall have the meaning provided in the Credit Agreement.
"Ubiquitel" shall have the meaning provided in the first recital of this
Agreement.
"Valuation Procedure" shall mean, with respect to the determination of
any amount or value required to be determined in accordance with such procedure,
a determination (which shall be final and binding on the Company and the
Holders) made (i) by agreement among the Company and the Requisite Holders
within twenty (20) days following the event requiring such determination or (ii)
in the absence of such an agreement, by an Independent Financial Expert selected
in accordance with the further provisions of this definition. If required, an
Independent Financial Expert shall be selected within five (5) days following
the expiration of the 20-day period referred to above, either by agreement among
the Company and the Requisite Holders or, in the absence of such agreement, by
lot from a list of four potential Independent Financial Experts remaining after
the Company nominates three, the Requisite Holders nominate three, and each side
eliminates one potential Independent Financial Expert. The Independent
Financial Expert shall be instructed by the Company and the Requisite Holders to
make its determination within 20 days of its selection. The fees and expenses
of an Independent Financial Expert selected hereunder shall be paid by the
Company.
"Warrant Certificates" shall have the meaning provided in Section 2.
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"Warrant Documents" shall mean this Agreement, the Warrant Certificates,
the Certificate, the Co-Sale Agreement and the Registration Rights Agreement.
"Warrant Number" shall have the meaning provided in Section 9.
"Warrant Shares" shall mean (a) the shares of non-voting Common Stock
issued or issuable upon exercise of a Warrant in accordance with Section 5 or
upon exchange of a Warrant in accordance with Section 5, (b) all other
securities or other property issued or issuable upon any such exercise or
exchange in accordance with this Agreement and (c) any securities of the Company
distributed with respect to, or issued upon the conversion of, the securities
referred to in the preceding clauses (a) and (b).
"Warrants" shall have the meaning provided in the recitals of this
Agreement.
SECTION 2.
WARRANT CERTIFICATES
The Company hereby agrees to issue to the Purchaser and hereby agrees to
accept from the Company, for good and valuable consideration received, subject
to the conditions and restrictions contained in this Agreement and in reliance
on the representations and warranties of the Company contained herein (including
those representations and warranties of the Company contained herein by
reference), 574,402 Warrants to initially purchase 574,402 shares of non-voting
Common Stock. The Company represents and warrants to the Purchaser that the
total number of Warrants issuable to the Purchaser pursuant hereto shall equal,
when exercised, a number of shares of non-voting Common Stock of the Company
equal to two and one quarter percent (2.25%) of the total equity of the Company
on the date hereof (including, after giving effect to the issuance of the
Warrants hereunder, the issuance of common stock purchase warrants to BET and
the issuance of additional shares of Series A Preferred Stock pursuant to the
Preferred Stock Purchase Agreement, on the date hereof) computed on a Fully
Diluted Basis. The Company shall issue and deliver a certificate or
certificates to the Purchaser evidencing the Warrants in the form of EXHIBIT A
attached hereto ("Warrant Certificates") concurrently with the Purchaser's
execution of this Agreement. Warrant Certificates shall be dated the date of
issuance by the Company.
SECTION 3.
EXECUTION OF WARRANT CERTIFICATES;
MUTILATED OR MISSING WARRANT CERTIFICATES
Warrant Certificates shall be signed on behalf of the Company by its
Chairman of the Board or its President or a Vice President of the Company. Each
Warrant Certificate shall also be manually signed on behalf of the Company by
its Secretary or an Assistant Secretary of the Company.
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In case any of the Warrant Certificates shall be mutilated, lost, stolen
or destroyed, the Company shall, upon request of the Holder of any such Warrant
Certificate, 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 indemnity, if requested, also
reasonably satisfactory to the Company.
SECTION 4.
REGISTRATION/RESERVATION OF WARRANT SHARES
The Company shall number and register the Warrant Certificates in a
register as they are issued. The Company may deem and treat the registered
Holders of the Warrant Certificates as the absolute owners thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes and shall not be affected by any notice to the
contrary. The Warrants shall be registered initially in such name or names as
the Purchaser shall designate.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Stock, for the purpose of enabling it to satisfy any obligation to issue Warrant
Shares upon exercise of Warrants and the subsequent conversion of such Warrant
Shares, the maximum number of shares of Common Stock which may then be
deliverable upon the exercise of all outstanding options, warrants (including
the Warrants) or other securities, directly or indirectly, convertible into or
exchangeable for Common Stock.
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants or upon conversion of Warrant Shares will, upon
payment of the Exercise Price therefor (in the case of an exercise of Warrants)
and issuance thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights (except as may be granted by this
Agreement) and free from all taxes, liens, charges and security interests with
respect to the issue thereof.
If and so long as the outstanding Common Stock may be listed on any
securities exchange in the United States, the Company shall use its best efforts
to cause all reserved Warrant Shares to be listed on each such exchange upon
official notice of issuance upon such exercise.
SECTION 5.
WARRANTS; EXERCISE OF WARRANTS
Subject to the terms of this Agreement, each Holder shall have the right,
which may be exercised at any time or from time to time until 5:00 p.m., New
York time, on December 28, 2009 (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
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of such Warrants and payment of the Exercise Price then in effect for such
Warrant Shares. Each Warrant not exercised prior to 5:00 p.m., New York
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; PROVIDED that the occurrence of the Expiration Date shall not relieve
the Company of any obligation to any Holder which arose pursuant to the terms
of this Agreement prior to such date.
The price at which each Warrant shall be exercisable (as such price may
be adjusted from time to time, in accordance with the terms hereof, the
"Exercise Price") shall initially be $.01 per share. The Common Stock shall
have a par value of no greater than $.001 per share.
A Warrant may be exercised upon surrender to the Company at its address
set forth on the signature pages hereto of the Warrant Certificate or Warrant
Certificates to be exercised with the form of election to purchase attached
thereto duly completed and signed, and upon payment to the Company of the
Exercise Price for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price may be
made, at the option of the applicable Holder, (i) by cash, certified or bank
cashier's check or wire transfer, (ii) by surrendering to the Company the number
of Warrants which, when exercised, would entitle the Holder thereof to that
number of Warrant Shares which is equal to (A) such aggregate Exercise Price
divided by (B) the Market Price, (iii) by surrendering to the Company the number
of shares of Common Stock which is equal to (A) such aggregate Exercise Price
divided by (B) the Market Price or (iv) any combination of the foregoing.
Subject to the provisions of Section 6, upon such surrender of Warrants
and payment of the Exercise Price the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Holder and in such name or names as such Holder may designate a certificate or
certificates for the number of full Warrant Shares issuable upon the exercise of
such Warrants (and such other consideration as may be deliverable upon exercise
of such Warrants) together with, at the sole option of the Company, cash for
fractional Warrant Shares as provided in Section 7. Such certificate or
certificates shall be deemed to have been issued and the Person so named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrants and payment of the Exercise Price,
irrespective of the date of delivery of such certificate or certificates for
Warrant Shares.
Each Warrant shall be exercisable, at the election of the Holder thereof,
either in full or from time to time in part and, in the event that a Warrant
Certificate 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 5 and of Section
2.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office.
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SECTION 6.
PAYMENT OF TAXES
The Company will pay all taxes and other governmental charges (including
all documentary stamp taxes, but excluding all foreign, federal, state or local
income taxes payable by a Holder) in connection with the issuance or delivery of
the Warrants hereunder, including all such taxes attributable to the initial
issuance or delivery of Warrant Shares upon the exercise of Warrants and payment
of the Exercise Price. The Company shall not, however, be required to pay any
tax that may be payable in respect of any subsequent transfer of the Warrants or
any transfer involved in the issuance and delivery of Warrant Shares in a name
other than that in which the Warrants to which such issuance relates were
registered, and, if any such tax would otherwise be payable by the Company, no
such issuance or delivery shall be made unless and until the Person requesting
such issuance has paid to the Company the amount of any such tax, or it is
established to the reasonable satisfaction of the Company that any such tax has
been paid.
SECTION 7.
FRACTIONAL INTERESTS
The Company shall not be required to issue fractional Warrant Shares 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 Warrant
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except for
the provisions of this Section 7, be issuable on the exercise of any Warrants
(or specified portion thereof), the Company shall, at its sole option, pay an
amount in cash equal to the Market Price of the Warrant Share so issuable
multiplied by such fraction.
SECTION 8.
LIMITATIONS ON CERTAIN HOLDERS
Notwithstanding anything in this Agreement or any Warrant Certificate to
the contrary, no Holder which is subject to the provisions of Regulation Y
promulgated by the Board of Governors of the Federal Reserve, or any successor
regulation thereto ("Regulation Y"), or which is affiliated with any entity
subject to the provisions of Regulation Y (if such Affiliate holds securities of
the Company (any such Holder being referred to herein as a "Regulated Holder"))
and no transferee of such Regulated Holder, may exercise the Warrants for a
number of Warrant Shares which would permit such Regulated Holder, together with
its Affiliates and transferees, to own or control a number of Warrant Shares
greater than that permitted by Applicable Law including, without limitation,
Regulation Y.
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SECTION 9.
ADJUSTMENT OF NUMBER OF WARRANT SHARES ISSUABLE
AND EXERCISE PRICE
The number of shares of non-voting Common Stock issuable upon the
exercise of each Warrant (the "Warrant Number") is initially one. The Warrant
Number is subject to adjustment from time to time upon the occurrence of any
event enumerated in, or as otherwise provided in this Section 9.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If the Company:
(i) subdivides or reclassifies its outstanding shares of Common
Stock into a greater number of shares or declares a stock dividend payable in
shares of Common Stock;
(ii) combines or reclassifies its outstanding shares of Common
Stock into a smaller number of shares; or
(iii) issues by reclassification of its Common Stock any shares
of its capital stock;
then the Warrant Number in effect immediately prior to such action shall be
adjusted so that the Holder of any Warrant thereafter exercised may receive the
aggregate number and kind of shares of capital stock of the Company which it
would have owned immediately following such action if such Warrant had been
exercised immediately prior to such action. The adjustment shall become
effective immediately after the effective date thereof. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) ADDITIONAL ISSUANCE. If the Company at any time shall issue any
Additional Shares at a price less than the Market Price or any other Equity
Securities which are exercisable or convertible for, exchangeable into or
otherwise providing the right to acquire Additional Shares at an exercise or
conversion, exchange or other effective price less than the Market Price, the
Warrant Number after such issuance shall be determined by multiplying the
Warrant Number by a fraction, (i) the denominator of which shall be the number
of shares of Common Stock on a Fully Diluted Basis immediately prior to such
issuance plus the number of shares that the aggregate consideration to be
received by the Company for the total number of such Additional Shares issued or
to be issued in connection with the conversion or exercise of other Equity
Securities (including the issue price of any such other Equity Securities) would
purchase at the Market Price and (ii) the numerator of which shall be the number
of shares of Common Stock on a Fully Diluted Basis immediately after such
issuance. Shares of Common Stock owned by or held for the account of the
Company or any Subsidiary of the Company on such date shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
effective immediately after such issuance. Such adjustment shall be made
successively whenever any such event shall occur. If the Company at any time
shall issue two or more securities as a unit and one or more of such securities
shall be Additional Shares or other Equity Securities subject to this subsection
(b), the consideration allocated to each such security shall be determined in
good faith by the Board of Directors of the Company.
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(c) DISTRIBUTION OF EVIDENCES OF INDEBTEDNESS OR ASSETS. If the
Company at any time shall fix a record date for the making of a distribution to
any holder of its Common Stock or other class of common stock (including any
such distribution to be made in connection with a consolidation or merger in
which the Company is to be the continuing corporation) of evidences of its
indebtedness or assets (excluding dividends paid in or distributions of Company
capital stock for which the Warrant Number shall have been adjusted pursuant to
subsection (a) of this Section 9 or dividends or distributions which have been
paid to the Holder pursuant to Section 10) the Warrant Number after such record
date shall be determined by multiplying the Warrant Number immediately prior to
such record date by a fraction, of which the denominator shall be the Market
Price per share of Common Stock on such record date, less the fair market value
(as determined in accordance with the Valuation Procedure and described in a
statement mailed by certified mail to each Holder) of the portion of the assets
or evidences of indebtedness to be distributed to a holder of one share of
Common Stock, and the numerator shall be such Market Price. Such adjustment
shall become effective immediately after such record date. Such adjustment
shall be made whenever such a record date is fixed, and in the event that such
distribution is not so made, the number of Warrant Shares purchasable hereunder
shall again be adjusted to be the number that was in effect immediately prior to
such record date.
(d) CONSIDERATION RECEIVED. For purposes of any computation
respecting consideration received pursuant to subsections (b) and (c) of this
Section 9, the following shall apply:
(i) in the case of an issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash (without any deduction
being made for any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in connection therewith);
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof (irrespective of the
accounting treatment thereof) as determined in accordance with the Valuation
Procedure; and
(iii) in the case of the issuance of other Equity Securities, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such securities plus
the additional minimum consideration, to be received by the Company upon the
conversion, exchange or exercise thereof (the consideration in each case to be
determined in the same manner as provided in clauses (i) and (ii) of this
subsection).
(e) WHEN DE MINIMIS ADJUSTMENT DEFERRED. No adjustment in the Warrant
Number need be made unless the adjustment would require an increase or decrease
of at least one-tenth of one percent in the Warrant Number. Any adjustments
that are not made shall be carried forward and taken into account in any
subsequent adjustment, provided that no such adjustment shall be deferred beyond
the date on which a Warrant is exercised. All calculations under this Section 9
shall be made to the nearest 1/10th of a share.
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(f) NOTICE OF ADJUSTMENT. Whenever the Warrant Number is adjusted,
the Company shall provide the notices required by subsection 14(a) hereof.
Whenever the Warrant Number is required to be adjusted, as herein provided, the
Company shall mail by first class, postage prepaid, to each Holder, notice of
such adjustment or adjustments and a certificate of a firm of nationally
recognized independent public accountants selected by the board of directors of
the Company (who may be the regular accountants employed by the Company) setting
forth the Warrant Number after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made.
(g) REORGANIZATIONS. In case of any capital reorganization, other
than in the cases referred to in subsections 9(a), (b) or (c) hereof, or the
consolidation or merger of the Company with or into another Person (other than a
merger or consolidation in which the Company is the surviving entity and which
does not result in any reclassification of the outstanding shares of Common
Stock into shares of other stock or other securities or property), or the sale
of the property of the Company as an entirety or substantially as an entirety
other than in the cases referred to in Subsections 9(a), (b) or (c) hereof
(collectively, such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Securities theretofore deliverable) the number of shares
of stock or other securities or property to which a holder, of the number of
shares of Common Stock that would otherwise have been deliverable upon the
exercise of such Warrant, would have been entitled upon such Reorganization if
such Warrant had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the board of directors of the Company, whose
determination shall be described in a duly adopted resolution certified by the
Company's Secretary or Assistant Secretary, shall be made in the application of
the provisions herein set forth with respect to the rights and interests of
Holders so that the provisions set forth herein shall thereafter be applicable,
as nearly as possible, in relation to any shares or other property thereafter
deliverable upon exercise of Warrants. The Company shall not effect or permit
any such Reorganization unless (i) the successor entity resulting from such
Reorganization or the Person purchasing such assets is a corporation duly
organized and validly existing under the laws of a state of the United States
and (ii) prior to or simultaneously with the consummation of such Reorganization
the successor entity (if other than the Company) resulting from such
Reorganization or the Person purchasing such assets shall expressly assume, by a
supplemental Warrant Agreement or other acknowledgment executed and delivered to
the Holder(s) in form and substance satisfactory to the Requisite Holders, the
obligation to deliver to each such Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such Holder may be
entitled to purchase, and all other obligations and liabilities under this
Agreement.
(h) FORM OF WARRANTS. Irrespective of any adjustments in the number
or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrant Certificates initially
issuable pursuant to this Agreement.
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(i) ADJUSTMENTS IN OTHER SECURITIES. If as a result of any event or
for any other reason, any adjustment is made which increases the number of
shares of Common Stock issuable upon conversion, exercise or exchange of, or in
the conversion or exercise price or exchange ratio applicable to, any Equity
Securities outstanding on the Closing Date, then a corresponding adjustment
shall be made hereunder to adjust the number of shares of Common Stock issuable
upon exercise of the Warrants, but only to the extent that no such adjustment
has been made pursuant to subsection 9(a), (b) or (c) with respect to such event
or for such other reason.
(j) OTHER DILUTIVE EVENTS. If any corporate action shall occur as to
which the provisions of this Section 9 are not strictly applicable but as to
which the failure to make any adjustment would adversely affect the purchase
rights or value represented by the Warrants in accordance with the essential
intent and principles of this Section 9 (which are to place the Holder in a
position as nearly equal as possible to the position the Holder would have
occupied had the Holder purchased shares of Common Stock on the date hereof)
then, in each such case, the Company shall appoint a firm of independent
certified public accountants of recognized national standing (which may be the
regular auditors of the Company) to give their opinion upon the adjustment, if
any, on a basis consistent with the essential intent and principles established
in this Section 9, necessary to preserve, without dilution, the purchase rights
represented by Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to Holders and will make the adjustments described
therein.
(k) EXERCISE PRICE ADJUSTMENT. Whenever the Warrant Number is
adjusted as herein provided, the Exercise Price payable upon exercise of this
Warrant shall be adjusted by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, the numerator of which shall be the Warrant
Number immediately prior to such adjustment, and the denominator of which shall
be the Warrant Number immediately thereafter.
(l) DISSOLUTION, LIQUIDATION OR WINDING UP. Notwithstanding any other
provision of this Agreement, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, each Holder shall be
entitled to share, with respect to the Warrant Shares issuable upon exercise of
the Holder's Warrants, equally and ratably in any cash or non-cash distributions
payable to holders of Common Stock, less the aggregate Exercise Price payable
upon the exercise of such Warrants. The Company shall give notice to each Holder
at the earliest practicable time (and, in any event, not less than twenty (20)
days before the date of such dissolution, liquidation or winding-up, as the case
may be) and each Holder of outstanding Warrants shall be entitled to share
equally and ratably in any cash or noncash distributions payable to holders of
Common Stock. In case of any such voluntary or involuntary dissolution,
liquidation or winding up of the Company, the Company shall hold in escrow any
funds or other property which a Holder is entitled to receive in respect of such
Holder's Warrant Shares at the time of any distribution. No such Holder will be
entitled to receive payment of any such distribution until such Holder has
surrendered the Warrant Certificates evidencing such Warrant to the Company.
From and after such voluntary or involuntary dissolution, liquidation or winding
up with respect to the Company, all rights of the Holders, except the right to
receive such distribution, without interest, upon the surrender of the Warrant
Certificates, shall cease and terminate and such Warrants shall not thereafter
be transferred (except with the consent of the
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Company) and such Warrants shall not be deemed to be outstanding for any
other purpose whatsoever. For the purposes of this Agreement, neither the
voluntary sale, lease, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all the
property or assets of the Company, nor the consolidation or merger of the
Company with one or more other corporations, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, with
respect to the Company.
(m) MISCELLANEOUS. In the event that at any time, as a result of an
adjustment made pursuant to this Section 9, the Holders shall become entitled to
purchase any securities of the Company other than, or in addition to, shares of
Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each Warrant 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 Warrant Shares contained in this Section 9, and
the provisions of Sections 5, 6, 7 and 8 with respect to the Warrant Shares or
the Common Stock shall apply on like terms to any such other securities.
(n) REGULATED HOLDERS. If, in the written opinion of counsel to any
Regulated Holder (which may be its internal counsel), the receipt by such
Regulated Holder of Warrant Shares (or any security included therein) upon any
exercise or exchange pursuant to this Section 9 or the receipt of any dividend
or distribution pursuant to Section 10 would cause such Regulated Holder to
violate any provision of Applicable Law with respect to its ownership of
securities of the Company, then the Company will use its best efforts (including
using its best efforts to cause its Organizational Documents to be amended) to
create an Equivalent Nonvoting Security with respect to Warrant Shares (or any
such security included therein) or any security received by such Regulated
Holder in connection with such dividend or distribution which would not cause
the Holder to violate any provision of Applicable Law, and such Regulated Holder
shall be entitled to receive upon such exercise or exchange or dividend or
distribution, in lieu of such number (as it shall specify) of shares or other
units of Warrant Shares (or any such security included therein) or other
securities otherwise receivable by such Regulated Holder, the same number of
shares or other units of such Equivalent Nonvoting Security.
SECTION 10.
PAYMENTS IN RESPECT OF DIVIDENDS AND DISTRIBUTIONS
If the Company pays any dividend or makes any distribution (whether in
cash, property or securities of the Company) on its capital stock, then the
Company shall simultaneously pay to each Holder of Warrants, other than to any
Holder of Warrants delivering a written legal opinion to the Company in
accordance with Section 9(n) hereof within ten (10) Business Days of the notice
delivered to such Holder pursuant to Section 13 hereof, an amount equal to the
dividend or distribution which would have been paid to such Holder on the
Warrant Shares receivable upon the exercise in full of such Warrant had such
Warrant been fully exercised immediately prior to the record date for such
dividend or distribution or, if no record is taken, the date as of which the
record holders of shares of Common Stock entitled to such dividend or
distribution are to be determined; PROVIDED HOWEVER, that in the event the
receipt by any Holder of any such asset
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distribution would result in a violation of Applicable Law applicable to such
Holder, such Holder shall be entitled to receive an amount of cash in lieu of
such asset distribution equal to the value (determined in accordance with the
Valuation Procedure) of the asset distribution which would other wise would
be received by such Holder.
SECTION 11.
HOLDERS' PUT RIGHTS
(a) GRANTING OF PUT, PUT OPTION PURCHASE PRICE. Subject to the
limitations set forth in subsection (e) hereof, at any time or from time to time
after the Put Effective Date but on or before the later of (x) the Expiration
Date and (y) the date thirty (30) Business Days after the date on which there
are no limitations on the Company's obligation to purchase shares of Common
Stock pursuant to this subsection (a) of the type described in subsection (e),
any Holder of Warrants and/or Warrant Shares, upon written notice to the Company
(a "Put Notice"), shall be entitled to sell, and the Company shall be obligated
to purchase from such Holder, all or any portion of the Warrants and/or Warrant
Shares held by such Holder at the Put Option Purchase Price.
(b) PUT NOTICE. Each Put Notice delivered pursuant to subsection (a)
shall specify:
(i) the name of the Holder of Warrants and/or Warrant Shares
delivering such Put Notice:
(ii) that such Holder is exercising its option, pursuant to this
Section 11, to sell the Warrants and/or Warrant Shares held by such Holder; and
(iii) the number of, and a description of, the Warrants and/or Warrant
Shares being tendered, including a statement, to the extent relevant, of:
(A) the number of Warrants and/or Warrant Shares sought to be
sold by such Holder that were issued upon the exercise of any Warrant; and
(B) the total number of Warrants and/or Warrant Shares sought
to be sold by such Holder that have not been exercised or canceled.
(c) COMPANY NOTICES.
(i) The Company shall, within twenty (20) days of receipt of such Put
Notice, deliver to the Holder or Holders exercising its or their put option
pursuant to this Section 11, a notice (i) specifying the Put Repurchase Date and
(ii) stating the type and number of the Warrants and/or Warrant Shares held by
each such other Holder.
(ii) The Company, not less than ten (10) days prior to the Put
Repurchase Date, shall deliver to the Holder or Holders exercising its or their
put option pursuant to this Section 11, a notice containing a detailed
calculation of the Put Option Purchase Price with respect to the Warrants and/or
Warrant Shares which are to be so repurchased from such Holder.
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(d) OBLIGATION TO PURCHASE WARRANT SHARES. The Company shall be
obligated, subject to subsection (e) hereof, to purchase all of such Holder's or
Holders' Warrants and/or Warrant Shares which are the subject of such Put
Notice, and shall pay the Put Option Purchase Price with respect to the exercise
of the put option which is the subject of each such Put Notice payable to such
Holder or Holders in immediately available funds, on the Put Repurchase Date
with respect to such Put Notice, against delivery by such Holder or Holders of
any and all certificates or other instruments evidencing the Warrants and/or
Warrant Shares which are the subject of such Put Notice, together with
appropriate stock powers or other instruments of transfer or assignment duly
endorsed in blank.
(e) LIMITATIONS ON RIGHT OF REPURCHASE. Notwithstanding anything
contained in this Section 11 to the contrary, the Company shall not be obligated
to purchase Warrant and/or Warrant Shares which are the subject of a Put Notice
or be obligated to pay the Put Option Purchase Price in respect of a Put Notice,
if, at any time:
(i) payment of the Put Option Purchase Price at such time would result
in a breach of, or default or event of default in respect of, the Credit
Agreement; or
(ii) payment of the Put Option Purchase Price is, at such time,
prohibited by Applicable Law;
PROVIDED, HOWEVER, with respect to (i) and (ii) above, if such breach, event of
default, default or violation would not result from the purchase of any number
of Warrants and/or Warrant Shares which is less than the total number of shares
the Company is obligated to purchase on the Put Repurchase Date, the Company
shall purchase on the Put Repurchase Date the maximum number of shares it may so
purchase, allocated among the Holders which have elected to have their Warrants
and/or Warrant Shares so repurchased ratably according to the number of Warrants
and/or Warrant Shares so tendered; PROVIDED, FURTHER, HOWEVER, with respect to
(i) and (ii) above, the Company shall use its best efforts to cure such default
or violation in a timely matter (including, but not limited to, increasing its
legally available funds under Applicable Law to amount sufficient to enable it
to purchase all Warrants and/or Warrant Shares put to it pursuant to a Put
Notice and/or effecting a Financing) and remove any associated restrictions or
limitations which are applicable to the rights of the Holders contained in this
Section 11.
SECTION 12.
COMPANY RIGHT OF CALL
(a) GRANTING CALL; PRICE. At any time after the Call Effective
Date but on or before the Expiration Date, the Company may give written notice
to all (but not less than all) Holders of Warrants and/or Warrant Shares (a
"Call Notice") of its intention to repurchase all, but not less than all, of the
Warrants and/or Warrant Shares then held by such Holders, at the Call Option
Purchase Price.
(b) CALL NOTICE. The Call Notice shall:
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(i) state the number of Warrants and/or Warrant Shares that the
Company intends to purchase, pursuant to this Section 12, from the
Holders:
(ii) specify the date on which the Company will repurchase the
Warrants and/or Warrant Shares of the Holders, which date shall be not
more than sixty (60) days from the date of delivery of the Call Notice
(the "Call Repurchase Date"); and
(iii) contain a reasonably detailed calculation of the Call
Option Purchase Price and the Market Price with respect to the Warrants
and/or Warrant Shares.
(c) OBLIGATION TO CALL. The Call Notice having been so given to each
Holder, the Company shall be obligated to purchase the number of Warrants and/or
Warrant Shares specified in the Call Notice with respect to each Holder, and
shall pay the Call Option Purchase Price, payable to each Holder in immediately
available funds, on the Call Repurchase Date, and each Holder shall be obligated
to deliver to the Company in exchange therefore, any and all certificates or
other instruments evidencing its respective repurchased Warrants and/or Warrant
Shares, together with appropriate instruments of transfer or assignment duly
endorsed in blank.
(d) LOOK BACK. (i) If the Company purchases Warrants and/or
Warrant Shares pursuant to this Section 12 and subsequently, at any time up to
twelve (12) months after the closing of such purchase, there occurs an event (a
"Look Back Event") involving any of the following:
(A) a sale of assets or stock, reorganization,
recapitalization, merger, consolidation, redemption, repurchase or other
transaction, the result of which is that following such sale,
reorganization, recapitalization, merger, consolidation, redemption,
repurchase or other transaction, there shall be a Change of Control,
whether in one or a series of transactions; or
(B) a sale, lease or other disposition of all or substantially
all of the Company's assets (determined on a consolidated basis), a sale,
lease or other disposition of all or substantially all or Ubiquitel's
assets, or a sale, lease or other disposition of the Company's assets
(determined on a consolidated basis) that represented at least fifty
percent (50%) of the gross revenues of the Company (determined on a
consolidated basis) for the most recently ended twelve (12) month period;
and the consideration involved in such sale, lease or other disposition,
reorganization, recapitalization, merger, consolidation, redemption, repurchase
or other transaction reflects a Warrant Share value which is greater, on a per
Warrant Share basis, than the Market Price of a Warrant Share used to determine
the Call Option Purchase Price, then the Company shall remit to the Holders from
whom such Warrants and Warrant Shares (the "Look Back Holders") were repurchased
an amount equal to the product of:
(x) the difference of
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(I) the actual fair market value of the consideration on a per
Warrant Share basis involved in such subsequent sale, lease
or other disposition, reorganization, recapitalization,
merger, consolidation, redemption, repurchase or other
transaction; less
(II) the Market Price of a Warrant Share used to determine the
Call Option Purchase Price
multiplied by
(y) in the case of repurchased Warrant Shares, the number of Warrant
Shares purchased by the Company pursuant to this Section 12; and
(z) in the case of repurchased Warrants, the Warrant Number in effect
as of the date of delivery of the Call Notice, as adjusted
pursuant to clause (ii) below, multiplied by the number of the
repurchased Warrants (such sum, after giving effect to the above
equation in total, the "Look Back Amount");
(ii) In the event that, at any time during the period beginning on the
Call Repurchase Date and ending on the date on which a Look Back Event occurs,
the Company entered into any transaction or took any other action that would
have triggered the anti-dilution provisions contained in Section 9 hereof, then,
for purposes of computing the Look Back Amount pursuant to Section 12(d)(i)
above (as it relates to the repurchased Warrants), the Warrant Number used to
determine such Look Back Amount shall be adjusted to the Warrant Number that
would have been in effect immediately prior to the date of such Look Back Event
(after giving effect to any adjustment made pursuant to Section 9) as if the
Warrants were never repurchased by the Company pursuant to this Section 12.
(iii) The Look Back Amount computed under Section 12(d)(i) shall also be
increased by all dividends and distributions paid by the Company during the
period beginning on the Call Repurchase Date and ending on the date on which a
Look Back Event occurs that the Look Back Holders would have been entitled to
receive pursuant to Section 10 hereof if the Company had not exercised its call
rights under this Section 12.
(iv) The Company shall provide each Look Back Holder with its
calculation of the Look Back Amount, certified by its Chief Financial Officer,
within five (5) days after the occurrence of the Look Back Event. The Company
shall pay to each Look Back Holder by wire transfer of immediately available
funds its PRO RATA portion the Look Back Amount calculated in accordance with
this Section 12(d) based on the number of Warrants and/or Warrant Shares
repurchased by the Company within five (5) days after it delivers its
calculation of the Look Back Amount to each Look Back Holder pursuant to the
preceding sentence.
(v) If all or any portion of the consideration involved in any sale,
lease, or other disposition, reorganization, recapitalization, merger,
consolidation, redemption, repurchase or other transaction described in Section
12(d)(i) hereof is non-cash consideration, a determination of the fair market
value of such consideration shall be made in good faith by the Board.
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SECTION 13.
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Holders the
following:
(a) the representations and warranties contained in the Credit
Agreement (including, without limitation, those representations and warranties
incorporated by reference therein as though specifically set forth in therein)
are incorporated by reference herein and are true and correct as of the date
hereof; and
(b) the capitalization of the Company, as of the date hereof and
immediately prior to the execution and delivery of this Agreement, the Credit
Agreement and the transactions contemplated hereby and thereby, is as
follows: (i) 150,000,000 authorized shares of voting Common Stock, of which
3,417,000 are issued and outstanding, (ii) 16,000,000 authorized shares of
non-voting Common Stock, of which 16,000,000 are issued and outstanding and
(iii) 17,008,500 shares of Series A Preferred Stock, par value $.001 per
share, of the Company (the "Series A Preferred Stock"), of which 1,000,000
are issued and outstanding. After giving effect to the transactions
contemplated by the Warrant Documents, the issuance of common stock purchase
warrants to BET and the issuance of additional shares of Series A Preferred
Stock pursuant to the Preferred Stock Purchase Agreement, on the date hereof,
(y) all outstanding shares of capital stock of the Company are held by the
parties and in the amounts set forth on SCHEDULE I hereto and (z) assuming
full conversion, exchange or exercise of all Convertible Securities (as
defined below), all outstanding shares of Common Stock are held by the
parties and in the amounts set forth on SCHEDULE I hereto. Except as set
forth on SCHEDULE II hereto, there are no existing options, warrants (other
than the Warrants issued pursuant hereto), calls, subscriptions, puts,
registration rights, conversion rights, rights of exchange, preemptive
rights, rights of first refusal, rights of first offer, plans or other
agreements, commitments, or claims of any character obligating the Company to
issue, transfer, sell, redeem or otherwise acquire any shares of its (or any
of its subsidiary's) capital stock or any other securities convertible into
or evidencing the right to subscribe for any such shares (all of the
foregoing, "Convertible Securities"). Since the date of issuance thereof,
except as set forth on SCHEDULE II hereto, there has been no adjustment in
the number of shares of capital stock of the Company into which any
Convertible Security is exercisable, exchangeable or convertible pursuant to
the terms of such security, the Certificate or otherwise.
SECTION 14.
COVENANTS
(a) NOTICES OF CERTAIN ACTIONS. In the event that the Company:
(i) shall have authorized the issuance of rights or warrants to
subscribe for or purchase capital stock of the Company since the last notice
delivered pursuant to this Section 14(a)(i) or the date hereof, whichever is
later, or of any other subscription rights or warrants to purchase capital stock
to holders of any type of capital stock of the Company since the last notice
delivered pursuant to this Section 14(a)(i) or the date hereof, whichever is
later; or
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(ii) shall authorize a dividend or other distribution of
evidences of its indebtedness, cash or other property or assets to holders of
any type of capital stock of the Company; or
(iii) proposes to become a party to any consolidation or merger
for which approval of any stockholders of the Company will be required, or to a
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any capital reorganization or reclassification or change
of any type of capital stock of the Company; or
(iv) commences a voluntary or involuntary dissolution,
liquidation or winding up; or
(v) commences a Qualified Public Offering; or
(vi) fails to comply with the provisions of this Agreement; or
(vii) proposes to take any other action which would require an
adjustment pursuant to Section 9; or
(viii) proposes any refinancing of the Credit Agreement;
(ix) proposes to enter into any transaction that would be
considered a Look Back Event; or
(x) sends any notice or information to the holders of Common
Stock of the Company or the Company becomes aware of any potential Change of
Control;
then the Company shall provide a written notice to each Holder stating (i) the
date as of which the holders of record of capital stock to be entitled to
receive any such rights, warrants or distribution are to be determined, (ii) the
material terms of any such consolidation or merger and the expected effective
date thereof, (iii) the material terms of any such conveyance or transfer, and
the date on which any such conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of capital stock will be entitled to
exchange their shares for securities or other property, if any, deliverable upon
such reclassification, conveyance, transfer, dissolution, liquidation or winding
up, (iv) the material terms of any such Qualified Public Offering (including a
copy of any prospectus, registration statement or offering statement), the
expected effective date thereof and the expected price range of the shares to be
sold in such Qualified Public Offering, (v) the nature of the lack of
compliance, any corrective action taken and any rights or remedies which such
lack of compliance has bestowed on the Holders, (vi) a notice as is required by
Section 9(g), (vii) a copy of such notice sent to the holders of Common Stock of
the Company (viii) the material terms of any refinancing of the Credit Agreement
(including delivery of the definitive credit documents to be executed in
connection therewith together with any other information reasonably requested by
any Holder of Warrants and/or Warrant Shares) and (ix) the material terms of
such Look back Event, and the expected effective date thereof. Such notice
shall be given not later than ten (10) Days prior to the effective date (or the
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applicable record date, if earlier) of such event. The failure to give the
notice required by this subsection 14(a) or any defect therein shall not affect
the legality or validity of any distribution, right, warrant, consolidation,
merger, conveyace, transfer, dissolution, liquidation or winding up, or the vote
upon any action.
(b) FINANCIAL STATEMENTS AND REPORTS. At any time a Holder holds any
Warrants and/or Warrant Shares, the Company shall furnish to each such Holder
the information described in Section 8.01 of the Credit Agreement and such other
information relating to the Company and its Subsidiaries and their operations
and financial condition as any Holder shall reasonably request.
(c) INFORMATION RIGHTS AND ACCESS RIGHTS. Each Holder shall have the
right whether or not such Holder has exercised or exchanged any Warrants, to
receive lists of stockholders or other information respecting the Company, to
inspect the books and records of the Company and to visit the properties of the
Company. Nothing contained in this Agreement shall be construed as conferring
upon any Holder, prior to its exercise of any Warrant, the right to vote or to
consent or to receive notice as stockholders in respect of meetings of
stockholders or the election of directors of the Company or any other matter, or
any rights whatsoever as stockholders of the Company, except as expressly
provided hereunder or under Applicable Law.
(d) TRANSACTIONS WITH AFFILIATES. Other than (i) transactions
permitted pursuant to Section 9.07 of the Credit Agreement, as in effect on the
date hereof, and (ii) the issuance of stock options for shares of Common Stock
as described in clause (iii) of the definition of Additional Shares, the Company
agrees with each of the Holders that, until the performance of all of its
obligations hereunder, the Company will not, and will not permit any of its
subsidiaries to, enter into transactions with any Affiliate of the Company other
than transactions on terms and conditions substantially as favorable to the
Company as would be obtainable in a comparable arm's-length transaction with a
Person other than an Affiliate; PROVIDED, that in no event shall the Company or
any subsidiary of the Company engage in a merger, business combination or sale
of a material amount of its assets to an Affiliate nor will the Company issue
any capital stock to an Affiliate for a price which is below its fair market
value.
(e) REGULATED HOLDERS.
(i) Notwithstanding any other provision of this Agreement to
the contrary, except as provided in this subsection 14(e), without the prior
written consent of any Regulated Holder, the Company shall not, directly or
indirectly, redeem, purchase or otherwise acquire, convert or take any action
(including any amendment to the Certificate) with respect to the voting
rights of, or undertake any other action or transaction (including any
merger, consolidation or recapitalization) affecting, any shares of its
capital stock or other voting securities if the result of the foregoing would
be to cause the ownership of the capital stock of the Company by such
Regulated Holder, or the ownership of voting securities of the Company (or
any class thereof) by such Regulated Holder, to exceed the quantity of such
capital stock or voting securities (or any class thereof) that such Regulated
Holder is permitted under Applicable Law to own. Any action or transaction
referred to in the preceding sentence shall be referred to
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herein as a "Section 14(e) Transaction". If the Company proposes to
undertake any action or transaction which could constitute a Section 14(e)
Transaction, it shall provide the Holders at least 15 days prior written
notice thereof. If, in the written opinion of counsel to any Regulated
Holder (which may be internal counsel) delivered within 10 days following
receipt of such notice, such action or transaction constitutes a Section
14(e) Transaction with respect to such Regulated Holder, then the Company
shall delay undertaking such Section 14(e) Transaction for the purpose of
using its best efforts to agree on a manner in which to restructure such
action or transaction in a manner reasonably satisfactory to the Company and
such Regulated Holder so that it no longer would constitute a Section 14(e)
Transaction. If the Company and such Regulated Holder are unable to agree,
within 20 days of the delivery of such written opinion, upon a manner in
which to so restructure such Section 14(e) Transaction, and such Section
14(e) Transaction is a bona fide action or transaction proposed by the
Company in good faith, then the Company shall be permitted to undertake such
Section 14(e) Transaction if prior to or concurrently with doing so, at the
election of such Regulated Holder, the number (specified by such Regulated
Holder) of Warrant Shares sufficient in the written opinion of counsel to
such Regulated Holder (which may be internal counsel) needed to prevent such
Section 14(e) Transaction from causing the ownership of the capital stock or
voting securities of such Regulated Holder to exceed the quantity of such
capital stock as such Regulated Holder is permitted under Applicable Law to
own, (i) are promptly purchased by the Company or the Company's designees,
from such Regulated Holder at a purchase price equal to the Market Price per
share of Common Stock, (ii) are exchanged for Equivalent Nonvoting Securities
or (iii) if the Regulated Holder would have received voting securities in
connection with such action or transaction, a number of shares or other units
of voting securities to be received by such Regulated Holder are exchanged
for the same number of shares or other units of Equivalent Nonvoting
Securities.
(ii) If it becomes unlawful for any Regulated Holder to continue
to hold some or all of the Warrants or Warrant Shares held by it, or
restrictions are imposed on any Regulated Holder by Applicable Law which, in the
reasonable judgment of such Regulated Holder, make it unduly burdensome to
continue to hold such Warrants or Warrant Shares, the Company shall (i)
cooperate with such Regulated Holder in any efforts by such Regulated Holder to
dispose of some or all of such Warrants or Warrant Shares in a prompt and
orderly manner, including providing (and authorizing such Regulated Holder to
provide) financial and other information concerning the Company to any
prospective purchaser of such Warrants or Warrant Shares and (ii) at the request
of such Regulated Holder, take all steps (including using its best efforts to
cause its Articles of Incorporation to be amended) necessary to create an
Equivalent Nonvoting Security with respect to the Warrant Shares then held by
such Regulated Holder and permit such Regulated Holder to exchange Warrant
Shares for the same number of shares or other units of such Equivalent Nonvoting
Security; PROVIDED, that nothing in this subsection 14(e) shall require the
Company to register or qualify such Warrants or Warrant Shares under any federal
or state securities laws.
(f) CURRENT PUBLIC INFORMATION. At all times after the Company has
filed a registration statement with the Commission pursuant to the requirements
of either the 1933 Act or the 1934 Act, the Company will file all reports
required to be filed by it under the 1933 Act
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and the 1934 Act and the rules and regulations adopted by the Commission
thereunder, and will take such further action as any Holder may reasonably
request, all to the extent required to enable such Holder to sell Warrant
Shares pursuant to Rule 144 or Rule 144A adopted by the Commission under the
1933 Act. Upon request, the Company will deliver to any such Holder a written
statement as to whether it has complied with such requirements.
(g) PUBLIC DISCLOSURES. The Company will not disclose any Holder's
name or identity as an investor in the Company in any press release or other
public announcement, unless such disclosure is required by Applicable Law or
governmental regulations or by order of a court of competent jurisdiction in
which case prior to making such disclosure the Company will give written notice
to such Holder describing in reasonable detail the proposed content of such
disclosure and will permit the Holder to review and comment upon the form and
substance of such disclosure.
(h) CERTAIN RESTRICTIONS. The Company will not without the consent of
the Requisite Holders, take any action, corporate or otherwise, the effect of
which would be to alter, impair or affect adversely either the rights of the
Holders or the duties and obligations of the Company under the Warrant
Documents.
(i) SPECIFIC PERFORMANCE. Each Holder shall have the right to
specific performance by the Company of the provisions of this Agreement, in
addition to any other remedies it may have at law or in equity. The Company
hereby irrevocably waives, to the extent that it may do so under Applicable Law,
any defense based on the adequacy of a remedy at law which may be asserted as a
bar to the remedy of specific performance in any action brought against the
Company for specific performance of this Agreement by any Holder of the Warrants
or Warrant Shares.
SECTION 15.
AMENDMENTS AND WAIVERS
(a) CONSENT OF HOLDERS. No amendment, modification, termination or
waiver of any provision of this Agreement and the Warrant Certificates or
consent to any departure by the Company therefrom, shall in any event be
effective without the written concurrence of the Requisite Holders; PROVIDED,
HOWEVER, that without the consent of each Holder affected, no amendment,
modification, termination or waiver may:
(i) make any change to the definition of "Requisite Holders";
(ii) make any change to the transfer provisions of Section 16
that adversely affects the ability of a Holder to make any transfer described
therein;
(iii) make any change in the foregoing amendment and waiver
provisions;
(iv) make any change to Section 11 hereof and the definitions
relating thereto (insofar as such definitions relate to Section 11); or
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(v) make any change to Section 12 hereof and the definitions
relating thereto (insofar as such definitions relate to Section 12).
After an amendment, modification, termination or waiver under this
Section 15 becomes effective, the Company shall mail to the Holders affected
thereby a notice briefly describing such amendment, modification, termination or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
amendment, modification, termination or waiver.
In connection with any amendment, modification, termination or waiver
under this Section 15, the Company may offer, but shall not be obligated to
offer, to any Holder who consents to such amendment, modification, termination
or waiver, consideration for such Holder's consent, so long as such
consideration is offered to all Holders.
(b) SOLICITATION OF HOLDERS. The Company will not effect any proposed
amendment, modification, termination or waiver of any of the provisions of this
Agreement or the Warrant Certificates unless each Holder (irrespective of the
amount of Warrants or Warrant Shares then owned by it) shall be informed thereof
by the Company prior to the effectuation thereof (but only to the extent the
Company has been provided with addresses for the Holders) and shall be afforded
the opportunity of considering the same and shall be supplied by the Company
with information which is sufficient in the Company's reasonable discretion to
enable such Holder to make an informed decision with respect thereto. Executed
or true and correct copies of any amendment, modification, termination or waiver
effected pursuant to the provisions of this Section 15 shall be delivered by the
Company to each Holder of outstanding Warrants or Warrant Shares forthwith
following the date on which the same shall have been executed and delivered by
the Holder or Holders of the requisite percentage of outstanding Warrant Shares
(but only to the extent the Company has been provided with the addresses for the
Holders).
(c) REVOCATION AND EFFECT OF CONSENTS. Until an amendment,
modification, termination or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Warrant or Warrant Shares, even if notation of the consent is not made on any
Warrant Certificate or stock certificate. However, any such Holder or subsequent
Holder may revoke any such consent by notice to the Company received before the
date on which the Requisite Holders have consented (and not theretofore revoked
such consent) to such amendment, modification, termination or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
modification, termination or waiver, which record date shall be at least 10 days
prior to the first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
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SECTION 16.
TRANSFERS
(a) Each Holder, subject to the provisions of subsection 16(c) below
shall be permitted to transfer any Warrant or Warrant Share (and the rights
relating thereto under this Agreement and the other Warrant Documents) to any
Permitted Transferee.
(b) In addition to the rights of transfer under Section 16(a), each
Holder, subject to the provisions of subsection 16(c) below, shall be permitted
to transfer any Warrant or Warrant Share (and the rights relating thereto under
this Agreement and the other Warrant Documents) to any other Person; PROVIDED
that:
(i) such transfer is made pursuant to a registration statement
under the 1933 Act (it being acknowledged that the Company shall not be
obligated to assist in any manner in any such registration) or pursuant to an
exemption from the registration requirements of the 1933 Act;
(ii) if such transfer is being made pursuant to an exemption
from such registration requirements and if requested by the Company, counsel for
such Holder (which counsel may be internal counsel) furnishes to the Company an
opinion to the effect that such transfer is being made pursuant such an
exemption;
(iii) the applicable transferee (or, in the case of an account
manager, the managed account on behalf of which the account manager is acting)
is an "accredited investor" as defined in Regulation D promulgated under the
1933 Act; and
(iv) such transferee represents to the Company in writing that it is
acquiring such Warrant or Warrant Share solely for its own account (or in the
case of account managers, on behalf of managed accounts) and not as nominee or
agent for any other Person (other than for such managed accounts, if applicable)
and not with a view to, or for offer or sale in connection with, any
distribution thereof (within the meaning of the 1933 Act), without prejudice,
however, to its right at all times to sell or otherwise dispose of all or any
part of said Warrant or Warrant Shares pursuant to a registration statement
under the 1933 Act or pursuant to an exemption from the registration
requirements of the 1933 Act, and subject, nevertheless, to the disposition of
its property being at all times within its control.
(c) The Company shall promptly register the transfer of any
outstanding Warrants in the Warrant register and any outstanding Warrant Shares
in a Common Stock register to be maintained by the Company upon surrender
thereof accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered Holder or Holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant or
Warrant Share, as the case may be, shall be issued and delivered with all
reasonable dispatch to the transferee(s) and such transferee(s) shall be deemed
to have become the Holder(s) of record of such Warrant or Warrant Share, as the
case may be, and the surrendered Warrant or Warrant Share, as the case may be,
shall be canceled and disposed of by the Company.
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SECTION 17.
MISCELLANEOUS
(a) NOTICES. Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and shall be made by personal service, telecopy, United States mail
or reputable courier service:
(i) if to the Purchaser or subsequent Holder, at the address or
telecopy number set forth on the signature pages to this Agreement, or such
other address as shall be designated in a written notice delivered to the
Company; and
(ii) if to the Company, at the address or telecopy number set
forth on the signature pages to this Agreement, or such other address as shall
be designated in a written notice delivered to the other parties hereto.
Unless otherwise specifically provided herein, any notice or other
communication shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telecopy, or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed.
(b) FAILURE OR INDULGENCE NOT WAIVER: REMEDIES CUMULATIVE. No failure
or delay on the part of any Holder in the exercise of any power, right or
privilege hereunder or under any other Warrant Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other power,
right or privilege. All rights and remedies existing under this Agreement and
the other Warrant Documents are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
(c) SEVERABILITY. In case any provision in or obligation under this
Agreement or the Warrant Certificates shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
(d) HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the
parties hereto and their respective successors and assigns and shall insure to
the benefit of the parties hereto and the successors and assigns and Permitted
Transferees of the Purchaser (including each Holder and its successors and
assigns and Permitted Transferees).
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<PAGE>
(g) COUNTERPARTS. This Agreement and any amendments, waivers,
consents or supplements hereto or in connection herewith may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
(h) SURVIVAL OF REPRESENTATION AND WARRANTIES, ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing or on behalf
of the Company in connection herewith shall survive the execution and delivery
of this Agreement and the Warrant Shares and the transfer by the Purchaser of
any Warrant Shares or any portion thereof on interest therein, and may be relied
upon by the Purchaser regardless of any investigation made at any time by or on
behalf of any Purchaser. This Agreement and the Warrant Certificates embody the
entire agreement and understanding between the parties hereto and supersede all
prior agreements and understandings, if any, relating to the subject matter
hereof.
(i) ADDITIONAL AGREEMENT. The Company hereby covenants and agrees
that it will as soon as possible, but in any event, within the earlier of thirty
(30) days of the date hereof and the date on which the Purchaser exercises any
Warrant issued hereunder (w) cause the Co-Sale Agreement to be amended and
restated such that the Purchaser shall be granted co-sale rights with respect to
any sale of Founder Stock (as defined in the Co-Sale Agreement) by any Founder
(as defined in the Co-Sale Agreement) and any sale of shares of Preferred Stock
(as defined in the Co-Sale Agreement) by Westover Communications, Spectrasite
Communications, and Brookwood Ubiquitel Investors, LLC and their respective
officers, directors, employees, partners and affiliates, on terms and conditions
satisfactory to the Purchaser, (x) cause the Registration Rights Agreement to be
amended and restated in order to grant the Purchaser the right to cause the
Company to file one long-form registration statement on its behalf after the
initial public offering of the Company and to provide the Purchaser with
unlimited piggy-back registration rights on all other registration statements
filed by the Company, on terms and conditions satisfactory to the Purchaser, (y)
shall amend its Certificate of Incorporation to increase the number of
authorized shares of non-voting Common Stock in order to allow the Purchaser to
exercise the Warrants, and (z) shall amend its Certificate of Incorporation to
provide for the conversion of the non-voting Common Stock issuable upon the
exercise of the Warrants into an equivalent number of shares of voting Common
Stock on terms satisfactory to the Purchaser. The Company acknowledges that its
compliance with each of the foregoing covenants is a material benefit to the
Purchaser. The parties hereby acknowledge and agree that it would be difficult
to determine the actual damages suffered by the Purchaser in the event the
Company fails to comply with the covenants set forth in clause (w) or (x)above.
Accordingly, in the event of any such breach, the Company shall promptly pay to
the Purchaser, as its non-exclusive remedy, the sum of one million dollars
($1,000,000.00), which the parties agree is fair and reasonable compensation for
any such breach. The Company also acknowledges and agrees that the payment of
such fee shall be in addition to any other remedies available to the Purchaser
pursuant to this Agreement or at law or in equity.
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<PAGE>
[Warrant Agreement Signature Page.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
NOTICE ADDRESS: UBIQUITEL HOLDINGS LLC
3 Bala Plaza East
Suite 502 By__________________________
Bala Cynwyd, PA 17004 Name:
Fax (610) 660-4920 Title:
Attention: Donald A. Harris
with a copy to:
NOTICE ADDRESS: PARIBAS NORTH AMERICA, INC.
Paribas North America, Inc.
787 Seventh Avenue By__________________________
New York, New York 10019 Name:
Fax: (212) 841-2369 Title:
Attention: Salo Aizenberg
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Fax: (212) 354-8113
Attention: John M. Reiss, Esq.
[Warrant Agreement Signature Page.]
<PAGE>
EXHIBIT 10.13
UBIQUITEL HOLDINGS, INC.
SERIES A
PREFERRED STOCK PURCHASE AGREEMENT
This Agreement dated as of November 23, 1999, is entered into by and
among UbiquiTel Holdings, Inc., a Delaware corporation (the "COMPANY"), The
Walter Group, Inc., a Washington corporation ("The Walter Group"), Donald A.
Harris ("Harris"), Paul F. Judge ("Judge"), James Parsons ("Parsons"), and U.S.
Bancorp (individually, a "Founder" and, collectively, the "FOUNDERS"), and the
individuals and entities listed on EXHIBIT A hereto (the "PURCHASERS ").
RECITALS
(A) The Company is the parent company and sole owner of UbiquiTel LLC,
a Delaware limited liability company ("Subsidiary"). The Company is currently
owned by the Founders, and will at the Closings (as hereinafter defined) be the
assignee of a Management Agreement among Sprint Spectrum L.P., WirelessCo, L.P.
and UbiquiTel, L.L.C., a Washington limited liability company ("Old UbiquiTel"),
a services agreement among Sprint Spectrum L.P. and Old UbiquiTel, a trademark
and license agreement between Sprint Communications Company, L.P. and Old
UbiquiTel, and a trademark and service mark license agreement between Sprint
Spectrum L.P. and Old UbiquiTel, each dated as of September, 1998 (the foregoing
agreements being referred to collectively as the "Management Agreement"),
pursuant to which the Company has the right as Manager to construct and manage
the Service Area Network in the Reno/Tahoe Service Area (all as defined in the
Management Agreement) as well as the right to assign its rights under the
Management Agreement to Subsidiary. The Company and Sprint may agree to amend
the Management Agreement to include Northern California in the Service Area
Network, in which case approximately $15,000,000 in equity and debt will be
required.
(B) Subject to the terms and conditions of this Agreement, the
Purchasers agree to purchase collectively $1,000,000 of Series A Preferred Stock
of the Company when the Company has firm commitments for at least $33,000,000 in
senior and subordinated debt financing, and an additional $16,008,500 in Series
A Preferred Stock when the Company and the senior and subordinated lenders have
executed loan agreements and other documentation required in connection with
such financing.
Now, therefore, the parties agree as follows:
1. AUTHORIZATION AND SALE OF SHARES.
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1.1 AUTHORIZATION. The Company has, or before the Interim Closing (as
defined in Section 2) will have, duly authorized the sale and issuance, pursuant
to the terms of this Agreement, of 17,008,500 shares of its Series A Preferred
Stock, $0.001 par value per share (the "SERIES A PREFERRED"), having the rights,
restrictions, privileges and preferences set forth in the Certificate of
Designation attached hereto as EXHIBIT B (the "CERTIFICATE OF DESIGNATION"). The
Company has, or before the Interim Closing will have, adopted and filed the
Certificate of Designation with the Secretary of State of the State of Delaware.
1.2 SALE OF SHARES. Subject to the terms and conditions of this
Agreement, (i) at the Interim Closing (as defined in Section 2), the Company
shall issue and sell to each Purchaser and each Purchaser shall purchase the
number of shares of Series A Preferred set forth opposite such Purchaser's name
on EXHIBIT A under the heading "Interim Closing", for an aggregate of
$1,000,000; and (ii) at the Subsequent Closing (as defined in Section 2), the
Company shall issue and sell to each Purchaser and each Purchaser shall purchase
the number of shares of Series A Preferred set forth opposite such Purchaser's
name on EXHIBIT A under the heading "Subsequent Closing", for an aggregate of
$16,008,500. The purchase price shall be one dollar ($1.00) per share (the
"Purchase Price"). The shares of Series A Preferred sold under this Agreement
are referred to as the "Shares." The Company's agreement with each Purchaser is
a separate agreement, and the sale of Shares to each Purchaser is a separate
sale.
1.3 USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Shares to construct and manage the Service Area Network and for general
corporate purposes.
2. THE INTERIM AND SUBSEQUENT CLOSING. (a) The initial purchase and
sale of the Series A Preferred by Purchasers in the amounts listed on EXHIBIT A
(the "INTERIM CLOSING") shall take place at the offices of Greenberg Traurig,
1750 Tysons Boulevard, McLean, Virginia, on 23, 1999, commencing at 10:00 a.m.,
or at such other time, date, and place as are mutually agreeable to the Company
and the Purchasers, but in no event later than December 15, 1999. At the
Interim Closing, all conditions precedent to Closing except the condition set
forth in Section 6.9(b) shall have been fulfilled. At the Interim Closing, the
Company shall deliver to each Purchaser a certificate for the number of Shares
being purchased by such Purchaser at that time, registered in the name of such
Purchaser, against payment to the Company of the Purchase Price, by wire
transfer of immediately available funds. If at the Interim Closing any of the
other conditions specified in Section 6 shall not have been fulfilled, each
Purchaser shall, at his or its election, be relieved of all of his or its
obligations under this Agreement without thereby waiving any other rights he or
it may have by reason of such failure or such non-fulfillment.
(b) The Subsequent Closing shall take place when the condition set
forth in Section 6.9(b) has been fulfilled, such time, date, and place as is
designated by the Company and notified to the Purchasers not less than five days
prior to such Closing, but in no event later than December 15, 1999. At the
Subsequent Closing, the Company shall deliver to each Purchaser a certificate
for the number of Shares being purchased by such Purchaser at that time,
registered in the name of such Purchaser, against payment to the Company of the
Purchase Price, by wire transfer of immediately available funds. If at the
Subsequent Closing any of the conditions specified in Section 6 shall not have
been fulfilled, each Purchaser shall, at his or its election, be
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<PAGE>
relieved of all of his or its obligations under this Agreement without
thereby waiving any other rights he or it may have by reason of such failure
or such non-fulfillment.
(c) The Interim and Subsequent Closings are referred to collectively
as "both Closings" or "each Closing".
3. REPRESENTATIONS OF THE COMPANY. Except as disclosed by the
Company in EXHIBIT C hereto, the Company hereby represents and warrants to each
Purchaser that the statements contained in this Section 3 are true, complete,
and correct and will be true, complete, and correct at each Closing. EXHIBIT C
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Section 3 and the disclosures in any paragraph of
EXHIBIT C shall qualify only the corresponding paragraph of this Section 3,
unless otherwise specified.
3.1 ORGANIZATION AND STANDING. (a) The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and all other agreements required to be executed by the
Company at or prior to the Interim Closing pursuant to Section 6.4 (the
"ANCILLARY AGREEMENTS") and to carry out the transactions contemplated by this
Agreement and the Ancillary Agreements. The Company is duly qualified to do
business as a foreign corporation and at each Closing will be in good standing
in the states of Nevada and California, which are the only jurisdictions in
which the failure so to qualify would have a material adverse effect on the
business, prospects, assets or condition (financial or otherwise) of the Company
(a "COMPANY MATERIAL ADVERSE EFFECT"). The Company has furnished to each
Purchaser true and complete copies of its Certificate of Incorporation and
Bylaws, each as amended to date and presently in effect. The Company has at all
times complied with the provisions of its Certificate of Incorporation and
Bylaws and is not in default under, or in violation of, any such provision.
(b) The Subsidiary is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to conduct its business as presently
conducted and as proposed to be conducted by it and to carry out the
transactions contemplated by this Agreement and the Ancillary Agreements. The
Subsidiary will be duly qualified to do business as a foreign limited liability
company and will be in good standing in the states of Nevada and California at
each Closing. The Subsidiary has furnished to each Purchaser true and complete
copies of its Certificate of Formation and Operating Agreement, each as amended
to date and presently in effect. The Subsidiary has at all times complied with
the provisions of its Certificate of Formation and Operating Agreement and is
not in default under, or in violation of, any such provision.
3.2 CAPITALIZATION. The authorized capital stock of the consists of
(i) 150,000,000 shares of common stock, $0.001 par value per share (the "COMMON
STOCK"), of which 3,417,000 shares are issued and outstanding, 2,040,000
shares have been reserved for issuance pursuant to the 1999 Stock Incentive Plan
of the Company, 3,060,000 are expected to be reserved in
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connection with senior and mezzanine bank financing, (ii) 16,000,000
shares of non voting common stock, $0.001 par value per share (the "Non
Voting Common Stock, of which 16,000,000 shares are issued and outstanding
and subject to repurchase by the Company at a price equal to the par value
thereof pursuant to a Founders Stock Agreement between the Company and the
Founders attached as EXHIBIT D), and 125,000,000 shares of preferred stock,
of which 17,008,500 are designated as Series A Preferred, none of which are
issued or outstanding, and all of which are intended to be issued pursuant to
this Agreement. All of the issued and outstanding shares of Common Stock and
Non Voting Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. Except as provided in this Agreement and the
Ancillary Agreements, (i) no subscription, warrant, option, convertible
security or preemptive or other right (contingent or otherwise) to purchase
or acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company, (iii) the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend (other than the obligation to pay a dividend on the Series A
Preferred pursuant to the Certificate of Designation) or make any other
distribution in respect thereof, and (iv) there are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect
to the Company. All of the issued and outstanding shares of capital stock of
the Company have been offered, issued and sold by the Company in compliance
with applicable federal and state securities laws.
3.3 SUBSIDIARIES, ETC. Other than the Subsidiary, the Company does
not own or control, directly or indirectly, any shares of capital stock of
any other corporation or any interest in any partnership, joint venture or
other non-corporate business enterprise. The Subsidiary is wholly owned by
the Company, and no subscription, warrant, option, convertible security or
preemptive or other right (contingent or otherwise) to purchase or acquire
any membership interest in the Subsidiary is authorized or outstanding, and
the Subsidiary has no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right or to
issue or distribute to the members any evidences of indebtedness or assets of
the Subsidiary.
3.4 SECURITYHOLDER AGREEMENTS. Except as provided in this Agreement
and the Ancillary Agreements, there are no agreements, written or oral,
between the Company and any holder of its securities, or, to the best of the
Company's knowledge, among any holders of its securities, relating to the
acquisition (including without limitation rights of first refusal,
antidilution or pre-emptive rights), disposition, registration under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or voting of the
capital stock of the Company.
3.5 ISSUANCE OF SHARES. The issuance, sale and delivery of the Shares
in accordance with this Agreement, and the issuance and delivery of the shares
of Common Stock issuable upon conversion of the Shares, have been, or will be on
or prior to the Interim Closing, duly authorized by all necessary corporate
action on the part of the Company, and all such shares have been or will be duly
reserved for issuance. The Shares when so issued, sold and delivered
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against payment therefor in accordance with the provisions of this Agreement,
and the shares of Common Stock issuable upon conversion of the Shares, when
issued upon such conversion, will be duly and validly issued, fully paid and
nonassessable.
3.6 AUTHORITY FOR AGREEMENT; NO CONFLICT. The execution, delivery and
performance by the Company of this Agreement and the Ancillary Agreements, and
the consummation by the Company of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action. This
Agreement has been, and the Ancillary Agreements when executed at the Interim
Closing will be, duly executed and delivered by the Company and constitute valid
and binding obligations of the Company enforceable in accordance with their
respective terms. The execution of and performance of the transactions
contemplated by this Agreement and the Ancillary Agreements and compliance with
their respective provisions by the Company will not (a) conflict with or violate
any provision of the Certificate of Incorporation or Bylaws of the Company, (b)
require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any court, arbitration tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (each of the foregoing is hereafter referred to as a
"GOVERNMENTAL ENTITY"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest (as
defined below) or other arrangement to which the Company is a party or by which
the Company is bound or to which its assets are subject, (d) result in the
imposition of any Security Interest upon any assets of the Company or (e)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets. For purposes of
this Agreement, "SECURITY INTEREST" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien (whether arising by contract or by
operation of law).
3.7 GOVERNMENTAL CONSENTS.
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental Entity
is required on the part of the Company in connection with the execution and
delivery of this Agreement or the Ancillary Agreements, the offer, issuance,
sale and delivery of the Shares, the issuance and delivery of the shares of
Common Stock issuable upon conversion of the Shares or the other transactions to
be consummated at the Interim Closing, as contemplated by this Agreement and the
Ancillary Agreements, except filings required to be made after each Closing
under applicable federal and state securities laws. Based on the representations
made by each Purchaser in Section 5 of this Agreement, the offer and sale of the
Shares to each Purchaser will comply with applicable federal and state
securities laws.
3.8 LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the best of the Company's
knowledge, any basis therefor or threat thereof, against the Company, the
Subsidiary, or any Founder, which questions the validity of
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this Agreement or any of the Ancillary Agreements or the right of the Company
or any Founder to enter into it, or which might result, either individually
or in the aggregate, in a Company Material Adverse Effect, nor is there any
litigation pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, against the Company or any Founder by reason of
the past employment relationships of any of the Founders, the proposed
activities of the Company, or negotiations by the Company and/or any Founder
with possible investors in the Company. The Company is not subject to any
outstanding judgement, order or decree.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor the
Subsidiary has previously conducted any business activities and neither has any
liability (whether known or unknown and whether absolute or contingent), except
for liabilities arising under or in connection with this Agreement and the
Ancillary Agreements, and the Management Agreement.
3.10 MATERIAL CONTRACTS AND OBLIGATIONS. EXHIBIT C sets forth a list
of all material agreements or commitments of any nature to which the Company or
the Subsidiary is a party or by which either of them is bound. The Company has
delivered to Purchasers copies of such agreements. All of such agreements are
valid, binding and in full force and effect. Neither the Company or the
Subsidiary, nor, to the Company's knowledge, any other party thereto, is in
default of any of its obligations under any of the agreements or contracts
listed on EXHIBIT C, in a manner which could have a Company Material Adverse
Effect.
3.11 BOOKS AND RECORDS. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. The stock
ledger of the Company is complete and reflects all issuances, transfers,
repurchases and cancellations of shares of capital stock of the Company.
3.12 DISCLOSURE. This Agreement and the Ancillary Agreements do not
contain any untrue statement of material fact by the Company or the Subsidiary,
and do not omit to state any material fact necessary in order to make the
statements made herein or therein, in light of circumstances under which they
are made, not misleading.
4. REPRESENTATIONS OF HARRIS AND FOUNDERS. Each Founder, and Harris
and Judge as to Section 4.1, severally represents and warrants to the
Purchasers as follows:
4.1 CONFLICTING AGREEMENTS. Harris and Judge are not and will not
be, as a result of the nature of the business conducted or proposed to be
conducted by the Company or for any other reason, in violation of (i) any
fiduciary or confidential relationship, (ii) any term of any contract or
covenant (either with the Company or with another entity) relating to
employment, patents, assignment of inventions, proprietary information
disclosure, non-competition or non-solicitation, or (iii) any other contract or
agreement, or any judgment, decree or order of any court or administrative
agency, relating to or affecting the right of such Founder to be employed by the
Company. No such relationship, term, contract, agreement, judgment, decree, or
order conflicts with Harris' and Judge's obligations to use his best efforts to
promote the interests of the Company nor does the execution and delivery of this
Agreement, nor the carrying on of the
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Company's business as an officer or key employee of the Company, conflict
with any such relationship, term, contract, agreement, judgment, decree or
order.
4.2 LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending or, to the best of such Founder's
knowledge, threatened against such Founder, relating to or in connection with
the Company, the business of the Company, or the Founder's relationship to the
Company, and, to the best of such Founder's knowledge, there is no basis for
any such action, suit, proceeding, or governmental inquiry or investigation.
4.3 STOCKHOLDER AGREEMENTS. Except as contemplated by or disclosed in
this Agreement or the Ancillary Agreements, such Founder is not a party to and
has no knowledge of any agreements, written or oral, relating to the
acquisition, disposition, registration under the Securities Act, or voting of
the securities of the Company.
4.4 REPRESENTATIONS AND WARRANTIES. To the best of such Founder's
knowledge, the representations and warranties of the Company set forth in
Section 3 are true and correct.
4.5 AUTHORITY. Each Founder has full authority to enter into and be
bound by this Agreement and, in the case of any Founder that is a corporation,
has taken all corporate action necessary to authorize the execution and delivery
of this Agreement.
5. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser severally
represents and warrants to the Company as follows:
5.1 INVESTMENT. Such Purchaser is acquiring the Shares, and
the shares of Common Stock into which the Shares may be converted, for his, her
or its own account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and, except as contemplated by this Agreement
and the Exhibits hereto, such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof. Such Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
5.2 AUTHORITY. Such Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms.
5.3 EXPERIENCE. Such Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement, and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to such Purchaser any and all
written information which he, she or it has requested and have answered to such
Purchaser's satisfaction all inquiries made by such Purchaser; and such
Purchaser has sufficient knowledge and experience in finance and business that
he, she or it is capable of evaluating the risks and merits of his, her or its
investment in the Company and such Purchaser is able financially to bear the
risks thereof. Each Purchaser understands that its investment in the Company
will for some period of time be illiquid.
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6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS. The obligation
of each Purchaser to purchase its Shares is subject to the fulfillment, or the
waiver by such Purchaser, of each of the following conditions on or before the
Interim Closing or Subsequent Closing, as applicable:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in Sections 3 and 4 shall be true on and
as of the date of each Closing, with the same effect as though such
representation and warranty had been made on and as of each Closing.
6.2 PERFORMANCE. The Company and each Founder shall have
performed and complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by the Company or such
Founder prior to or at the Interim Closing or at the Subsequent Closing.
6.3 OPINION OF COUNSEL. Each Purchaser shall have received an
opinion from Greenberg Traurig, counsel for the Company, dated as of the date of
each of the Interim and Subsequent Closing, addressed to the Purchasers, and
satisfactory in form and substance to each Purchaser, to the effect set forth on
EXHIBIT E.
6.4 ANCILLARY AGREEMENTS.
(a) STOCKHOLDERS' VOTING AGREEMENT. The Stockholders' Voting
Agreement attached hereto as EXHIBIT F (the "STOCKHOLDERS' VOTING AGREEMENT")
shall have been executed and delivered by the Company, by each Purchaser, and by
each Founder. All such action shall have been taken as may be necessary to
elect a Board of Directors of the Company, effective upon the Interim Closing,
in accordance with the Stockholders' Voting Agreement.
(b) REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement attached hereto as EXHIBIT G (the "REGISTRATION RIGHTS AGREEMENT")
shall have been executed and delivered by the Company and each Purchaser.
(c) CO-SALE AGREEMENT. The Co-Sale Agreement attached hereto,
containing "drag-along" and "take-along" rights, as EXHIBIT H (the "Co-Sale
Agreement") shall have been executed and delivered by each Purchaser, each
Founder, and the other parties named therein.
(d) EMPLOYMENT AND NON-COMPETITION AGREEMENT. Harris and the
Company shall have entered into an Employment and Non-Competition Agreement in
the form attached as EXHIBIT I.
(e) FOUNDERS STOCK AGREEMENT. The Founders Stock Agreement
dated as of and attached hereto as EXHIBIT D, previously executed by and
between the Company and each Founder, shall be in full force and effect, and
shall not have been amended.
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6.5 CERTIFICATES AND DOCUMENTS. The Company shall have
delivered to each Purchaser:
(a) The Certificate of Incorporation of the Company and
Certificate of Formation of the Subsidiary, as amended and in effect as of date
of the Interim Closing Date (including the Certificate of Designation),
certified by the Secretary of State of the State of Delaware;
(b) Certificates of good standing of the Company and the
Subsidiary, as of the most recent practicable dates, issued by the Secretary of
State of the State of Delaware and the Secretary of the State of Nevada and the
Secretary of State of the State of California.
(c) Bylaws of the Company and Operating Agreement of the
Subsidiary, certified by their respective Secretaries or Assistant Secretaries
as of the Interim and Subsequent Closing Dates;
(d) Resolutions of the Board of Directors and stockholders of
the Company, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, certified by the Secretary
or Assistant Secretary of the Company as of the Interim and Subsequent Closing
Dates; and
6.6 MINIMUM INVESTMENT. Purchasers shall have paid at the
Interim Closing not less than $1,000,000 and at the Subsequent Closing aggregate
consideration of not less than $16,008,500 for the purchase of Shares.
6.7 COMPLIANCE CERTIFICATES. The Company shall have delivered
to the Purchasers a certificate, executed by the President of the Company, dated
the Interim and Subsequent Closing Dates, certifying fulfillment of the
conditions specified in Sections 6.1, 6.2, 6.4, 6.5 and 6.6 of this Agreement.
6.8 ASSIGNMENT OF CONTRACTS. All necessary consents to the
assignment or transfer of control of the Material Contracts shall have been
obtained, and the Company shall have delivered to the Purchasers copies of all
documents and instruments of assignment relating to assignment of all Material
Contracts to the Subsidiary.
6.9 SENIOR AND SUBORDINATED DEBT FINANCING.
(a) For the Interim Closing, the Company shall have received
firm commitments from the lenders of senior and subordinated debt financing in a
total amount of not less than $33,000,000 on terms satisfactory to the
Purchasers.
(b) For the Subsequent Closing, the Company and the lenders
shall have executed loan agreements and other documentation satisfactory to the
Purchasers with respect to the financing described in subsection (a) and all
conditions to the initial disbursement of funds thereunder shall have been
satisfied.
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6.10 OTHER MATTERS. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers and their special counsel,
and the Purchasers and special counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
7. CONDITION TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company under Section 1.2 of this Agreement are subject to fulfillment, or
the waiver, of the following condition on or before the Interim Closing or
Subsequent Closing, as applicable:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchasers contained in Section 5 shall be
true on and as of the dates of Interim and Subsequent Closing with the same
effect as though such representations and warranties had been made on and as of
that date.
7.2 MINIMUM INVESTMENT. Purchasers shall have paid at the
Interim Closing aggregate consideration of not less than $1,000,000 and at the
Subsequent Closing aggregate consideration of not less than $16,008,500 for the
purchase of Shares.
8. AFFIRMATIVE COVENANTS OF THE COMPANY. For so long as the Series A
Preferred has not been converted into Common Stock, the Company shall fulfill
and observe the following affirmative covenants:
8.1 INSPECTION AND OBSERVATION. The Company shall permit each
Purchaser who holds not less than 1,000,000 shares of Series A Preferred, or any
authorized representative thereof, to visit and inspect the properties of the
Company once annually, including its corporate and financial records, and to
discuss its business and finances with officers of the Company, during normal
business hours following reasonable notice.
8.2 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) The Company shall deliver to each Purchaser:
(i) Within 120 days after the end of each fiscal year of
the Company, an audited balance sheet of the Company as at the end of such year
and audited statements of income and of cash flows of the Company for such year,
certified by certified public accountants of established national reputation
selected by the Company, and prepared in accordance with GAAP;
(ii) within 60 days after the end of each fiscal quarter
of the Company, an unaudited balance sheet of the Company as at the end of such
quarter, and
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<PAGE>
unaudited statements of income and of cash flows of the Company for such
fiscal quarter and for the current fiscal year to the end of such fiscal
quarter;
(iii) as soon as available, but in any event prior to the
commencement of each new fiscal year, a business plan and projected financial
statements for such fiscal year;
(iv) such other notices, information and data with
respect to the Company as the Company delivers to the holders of its capital
stock at the same time it delivers such items to such holders.
(b) The foregoing financial statements shall be prepared on a
consolidated or combined basis if the Company then has any subsidiaries. The
financial statements delivered pursuant to clause (ii) of paragraph (a) shall be
accompanied by a certificate of the chief financial officer of the Company
stating that such statements have been prepared in accordance with GAAP
consistently applied (except as noted) and fairly present the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby.
8.3 MATERIAL CHANGES AND LITIGATION. The Company shall promptly
notify the Purchasers of any material adverse change in the business, prospects,
assets or condition, financial or otherwise, of the Company and of any
litigation or governmental proceeding or investigation brought or, to the best
of the Company's knowledge, threatened against the Company, or against any
Founder, officer, director, key employee or principal stockholder of the Company
which, if adversely determined, would have a Company Material Adverse Effect.
8.4 AGREEMENTS WITH EMPLOYEES. The Company shall require all persons
now or hereafter employed by the Company who have access to confidential and
proprietary information of the Company to enter into employment agreements
containing nondisclosure and assignment of inventions clauses substantially in
the form of EXHIBIT I, or such other form as may be approved by the Board of
Directors.
8.5 DIRECTORS.
(a) The Company shall have a Board of Directors consisting of
five persons selected in accordance with the Stockholders' Voting Agreement,
provided that if the Company concludes a private equity offering prior to
September 30, 2000 which results in net proceeds to the Company of $100,000,000
or more, the number of directors and the composition and method of selecting
the Board of Directors shall be modified as may be required in connection with
such offering. The Bylaws of the Company shall at all times provide that the
affirmative vote of a majority of all members of the Board of Directors shall be
required to approve issuances of equity securities, corporate acquisitions,
adoption of annual budgets, adoption of an equity stock plan for employees, and
borrowings in excess of $1,000,000.
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(b) The Company shall reimburse each director of the Company
who is not an employee of the Company and who was elected as a director by the
holders of Series A Preferred for all of his or her reasonable out-of-pocket
expenses incurred in attending each meeting of the Board of Directors or any
committee thereof.
(c) The Board of Directors shall meet at least quarterly,
unless otherwise agreed by a majority of all members of the Board of Directors.
8.6 RESERVATION OF COMMON STOCK. The Company shall reserve and
maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.
8.7 RELATED PARTY TRANSACTIONS. The Company shall not enter into any
agreement with any stockholder, officer or director of the Company, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity, without the consent of at least a
majority of the members of the Company's Board of Directors having no interest
in such agreement or arrangement.
8.8 INSURANCE. The Company will maintain valid policies of D&O
insurance, workers' compensation insurance and insurance with respect to its
proposed business of the kinds and in the amounts not less than is customarily
obtained by corporations of established reputation engaged in the same or
similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability and other risks.
8.A AFFIRMATIVE COVENANT OF HARRIS AND THE WALTER GROUP. Harris and
The Walter Group severally agree that each of them will not pursue any Sprint
PCS affiliation except through the Company or subsidiaries of the Company.
8.B NEGATIVE COVENANT OF FOUNDER AND THE COMPANY. The Founders and
the Company will not amend the Founders Stock Agreement without the consent of
the Holders of 75% of the Series A Preferred.
9. TRANSFER OF SHARES.
9.1 RESTRICTED SHARES. "Restricted Shares" means (i) the Shares, (ii)
the shares of Common Stock issued or issuable upon conversion of the Shares, and
(iii) any other shares of capital stock of the Company issued in respect of such
shares (as a result of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); PROVIDED, HOWEVER, that shares of Common
Stock which are Restricted Shares shall cease to be Restricted Shares (x) upon
any sale pursuant to a registration statement under the Securities Act, Section
4(l) of the Securities Act, or Rule 144 under the Securities Act or (y) at such
time as they become eligible for sale under Rule 144(k) under the Securities
Act.
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9.2 REQUIREMENTS FOR TRANSFER.
(a) Restricted Shares shall not be sold or transferred unless
either (i) they shall have been registered under the Securities Act, or (ii) the
Company shall have been furnished with an opinion of legal counsel, reasonably
satisfactory to the Company, to the effect that such sale or transfer is exempt
from the registration requirements of the Securities Act.
(b) Notwithstanding the foregoing, no registration or opinion
of counsel shall be required for (i) a transfer by a Purchaser which is a
corporation to a wholly owned subsidiary of such corporation, a transfer by a
Purchaser which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner, or a transfer by a Purchaser which is a
limited liability company to a member of such limited liability company or a
retired member who resigns after the date hereof or to the estate of any such
member or retired member; or a transfer by a Purchaser which is an individual to
a member of the immediate family of such individual or to a trust solely for the
benefit of such individual or the members of the immediate family of such
individual or to the estate of such individual, provided that the transferee in
each case agrees in writing to be subject to the terms of this Section 9 to the
same extent as if it were the original Purchaser hereunder, or (ii) a transfer
made in accordance with Rule 144 under the Securities Act.
9.3 LEGEND. Each certificate representing Restricted Shares shall
bear a legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE
REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
10. MISCELLANEOUS.
10.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement, and the rights and obligations of each
Purchaser hereunder, may be assigned by such Purchaser to any person or entity
to which Shares are transferred by such Purchaser, and such transferee shall be
deemed a "Purchaser" for purposes of this Agreement; provided that the
transferee provides written notice of such assignment to the Company. The
Company may not assign its rights under this Agreement.
10.2 CONFIDENTIALITY. Each Purchaser agrees that he, she or it
will keep confidential and will not disclose, divulge or use for any purpose
other than to monitor his, her
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or its investment in the Company any confidential, proprietary or secret
information which such Purchaser may obtain from the Company pursuant to
financial statements, reports and other materials submitted by the Company to
such Purchaser pursuant to this Agreement, or pursuant to visitation or
inspection rights granted hereunder ("CONFIDENTIAL INFORMATION"), unless such
Confidential Information is known, or until such Confidential Information
becomes known, to the public (other than as a result of a breach of this
Section 10.2 by such Purchaser); PROVIDED, HOWEVER, that a Purchaser may
disclose Confidential Information (i) to its attorneys, accountants,
consultants, and other professionals to the extent necessary to obtain their
services in connection with monitoring its investment in the Company, (ii) to
any prospective purchaser of any Shares from such Purchaser as long as such
prospective purchaser agrees in writing to be bound by the provisions of this
Section 10.2, (iii) to any affiliate of such Purchaser or to a partner,
stockholder or subsidiary of such Purchaser, provided that such person agrees
in writing to be bound by the provisions of this Section 10.2, or (iv) as may
otherwise be required by law, provided that the Purchaser takes reasonable
steps to minimize the extent of any such required disclosure.
10.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the transactions
contemplated hereby.
10.4 EXPENSES. Each party to this Agreement shall pay its own
expenses in connection with the preparation of this Agreement and the Ancillary
Agreements and the closing of the transactions contemplated hereby.
10.5 BROKERS. The Company, each Founder, and each Purchaser (i)
represents and warrants to the other parties hereto that he, she or it has not
retained a finder or broker in connection with the transactions contemplated by
this Agreement for which any other party may become liable (except that US Bank
Corp has been retained and will be paid by the Company in connection with this
transaction), and (ii) will indemnify and save the other parties harmless from
and against any and all claims, liabilities or obligations with respect to
brokerage or finders' fees or commissions, or consulting fees in connection with
the transactions contemplated by this Agreement asserted by any person on the
basis of any statement or representation alleged to have been made by such
indemnifying party.
10.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware (without
reference to the conflicts of law provisions thereof).
10.7 NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by messenger, or via a reputable nationwide overnight courier service
guaranteeing next business day delivery, or by facsimile followed by first class
mail, in each case to the intended recipient as set forth below:
If to the Company, to:
UbiquiTel Holdings, Inc., at its principal address
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Attention: President
or at such other address or addresses as may have been furnished in
writing by the Company to the Purchasers.
If to any Purchaser, to address(es) for notice set forth below such
Purchaser's signature on the applicable execution page hereof.
If to any Founder, to address(es) for notice set forth below such
Founder's signature on the applicable execution page hereof.
Any party may change the address to which notices, requests, consents or
other communications hereunder are to be delivered by giving the other parties
notice in the manner set forth in this Section.
10.8 COMPLETE AGREEMENT. This Agreement (including its
Exhibits) and the Ancillary Agreements constitute the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to such subject
matter.
10.9 AMENDMENTS AND WAIVERS. This Agreement may be amended only
by a written amendment signed by all parties. No waivers of or exceptions to any
term, condition or provision of this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
10.12 PRONOUNS. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
10.13 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
10.14 SECTION HEADINGS. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
[Signature pages follow]
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SIGNATURE PAGE FOR
SERIES A STOCK PURCHASE AGREEMENT
The foregoing agreement is hereby executed as of the date set forth on
the first page:
COMPANY:
UBIQUITEL HOLDINGS, INC.
By:
--------------------------------
Name: Donald A. Harris
Title: President and CEO
3 Bala Plaza - Suite 502
Bala Cynwyd, PA 19004
(610) 660-4920 (fax)
FOUNDERS:
-----------------------------------
Donald A. Harris
130 Abrahams Lane
St. Davids, PA 19087
(610) 660-4920 (fax)
-----------------------------------
James Parsons
330 Madison Avenue S.
Bainbridge Island, WA 98110
(206) 780-1414 (fax)
-----------------------------------
Paul F. Judge
120 Lakeside Avenue, Suite 310
Seattle, WA 98122-6578
(206)328-0815 (fax)
THE WALTER GROUP
By:
-----------------------------
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Name:
-----------------------------
Title:
-----------------------------
120 Lakeside Avenue, Suite 310
Seattle, WA 98122-6578
(206) 328-0815 (fax)
US BANCORP.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
111 SW 5th Avenue - 2nd Floor
Portland, OR 97204
(503) 275-6663
PURCHASERS:
-----------------------------------
Donald A. Harris
BROOKWOOD FINANCIAL
PARTNERS, LLC
By:
-----------------------------
Name: Thomas N. Trkla
Title: Chairman and CEO
55 Tozer Road
Beverly, MA 01915
(978) 927-0499 (fax)
Copy to:
James T. Easterling
Ungaretti & Harris
3500 Three First National Plaza
Chicago, IL 60602
(312) 977-4405
LANCASTER INVESTMENT PARTNERS
By:
-----------------------------
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Name:
-----------------------------
Title:
-----------------------------
500 N. Gulph Road - Suite 110
King of Prussia, PA 19406
(610) 783-4788 (fax)
-----------------------------------
Stephen C. Marcus
915 Exeter Crest
Villanova, PA 19085
(610) 519-1389 (fax)
-----------------------------------
Robert Berlacher
675 Church Road
Villanova, PA 19085
(610) 783-4788 (fax)
-----------------------------------
Richard C. Walling, Jr.
c/o Richard C. Walling, Jr.
Express Marine, Inc.
29th Street on the Delaware
Camden, NJ 08105
(856) 541-0338 (fax)
PORTER PARTNERS, LP
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
100 Shoreline, Suite 211B
Mill Valley, CA 94941
(415) 332-8223 (fax)
BALLYSHANNON PARTNERS LP
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By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
325 Bryn Mawr Avenue
Bryn Mawr, PA 19010
(610) 935-3000 (fax)
------------------------------
Barry Porter
(310) 385-3714 (fax)
WESTOVER COMMUNICATIONS,
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
1733 H Street, #330-141
Blaine, WA 98230
Copy to:
Westover Communications Ltd.
17886 55 Avenue
Surray BC V35 6C8
(604) 576-4855 (fax)
SPECTRASITE COMMUNICATIONS
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
100 Regency Forest Drive
- Suite 400
Cary, NC 27511
(919) 468-8522 (fax)
-----------------------------------
Mark Buechley
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<PAGE>
-----------------------------------
Jerri Buechley
P.O. Box 394
Glide, OR 97443
(503) 210-1002 (fax)
Copy to:
Coni Rathbone
Davis Wright Tremane
1300 SW 5th Avenue, Suite 2300
Portland, OR 97201
(503) 778-5299 (fax)
New Ventures, LLC
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
211 N. Union Street, Suite 300
Alexandria, VA 22314
(703) 706-3837 (fax)
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EXHIBIT 10.15
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT, dated as of February 16, 2000 (this
"AGREEMENT"), by and between UBIQUITEL HOLDINGS, INC., a Delaware corporation
(the "COMPANY"), and DLJ MERCHANT BANKING PARTNERS II, L.P., a Delaware limited
partnership (the "INVESTOR").
SECTION 1. ISSUANCE AND SALE OF SENIOR PREFERRED STOCK.
(a) INITIAL PURCHASE AND SALE. Subject to the terms and conditions
set forth in this Agreement, the Investor hereby agrees to purchase from the
Company, and the Company hereby agrees to issue and sell to the Investor,
2,110,347 shares (the "INITIAL SHARES") of the Company's 7% Senior Pay-in-Kind
Non-Voting Convertible Preferred Stock (the "SENIOR PREFERRED STOCK"), at a
price of $11.85 per share, for an aggregate purchase price (the "INITIAL
PURCHASE PRICE") of $25,000,000 (the "INITIAL PURCHASE").
(b) ADDITIONAL PURCHASE AND SALE. In addition to the Initial
Purchase, subject to the terms and conditions set forth in this Agreement, the
Investor hereby agrees to purchase from the Company, if requested by the Company
by delivery of the notice referred to in paragraph (c) of this Section 1,
11,837,024 additional shares (the "ADDITIONAL SHARES" and, together with the
Initial Shares, the "SHARES") of Senior Preferred Stock, at a price of $8.45 per
share, for an aggregate purchase price (the "ADDITIONAL PURCHASE PRICE") of
$100,000,000 (the "ADDITIONAL PURCHASE").
(c) THE CLOSINGS. Subject to the terms and conditions set forth in
this Agreement, the closing of the Initial Purchase (the "INITIAL CLOSING")
shall take place on the date of this Agreement, or on such other date as may be
agreed to in writing by the Company and the Investor (in either case, the
"INITIAL CLOSING DATE"), at the offices of Latham & Watkins, 885 Third Avenue,
New York, New York 10022. In addition, subject to the terms and conditions set
forth in this Agreement, the closing of the Additional Purchase (the "ADDITIONAL
CLOSING") shall take place on June 30, 2000, or on such other date as may be
agreed to in writing by the Company and the Investor (in either case, the
"ADDITIONAL CLOSING DATE"), at the above offices of Latham & Watkins.
(d) ISSUANCE OF THE SHARES. The Shares will be issued pursuant to a
certificate of designations, preferences and relative participating, optional
and other rights in the form of Exhibit A (the "CERTIFICATE OF DESIGNATIONS"),
which has been or, on the Initial Closing Date will be, filed with the Secretary
of State of the State of Delaware. As of the Initial Closing Date, each Share
will be convertible into one share (each, a "VOTING PREFERRED SHARE") of the
Company's 7% Senior Pay-in-Kind Convertible Preferred Stock (the "VOTING
PREFERRED STOCK"), which in turn will be convertible into one share (each, a
"CONVERSION SHARE") of voting common stock, par value $.001 per share (the
"COMMON STOCK"), of the Company. The Voting Preferred Shares will be issued
pursuant to a certificate of designations, preferences and relative
participating, optional and other rights in the form of Exhibit B (the "VOTING
CERTIFICATE OF DESIGNATIONS" and, together with the Certificate of Designations,
the "CERTIFICATES OF
<PAGE>
DESIGNATIONS"), which has been or, on the Initial Closing Date will be, filed
with the Secretary of State of the State of Delaware.
(e) DELIVERIES AT CLOSING. At each of the Initial Closing and the
Additional Closing, the Company shall deliver to the Investor a certificate or
certificates representing the Initial Shares or the Additional Shares, as the
case may be, registered in such name or names as requested in writing by the
Investor at least one business day prior to such closing (or, if no such request
has been made, in the name of the Investor), against payment of the Initial
Purchase Price or the Additional Purchase Price, as the case may be, by wire
transfer in same day funds to an account designated in writing by the Company at
least two business days prior to such closing (or, if no such designation has
been made, by check payable to the Company); PROVIDED, HOWEVER, that the
Investor may retain from such payments any amounts then due and payable by the
Company pursuant to Section 11 hereof.
(f) DISTRIBUTIONS PAYABLE AT ADDITIONAL CLOSING. If, prior to the
Additional Closing Date, the Company declares any dividend or other distribution
(a "DISTRIBUTION") in respect of any of its capital stock (the "SUBJECT STOCK")
such that, pursuant to the terms of the Certificate of Designations, holders of
the Additional Shares would have been entitled to receive such Distribution had
such Additional Shares been outstanding on the record date for such Distribution
(the "RECORD DATE"), then (i) if such Distribution has already been made to
holders of the Subject Stock, the Company shall distribute to the Investor on
the Additional Closing Date the Distribution that the Investor would have
received had the Investor owned the Additional Shares on the Record Date, and
(ii) if such Distribution has not yet been made to holders of the Subject Stock,
the Company shall make such Distribution to the Investor on the same date that
it is made to holders of the Subject Stock.
(g) SHAREHOLDERS' AGREEMENTS. At each of the Initial Closing and the
Additional Closing, the Company and the Investor shall execute a shareholders'
agreement in the form of Exhibit C, in the case of the Initial Closing (the
"INITIAL SHAREHOLDERS' AGREEMENT"), and in the form of Exhibit D, in the case of
the Additional Closing (the "ADDITIONAL SHAREHOLDERS' AGREEMENT" and, together
with the Initial Shareholders' Agreement, the "SHAREHOLDERS' AGREEMENTS").
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to the Investor as of the date hereof, as
of the Initial Closing Date, and as of the Additional Closing Date (as though
made as of each such date) as follows:
(a) ORGANIZATION AND GOOD STANDING; POWER AND AUTHORITY;
QUALIFICATIONS. The Company:
(i) is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware;
(ii) has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as
presently and as proposed to be conducted;
(iii) has all requisite corporate power and authority to enter
into and carry out the transactions contemplated by this Agreement, the
Certificates of Designations and the Shareholders' Agreements;
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(iv) is qualified to do business as a foreign corporation and
is in good standing in the States of Nevada and California; and
(v) is not qualified, and is not required to qualify, to do
business as a foreign corporation in any jurisdiction other than the
States of Nevada and California.
(b) SUBSIDIARIES. The Company has no subsidiaries other than
UbiquiTel, LLC, a Delaware limited liability company (the "SUBSIDIARY"). The
Subsidiary:
(i) is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware;
(ii) has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as
presently and as proposed to be conducted;
(iii) is qualified to do business as a foreign corporation and
is in good standing in the States of Nevada and California hereto; and
(iv) is not qualified, and is not required to qualify, to do
business as a foreign corporation in any jurisdiction other than the
States of Nevada and California.
The Company is the sole member of the Subsidiary, and no other person owns any
equity or other similar interests in the Subsidiary. For purposes of this
Agreement, a "subsidiary" of the Company includes any company, limited liability
company, general or limited partnership or other entity:
(v) of which at least a majority of the shares of capital
stock or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other similar managing body of
such company, partnership or other entity are at the time owned or
controlled, directly or indirectly, by the Company; or
(vi) the management of which is otherwise controlled, directly
or indirectly, through one or more intermediaries by the Company.
(c) AUTHORIZATION OF TRANSACTIONS. The execution and delivery by the
Company of this Agreement, the Certificates of Designations and the
Shareholders' Agreements, and the performance by the Company of its obligations
hereunder and thereunder, have been duly authorized by all requisite corporate
action on the part of the Company and its shareholders. This Agreement, the
Certificates of Designations, and the Initial Shareholders' Agreement have been
duly executed and delivered and constitute, and the Additional Shareholders'
Agreement, if and when executed and delivered in accordance with this Agreement,
will constitute, the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms.
(d) CAPITALIZATION OF THE COMPANY. Immediately prior to the Initial
Closing, the capitalization of the Company consists of:
(i) Common Stock, of which 150,000,000 shares are authorized
and (A) 3,417,000 shares are issued and outstanding and owned, of record
and beneficially, by, and in the amounts set forth opposite the names of,
the persons listed on SCHEDULE 2(d)
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hereto, (B) 2,040,000 shares are reserved for issuance pursuant to the
Company's 2000 Equity Incentive Plan, (C) 17,008,500 shares are reserved
for issuance upon the conversion of the Company's Series A Preferred
Stock, par value $.001 per share (the "SERIES A PREFERRED STOCK"), and
(D) 2,489,075 shares are reserved for issuance upon the exercise of a
warrant (the "BET WARRANT") issued to BET Associates, L.P. ("BET");
(ii) non-voting common stock, par value $.001 per share (the
"NON-VOTING COMMON STOCK"), of which 17,000,000 shares are authorized and
(A) 16,000,000 shares are issued and outstanding and (B) 574,402 shares
are reserved for issuance upon the exercise of a warrant (the "PARIBAS
WARRANT") issued to Paribas North America, Inc. ("PARIBAS"); and
(iii) preferred stock, of which 125,000,000 shares are
authorized and (A) 17,008,500 shares have been designated as the Series A
Preferred Stock and are issued and outstanding, (B) 35,000,000 shares
have been or will be designated as the Senior Preferred Stock to be
issued pursuant to this Agreement, and (C) 35,000,000 shares have been or
will be designated as the Voting Preferred Stock to be issued upon
conversion of the Senior Preferred Stock.
All of the issued and outstanding shares of Common Stock, Non-Voting Common
Stock and Series A Preferred Stock are validly issued, fully paid and
nonassessable. No series of preferred stock have been designated by the
Company other than the Series A Preferred Stock, the Senior Preferred Stock
and the Voting Preferred Stock. Except as set forth in the first sentence of
this paragraph (d), there are no outstanding (A) shares of capital stock or
voting securities of the Company, (B) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, (C) options or other rights to acquire, or other obligations of the
Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
the Company, or (D) obligations of the Company to repurchase, redeem, or
otherwise acquire or retire any securities of the type described in clause
(A), (B) or (C) of this sentence. Other than those agreements set forth on
SCHEDULE 2(d) hereto, the Company is not a party to any, and to the best of
the Company's knowledge there are no, agreements, restrictions or
encumbrances with respect to the purchase, sale or voting of the Company's
securities, including, without limitation, preemptive rights, rights of first
refusal, rights of first offer, proxies, voting agreements, voting trusts,
registration rights agreements or shareholders' agreements.
(e) AUTHORIZATION AND ISSUANCE OF SHARES. The Shares have been duly
and validly authorized and, when issued, sold and delivered against payment
therefor in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable.
(f) AUTHORIZATION AND ISSUANCE OF VOTING PREFERRED SHARES AND
CONVERSION SHARES. The Voting Preferred Shares initially issuable upon
conversion of the Shares have been duly and validly authorized and reserved for
issuance by the Company and, if and when issued in accordance with the
Certificate of Designations, will be validly issued, fully paid and
nonassessable. The Conversion Shares initially issuable upon conversion of the
Shares and the Voting Preferred Shares have been duly and validly authorized and
reserved for issuance by the Company and, if and when issued in accordance with
the Voting Certificate of Designations, will be validly issued, fully paid and
nonassessable.
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(g) FINANCIAL STATEMENTS. The Company has made available to the
Investor the audited consolidated financial statements of the Company as of and
for the year ended December 31, 1999. Such historical financial statements:
(i) are in accordance with the books and records of the
Company and the Subsidiary;
(ii) have been prepared in accordance with generally accepted
accounting principles in the United States consistently applied ("GAAP");
and
(iii) fairly present the consolidated financial position and
results of operations of the Company as of the dates and for the periods
presented.
The Company has made available to the Investor consolidated financial statement
forecasts as of December 31 of and for each of the years in the ten-year period
ending December 31, 2010. Such financial statement forecasts were prepared in
good faith based on the assumptions set forth therein, which assumptions:
(A) the Company believes to be reasonable as of the date
hereof; and
(B) include all assumptions that the Company believes are
significant in forecasting the Company's financial position and results
of operations as of such dates and for such periods, although actual
results may differ materially from the results projected in such
forecasts.
(h) ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor the
Subsidiary has any liabilities or obligations (whether known or unknown,
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due) other than:
(i) liabilities or obligations reserved against or otherwise
disclosed in the Company's consolidated balance sheet (the "BALANCE
SHEET") as of December 31, 1999 (the "BALANCE SHEET DATE"), or the
footnotes thereto;
(ii) other liabilities or obligations which were incurred
after the Balance Sheet Date in the ordinary course of business
consistent (in amount and kind) with past practice (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) and which, individually or in the
aggregate, do not exceed $250,000;
(iii) obligations and liabilities arising under the agreements
listed on SCHEDULE 2(K) hereto; and
(iv) liabilities set forth on SCHEDULE 2(h) hereto.
(i) ABSENCE OF CHANGES. Other than such changes set forth on SCHEDULE
2(i) hereto, since the Balance Sheet Date, each of the Company and the
Subsidiary has conducted its business in the ordinary course, consistent with
past practice and there has not been any:
(i) material adverse change in the condition (financial or
otherwise), operations, properties, prospects, results of operations,
business, assets, or liabilities of
5
<PAGE>
the Company, the Subsidiary, or the industry in which the
Company and the Subsidiary conduct or propose to conduct their
business (a "MATERIAL ADVERSE CHANGE"), or any events or conditions
that could reasonably be expected, individually or in the aggregate,
to result in a Material Adverse Change;
(ii) waiver or cancellation of any material right of the
Company or the Subsidiary, or the cancellation of any material debt or
claim held by the Company or the Subsidiary;
(iii) payment, discharge or satisfaction of any claim,
liability or obligation of the Company or the Subsidiary other than in
the ordinary course of business;
(iv) mortgages, judgements, claims, liens, security interests,
pledges, escrows, charges or other encumbrances of any kind or character
whatsoever (collectively "ENCUMBRANCES") upon any assets of the Company
or the Subsidiary, other than Encumbrances arising in the ordinary course
of business that do not materially impair the ownership or use of such
assets or the ability to obtain financing by using such assets as
collateral (PROVIDED that all of the assets of the Company and the
Subsidiary are subject to Encumbrances under the Company's Credit
Agreement, dated December 29, 1999, among the Company, the Subsidiary,
the banks named therein, and Paribas, as agent (the "CREDIT AGREEMENT"));
(v) declaration or payment of dividends on, or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any securities of the Company or the Subsidiary, other
than the conversion of Non-Voting Common Stock to Voting Common Stock as
a result of the transactions contemplated hereby pursuant to the Founders
Stock Agreement, dated as of November 1, 1999 (the "FOUNDERS STOCK
AGREEMENT"), among the Company, James Parsons, Donald A. Harris, Paul F.
Judge, The Walter Group, Inc., and U.S. Bancorp (collectively, the
"FOUNDERS"), as amended;
(vi) issuance of any shares, bonds or other securities of the
Company or the Subsidiary;
(vii) sale, assignment or transfer of any tangible or
intangible assets of the Company or the Subsidiary, other than in the
ordinary course of business;
(viii) loan by the Company or the Subsidiary to any officer,
director, employee, consultant or shareholder of the Company or the
Subsidiary, other than advances to such persons in the ordinary course of
business in connection with travel and travel related expenses;
(ix) damage, destruction or loss (whether or not covered by
insurance) affecting the assets, property, financial condition or results
of operations of the Company or the Subsidiary;
(x) increase, direct or indirect, in the compensation
(including bonuses and other benefits) paid or payable to any officer or
director of the Company or the Subsidiary or, other than in the ordinary
course of business, to any other employee, consultant or agent of the
Company or the Subsidiary;
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(xi) change in the accounting or tax methods, practices or
policies, or any tax election, of the Company or the Subsidiary;
(xii) indebtedness incurred for borrowed money by the Company
or the Subsidiary, other than in the ordinary course of business
including pursuant to the Credit Agreement;
(xiii) amendment to or termination of any material contract or
agreement to which the Company or the Subsidiary is a party, including,
without limitation, any operating agreement to which the Company is a
party;
(xiv) material change or pending or proposed material change to
the regulation of the Company or the Subsidiary or their activities by
any administrative agency or governmental body;
(xv) material change in the manner of business or operations
of the Company or the Subsidiary (including, without limitation, any
accelerations or deferral of the payment of accounts payable or other
current liabilities or deferral of the collection of accounts or notes
receivable);
(xvi) capital expenditures with respect to tangible assets or
commitments therefor by the Company or the Subsidiary, other than capital
expenditure amounts disclosed in the Company's business plan previously
provided to the Investor (the "BUSINESS PLAN");
(xvii) amendment of the certificate of incorporation, by-laws or
other organizational documents of the Company or the Subsidiary, other
than as contemplated by this Agreement;
(xviii) transaction entered into by the Company or the Subsidiary
other than in the ordinary course of business, or any other transaction
entered into by the Company or the Subsidiary material to the Company and
the Subsidiary, taken as a whole, whether or not in the ordinary course
of business;
(xix) amendment to or termination of the Company's affiliation
management agreement with Sprint PCS (the "SPRINT AGREEMENT"); or
(xx) agreement or commitment (contingent or otherwise) by the
Company or the Subsidiary to do any of the foregoing other than the Bank
Financing commitment and the High Yield Bridge Financing commitment.
(j) NO CONFLICT. The execution, delivery and performance by the
Company of this Agreement, the Certificates of Designations and the
Shareholders' Agreements, the consummation of the transactions contemplated
hereby and thereby, and the compliance by the Company with the provisions hereof
and thereof, will not:
(i) violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgement or decree
of any court, administrative agency or other governmental body,
applicable to the Company or the Subsidiary, or any of their respective
properties or assets;
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(ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with due notice or
lapse of time, or both) a default, or give rise to any right of
termination, cancellation or acceleration, under, any contract,
agreement, license or permit to which the Company or the Subsidiary is a
party, or result in the creation of any Encumbrance upon any of their
respective properties or assets; or
(iii) violate the certificate of incorporation, by-laws or
other organization document of the Company or the Subsidiary.
(k) AGREEMENTS. Except as set forth on SCHEDULE 2(k) hereto, neither
the Company nor the Subsidiary is a party to any indenture, mortgage, guaranty,
lease, license, or other contract, agreement or understanding, written or oral
(each, a "CONTRACT"), other than any Contract that:
(i) pursuant to its terms, has expired or has been terminated
or fully performed by the parties and, in each case, under which neither
the Company nor the Subsidiary has any liability, contingent or
otherwise; or
(ii) involves payments to or from the Company or the
Subsidiary that aggregate less than $50,000 and is not material to the
condition (financial or otherwise), operations, properties, prospects,
results of operations, business, assets, or liabilities of the Company
and the Subsidiary taken as a whole.
Each such Contract is a legal, valid and binding obligation, enforceable and in
full force and effect against the Company, and, to the best of the Company's
knowledge, all other parties thereto. There is no breach, violation or default
by the Company or the Subsidiary, and no event (including, without limitation,
the consummation of the transactions contemplated hereby or any pending or
threatened termination, cancellation or material modification) that, with notice
or lapse of time or both, would (i) constitute a breach, violation or default by
the Company or the Subsidiary under any such Contract or (ii) give rise to any
Encumbrance on any property or asset of, or right of, or result in any
termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration against, the Company or the Subsidiary under any such
Contract. To the best knowledge of the Company, no other party to any of such
Contracts is in arrears in respect of the performance or satisfaction of the
terms and conditions on its part to be performed or satisfied under any of such
Contracts, no waiver or indulgence has been granted by any of the parties
thereto, and no party to any of such Contracts has repudiated any provision
thereof.
(l) INTELLECTUAL PROPERTY RIGHTS. Each of the Company and the
Subsidiary owns or has the right to use pursuant to license, sublicense,
agreement or permission all Intellectual Property (as defined below) that is
material, individually or in the aggregate, to the operation of its business as
currently conducted. Each item of Intellectual Property owned or used by the
Company or the Subsidiary immediately prior to the Initial Closing will be owned
or available for use by the Company or the Subsidiary on identical terms and
conditions immediately subsequent to the Initial Closing or the Additional
Closing, as the case may be. Each of the Company and the Subsidiary has taken
all necessary action to maintain and protect its interest in each item of
Intellectual Property that is material to the conduct of its business.
(ii) To the best knowledge of the Company, neither the Company
nor the Subsidiary has interfered with, infringed upon, or misappropriated any
Intellectual Property
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rights of third parties, and neither the Company nor the Subsidiary has
received any charge, complaint, claim, demand or notice alleging any such
interference, infringement, or misappropriation, including any claim that it
must license or refrain from using any Intellectual Property rights of any
third party. To the best knowledge of the Company, no third party has
interfered with, infringed upon, or misappropriated any Intellectual Property
rights of the Company or the Subsidiary.
(iii) Neither the Company nor the Subsidiary owns any patent or
has any pending patent application.
(iv) SCHEDULE 2(l) identifies each item of Intellectual
Property that is material to the conduct of the business of the Company and the
Subsidiary as presently conducted. Neither the Company nor the Subsidiary has
granted any sublicense or similar right with respect to any such Intellectual
Property, and, to best the knowledge of the Company, (A) each such item of
Intellectual Property is not subject to any outstanding injunction, judgement,
order, decree, ruling or change, and (B) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or threatened that
challenges the legality, validity, or enforceability of any such item of
Intellectual Property.
(v) For purposes of this Agreement, "INTELLECTUAL PROPERTY"
means all worldwide:
(A) inventions and discoveries (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof;
(B) trademarks, service marks, trade dress, logos, trade
names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith;
(C) copyrightable works, copyrights and applications,
registrations and renewals in connection therewith;
(D) mask works and applications, registrations and
renewals in connection therewith;
(E) know-how, trade secrets and confidential business
information, whether patentable or unpatentable and whether or not
reduced to practice (including ideas, research and development, know-how,
formulae, compositions, manufacturing and production process and
techniques, technical data, designs, drawings, specifications, customer
and supplier lists, pricing and cost information and business and
marketing plans and proposals);
(F) computer software (including data and related
documentation);
(G) other proprietary rights;
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(H) copies and tangible embodiments thereof (in whatever
form or medium); and
(I) licenses and agreements in connection therewith.
(m) SUITABILITY. To the best knowledge of the Company, none of the
events described in Item 401(f) of Regulation S-K promulgated under the United
States Securities Act of 1933, as amended (including the rules and regulations
promulgated thereunder, the "SECURITIES ACT"), has occurred during the last five
years with respect to any director or officer of the Company or the Subsidiary.
(n) ASSETS.
(i) Each of the Company and the Subsidiary has good and
marketable title to, or a valid leasehold interest in or contractual
right to use, all of its assets and properties, free and clear of any
Encumbrances, other than (A) Encumbrances set forth in SCHEDULE 2(n)
hereto, and (B) Encumbrances for taxes not yet due and payable.
(ii) All buildings, facilities, machinery, equipment,
furniture, leasehold and other improvements, fixtures, vehicles,
structures, related capitalized items and other tangible property owned
by, or leased to, the Company or the Subsidiary are:
(A) in good operating condition and repair (normal wear
and tear excepted), free of any material structural or engineering
defects;
(B) subject to continued repair and replacement in
accordance with past practice and all material applicable regulations;
and
(C) suitable for their current and proposed use in all
material respects.
(iii) Neither the Company nor the Subsidiary has received written
notice of, or has knowledge of, any pending, threatened or contemplated
condemnation proceeding or similar taking affecting the assets of the Company or
the Subsidiary.
(o) EMPLOYEE MATTERS.
(i) The Company has no Benefit Plans (as defined below).
(ii) With respect to each Employee Agreement (as defined
below):
(A) each of the Company and the Subsidiary has complied
with all of its obligations thereunder, and each such Employee Agreement
is presently, and has at all times in the past been, in compliance with
all statutes, orders, rules and regulations applicable to it;
(B) to the best knowledge of the Company, each such
Employee Agreement that is a confidentiality or other similar agreement
is fully enforceable in accordance with its terms, and no person is
presently, or has at any time in the past been, in violation of any of
the terms of any such Employee Agreement;
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(C) there are no actions, proceedings, arbitrations,
suits, claims or other similar proceedings pending or threatened against
the Company or the Subsidiary with respect to any Employee Agreement,
except for a threatened claim by the Company's former Vice
President--Finance, Eli Bakofsky.
(iii) Neither the Company, nor the Subsidiary, nor any ERISA
Affiliate (as defined below) currently sponsors, maintains, contributes to, or
is required to contribute to, and neither the Company nor the Subsidiary has any
liability, contingent or otherwise, with respect to any "defined benefit plan"
(as defined in Section 3(35) of the Employee Retirement Income Security Act of
1974 ("ERISA")), "multiemployer plan" (as defined in Section 3(37) of ERISA), or
Retired Welfare Plan (as defined below).
(iv) To the best knowledge of the Company, no Employee has been
hired in violation of any restrictive covenant or non-compete agreement with any
other person.
(v) The execution of, and performance of the transactions
contemplated by, this Agreement, the Certificates of Designations and the
Shareholders' Agreements will not (either alone or upon the occurrence of any
additional or subsequent events):
(A) constitute an event under any Employee Agreement
that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligations to fund benefits with
respect to any Employee (as defined below); or
(B) result in any payment made or to be made by the
Company or the Subsidiary constituting an "excess parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986
(the "CODE").
(vi) For purposes of this Agreement:
(A) "BENEFIT PLAN" means each plan, program, policy,
payroll practice, contract, agreement or other arrangement, or commitment
therefor, providing for compensation, severance, termination pay,
pension, retirement or any other post-termination benefit, performance
awards, share or share-related awards, fringe benefits or other employee
benefits of any kind, whether formal or informal, funded or unfunded,
written or oral, which is now or previously has been sponsored,
maintained, contributed to or required to be contributed to by the
Company or the Subsidiary or pursuant to which the Company or the
Subsidiary has any liability, contingent or otherwise;
(B) "EMPLOYEE AGREEMENT" means each management,
employment, bonus, option, equity (or equity related), severance,
consulting, noncompete, confidentiality or similar agreement or contract
between the Company or the Subsidiary and any current, former or retired
employee, officer, consultant, independent contractor, agent or director
of the Company or the Subsidiary (an "EMPLOYEE");
(C) "ERISA AFFILIATE" means any entity that is (1) a
member of a "controlled group of corporations," under "common control" or
a member of an "affiliated service group," within the meaning of Section
414(b), (c) or (m) of the Code, (2) required to be aggregated under
Section 414(o) of the Code, or (3) under "common
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control," within the meaning of Section 4001(a)(14) of ERISA, or any
regulations promulgated or proposed under any of the foregoing, in
each case with the Company or the Subsidiary; and
(D) "RETIRED WELFARE PLAN" means any Benefit Plan that
provides, or has any liability to provide, life insurance or medical,
severance or other employee welfare benefits to any Employee beyond his
or her retirement or termination of employment, except as required by
Section 4980B of the Code.
(p) LABOR RELATIONS; EMPLOYEES. Neither the Company nor the
Subsidiary is bound by a change of control provision or change of control
agreement in respect of any of its Employees. Neither the Company nor the
Subsidiary is delinquent in payments to any of its Employees for any wages,
salaries, commissions, bonuses or other compensation for any services performed
or amounts required to be reimbursed. Each of the Company and the Subsidiary is
in compliance with all applicable laws, rules and regulations respecting
employment, employment practices, occupational health and safety, workers'
compensation, pay equity, labor, terms and conditions of employment and wages
and hours. Neither the Company nor the Subsidiary is bound by or subject to
(and none of its assets or properties is bound by or subject to) any written or
oral, express or implied, commitment or arrangement with any labor union, and no
labor union has requested or, to the best knowledge of the Company, has sought
to represent any of the employees, representatives or agents of the Company or
the Subsidiary, or has bargaining rights in respect of any of the employees,
representatives or agents of the Company or the Subsidiary. There is no labor
strike, dispute, slowdown or stoppage pending or threatened against or involving
the Company or the Subsidiary. To the best knowledge of the Company, other than
the Company's former Vice President--Finance, Eli Bakofsky, who has resigned, no
salaried employee has any plans to terminate his or her employment with the
Company or the Subsidiary.
(q) LITIGATION; ORDERS. Other than as set forth on SCHEDULE 2(q)
hereto, there is no civil, criminal or administrative action, suit, claim,
notice, hearing, inquiry, proceeding or investigation at law or in equity by or
before any court, arbitrator or similar panel, governmental instrumentality or
other agency (including, without limitation, proceedings, inquiries or
investigations of the Federal Communication Commission (the "FCC")) pending or
threatened against the Company or the Subsidiary or the assets or business of
the Company or the Subsidiary. Neither the Company nor the Subsidiary is
subject to any order, writ, injunction or decree of any court or other
governmental department, commission, board, bureau, agency or instrumentality.
(r) COMPLIANCE WITH LAWS; LICENSES. (i) Each of the Company and the
Subsidiary has complied in all material respects with all federal, state, local
and foreign laws, rules, ordinances, codes, consents, authorizations,
registrations, regulations, decrees, directives, judgements and orders
applicable to it and its business, Neither the Company nor any subsidiary is in
material violation of any judgement, decree, writ, law, statute, rule, or
regulation rendered or enacted respecting telecommunications applicable to it,
or any published interpretation or policy relating thereto.
(ii) Each of the Company and the Subsidiary either has or
intends to procure in a timely manner such permits, licenses, consents,
exemptions, franchises, authorizations and other approvals (each, an
"AUTHORIZATION") of, and has made all filings with and notices to, all necessary
federal, state, local and foreign governmental or regulatory authorities
(including,
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without limitation, as appropriate, the state public utilities commissions of
Nevada, California, Idaho, Washington, Montana, Utah, Indiana, Kentucky,
Wyoming, and Illinois) and self-regulatory organizations and all courts and
other tribunals, including without limitation, under any applicable
environmental laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, including the planned
buildout of the PCS telecommunications network, as described in the Sprint
Agreement. Each such authorization is or will be valid and in full force and
effect, and each of the Company and the Subsidiary is in compliance with all
of the terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto.
There is no reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such authorization; and no
event has occurred (including, without limitation, the receipt of any notice
from any authority or governing body) which allows or, after notice or lapse
of time or both, would allow, revocation, suspension or termination of any
such authorization or results or, after notice or lapse of time or both,
would result in any other impairment of the rights of the holder of any such
authorization; and such authorizations contain no restrictions that are
burdensome to the Company or the Subsidiary.
(iii) There are no judgements, decrees or orders issued by the
FCC that could have a material adverse effect upon, or cause material disruption
to, the Company's or the Subsidiary's operations. There is no complaint,
investigation, action or proceeding pending or threatened relating to the
Company's or the Subsidiary's operations, including, without limitation, any
notice of violation, notice of apparent liability or order to show cause, other
than proceedings that affect the PCS industry generally, that could have a
material adverse effect upon, or cause material disruption to, the Company's or
the Subsidiary's operations.
(iv) Neither the Company nor the Subsidiary is in violation of
any judgement, decree, order, writ, law, statute, rule or regulation rendered or
enacted respecting telecommunications applicable to it, or any published
interpretation or policy relating thereto.
(v) No notices, reports or other filings are required to be
made by the Company or the Subsidiary, either prior to or following the
consummation of the transactions contemplated hereby, with, nor are any
consents, registrations, applications or permits required to be obtained by the
Company or the Subsidiary from, any court or governmental agency or other
regulatory body or tribunal or similar entity pursuant to telecommunications
regulatory law in connection with the consummation of the transactions
contemplated hereby.
(s) OFFERING EXEMPTION. Assuming the accuracy of the representations
and warranties contained in Section 3 of this Agreement, each of the offer,
sale, issuance and delivery of the Shares and the Conversion Shares is exempt
from the prospectus and registration requirements of the Securities Act.
(t) RELATED TRANSACTIONS. Other than as set forth on SCHEDULE 2(t)
hereto, neither the Company nor the Subsidiary has been a party to any
transactions, agreements, arrangements or understandings that would be required
to be disclosed under Item 404 of Regulation S-K promulgated under the
Securities Act.
(u) TAXES.
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(i) Each of the Company and the Subsidiary has duly and
timely filed its Tax Returns (as defined below) with the appropriate
Governmental Authority (as defined below) and has duly, completely and
correctly reported all income and all other amounts and information
required to be reported thereon. Each of the Company and the Subsidiary
has duly and timely paid all Taxes (as defined below), including all
installments on account of Taxes for the year, that are due and payable
by it, whether or not assessed by the appropriate Governmental
Authority. Each of the Company and the Subsidiary has established
reserves that are reflected on the Balance Sheet that are at least equal
to the amount of all Taxes that are not yet due and payable.
(ii) Neither the Company nor the Subsidiary has requested, or
entered into any agreement or other arrangement or executed any waiver
providing for, any extension of time within which:
(A) to file any Tax Return covering any Taxes for which
the Company or the Subsidiary is or may be liable;
(B) the Company or the Subsidiary is required to pay or
remit any Taxes or amounts on account of Taxes; or
(C) any Governmental Authority may assess or collect
Taxes for which the Company or the Subsidiary is or may be liable.
(iii) (A) There are no actions, suits, proceedings,
investigations, audits or claims pending or threatened against the Company or
the Subsidiary in respect of any Taxes, (B) there are no matters under
discussion, audit or appeal with any Governmental Authority relating to Taxes,
(C) there are no rulings, requests for rulings or closing agreements relating to
the Company or the Subsidiary that could affect its liability for Taxes for any
period, (D) neither the Company nor the Subsidiary is a party to or is bound by
any Tax allocation or Tax sharing agreement or arrangement, and neither the
Company nor the Subsidiary has any current contractual obligation to indemnify
any other person with respect to Taxes, (E) no taxing authority in a
jurisdiction where the Company or the Subsidiary does not file Tax Returns has
made any claim, assertion or threat that the Company or the Subsidiary is or may
be subject to taxation by such jurisdiction, (F) neither the Company nor the
Subsidiary has agreed in writing to, nor is it required to include in income,
any adjustment by reason of a change in accounting method or otherwise, nor do
the Company or the Subsidiary have any knowledge that any taxing authority has
proposed, or is considering, any such change in accounting method, and (G)
neither the Company nor the Subsidiary is a personal holding corporation within
the meaning of Section 542 of the Code.
(iv) For purposes of this Agreement:
(A) "GOVERNMENTAL AUTHORITY" means any government,
regulatory authority, governmental department, agency, commission, board,
tribunal, or court or other law, rule or regulating-making entity having
or purporting to have jurisdiction on behalf of any nation, state or
other subdivision thereof or any, municipality, district or other
subdivision thereof;
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(B) "TAXES" includes all taxes, duties, fees,
assessments, imposts, levies and other charges of any kind whatsoever
imposed by any Governmental Authority, together with all interest,
penalties, fines, additions to tax or other additional amounts imposed in
respect thereof, including those levied on, or measured by, or referred
to as income, gross receipts, profits, capital, transfer, land transfer,
sales, goods and services, use value-added, excise, stamp, withholding,
business, franchising, property, payroll, employment, health, social
services, education and social security taxes, and all surtaxes, customs
duties, import and export taxes, and license, franchise and registration
fees; and
(C) "TAX RETURN" includes all returns, reports,
declarations, elections, notices, filings, information returns and
statements filed or required to be filed with any Governmental Authority
in respect of Taxes.
(v) ENVIRONMENTAL PROTECTION. Each of the Company and the Subsidiary
has conducted and is conducting its business in compliance with all applicable
Environmental Laws (as defined below). Neither the Company nor the Subsidiary
has caused, arranged or allowed, or contracted with any party for, the
transportation, treatment, storage or disposal of any Hazardous Substance (as
defined below) in connection with the operation of its business or otherwise.
To the best knowledge of the Company, no Hazardous Substance has been Released
(as defined below) into the environment on or from any real property currently
or formerly owned, leased or controlled by the Company or the Subsidiary, which
Release is required or may be required under applicable Environmental Laws to be
abated or remediated by the Company or the Subsidiary. To the best of the
Company's knowledge, there are no past or present Releases, conditions, events,
circumstances, facts, activities, practices, incidents, actions, or omissions
that could reasonably be expected to form the basis of any claim, action, suit,
proceeding, order, or administrative sanction against or involving the Company
or the Subsidiary based on any violation of any Environmental Law or that is
reasonably likely to require the Company or the Subsidiary to incur any material
expense in connection therewith. For purposes of this Agreement:
(i) "ENVIRONMENTAL LAWS" means all laws, rules,
regulations, orders, ordinances, codes and judgements of any
Governmental Authority relating in full or in part to the
protection of the environment, and employee and public health and
safety, and includes those relating to the storage, generation,
use, handling, manufacture, processing, labeling, transportation,
treatment and Release of Hazardous Substances in effect and as
amended as of the date of this Agreement;
(ii) "HAZARDOUS SUBSTANCES" means any pollutant,
contaminant, waste of any nature, hazardous substance, hazardous
material or toxic substance as defined, judicially interpreted or
identified in any Environmental Law, including any asbestos,
asbestos containing materials, petroleum and/or other hydrocarbons
or petroleum by-products; and
(iii) "RELEASE" shall have the meaning prescribed in any
Environmental Law and includes any release, spill, leak, pumping,
pouring, emission, emptying, discharge, injection, escape, leaching,
disposal, dumping, deposit, spraying, burial, abandonment, incineration,
seepage, or placement.
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(w) CONSENTS. Other than those consents that have been obtained and
are set forth on SCHEDULE 2(w) hereto, no permit, authorization, consent or
approval of or by, or any notification of or filing with, any person
(governmental or private) is required in connection with the:
(i) execution, delivery and performance by the Company of
this Agreement, the Certificates of Designations or the Shareholders'
Agreements;
(ii) the consummation by the Company of the transactions
contemplated hereby or thereby; or
(iii) the issuance, sale or delivery of the Shares, the Voting
Preferred Shares or the Conversion Shares.
(x) INSURANCE. All material assets of the Company and the
Subsidiary that are of an insurable character are covered by insurance with
reputable insurers against risks of liability, casualty and fire and other
losses and liabilities customarily obtained to cover comparable businesses
and assets in amounts, scope and coverage which are consistent with prudent
industry practice. Neither the Company nor the Subsidiary is in default of
any insurance policy maintained by it. All such policies are in full force
and effect and all premiums due with respect thereto have been paid. Neither
the Company nor the Subsidiary has failed to give any notice or present any
material claim under any such insurance policy in due and timely fashion or
as required by any such insurance policy, and has not otherwise, through any
act, omission or non-disclosure, jeopardized or impaired full recovery of any
claim under such policies, and there are no material claims by the Company or
the Subsidiary under any such policy to which any insurer is denying
liability or defending under a reservation of rights or similar clause.
Neither the Company nor the Subsidiary has received notice of any pending or
threatened termination of any insurance policy or premium increase for the
current policy period, and the consummation of the transactions contemplated
by this Agreement will not result in any such termination or premium increase.
(y) BROKERS. Neither the Company, nor the Subsidiary, nor any officer,
director, employee or shareholder of the Company or the Subsidiary, has employed
any broker, finder or placement agent in connection with the transactions
contemplated by this Agreement.
(z) REAL PROPERTY. Neither the Company nor the Subsidiary owns any
real property; except as set forth on SCHEDULE 2(z) hereto, neither the Company
nor the Subsidiary leases any real property. Each of the Company and the
Subsidiary has unencumbered leasehold title to its leased real properties, free
and clear of all imperfections of title and all Encumbrances, other than:
(i) those consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of
such property or irregularities in title thereto that, individually and
in the aggregate, do not materially impair the use of such property;
(ii) warehousemen's, mechanics', carriers', landlords',
repairmen's or other similar Encumbrances arising in the ordinary course
of business and securing obligations not yet due and payable;
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(iii) Encumbrances for the benefit of the lenders under the
Credit Agreement; and
(iv) other Encumbrances that, individually and in the
aggregate, do not materially impair the use of such property or the
ability to obtain financing by using such property as collateral. There
are no options, rights of first refusal, rights of first offer or other
similar rights with respect to any such real property.
With respect to each lease of real property to which the Company or the
Subsidiary is a party, so long as the Company or the Subsidiary duly performs
its obligations under such lease within applicable notice and grace periods:
(v) the rights of the Company or the Subsidiary under such
lease may not be terminated; and
(vi) possession of such real property and the use and
enjoyment thereof by the Company or the Subsidiary may not be disturbed
by any landlord, overlandlord, mortgagee or other superior party.
Neither the Company nor the Subsidiary is obligated to purchase any real
property currently leased by it, and no lease for real property is required to
be accounted for under GAAP as a capitalized lease. Neither the Company nor the
Subsidiary is a real property holding company as defined in Section 897 of the
Code.
(aa) INVESTMENT BANKING SERVICES. Neither the Company nor the
Subsidiary is a party to any Contract that grants rights to any third party with
respect to the performance of investment banking services for it, including,
without limitation, with respect to its sale or a public offering, including an
initial public offering, of its securities, other than:
(i) any such agreement with Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"); and
(ii) the agreement dated as of January 12, 2000 with Verocom
Group, Inc.
(bb) PREVIOUS ISSUANCES EXEMPT. All securities issued by the Company
or the Subsidiary prior to the date hereof have been issued in transactions
exempt from the prospectus and registration requirements of the Securities Act
and all applicable state securities or "blue sky" laws (collectively,
"Securities Laws"), or have been distributed or registered, as the case may be,
in compliance with all Securities Laws. Neither the Company nor the Subsidiary
has violated any Securities Laws in connection with the issuance of any
securities prior to the date hereof.
(cc) PUBLIC UTILITY HOLDING COMPANY ACT; INVESTMENT COMPANY ACT.
Neither the Company nor the Subsidiary is a "holding company," a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company," as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. Neither the Company nor the Subsidiary is an "investment company," or
an "affiliated person" or a "principal underwriter" of an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as amended.
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(dd) DISCLOSURE. The documents and information disclosed and delivered
to the Investor in connection with the transactions contemplated hereby, taken
as a whole, do not contain an untrue statement of a material fact and do not
fail to state any material fact necessary to make the statements therein not
misleading, which untrue statements or omissions could reasonably be expected to
be material to the Investor's evaluation of the transactions contemplated
hereby.
(ee) FINANCING COMMITMENTS. The Company has received commitments with
respect to:
(i) a senior credit facility providing the Company with a
$120 million Term Loan A, a $75 million Term Loan B, and no less than $55
million of revolving credit borrowings (the "BANK FINANCING"), a copy of
which is attached as SCHEDULE 2(ee)(i) to this Agreement; and
(ii) a high yield bridge financing providing the Company with
no less than $125 million of gross proceeds (the "HIGH YIELD BRIDGE
FINANCING"), a copy of which is attached as SCHEDULE 2(ee)(ii) to this
Agreement.
Each of the Bank Financing commitment and the High Yield Bridge Financing
commitment has been duly authorized, executed and delivered by the parties
thereto, and constitutes the valid and binding obligation of such parties,
enforceable in accordance with its terms. The Company has no reason to believe
that the conditions to funding contained in the Bank Financing commitment and
the High Yield Bridge Financing commitment will not be satisfied on or prior to
the Additional Closing Date.
(ff) SUFFICIENT FINANCING. SCHEDULE 2(ff)(i) hereto sets forth the use
of proceeds of the sale of the Initial Shares to the Investor, and SCHEDULE
2(ff)(ii) hereto sets forth the sources and uses of funds with respect to the
sale of the Additional Shares to the Investor, and the consummation of the Bank
Financing and the High Yield Bridge Financing. The proceeds of the sale of the
Shares to the Investor, together with:
(i) the proceeds of the Bank Financing;
(ii) the proceeds of the High Yield Bridge Financing; and
(iii) reasonably anticipated cash flows from operations,
are sufficient, without any additional financing, to finance the Company's
business plan through the end of the fiscal year ending December 31, 2010.
(gg) SPRINT AGREEMENT. The Sprint Agreement has been duly authorized,
executed and delivered by the parties thereto, and constitutes the valid and
binding obligation of such parties, enforceable in accordance with its terms.
In accordance with the terms of the Sprint Agreement, (i) the Company and the
Subsidiary presently have the right to operate in the Reno/Tahoe territory, and
(ii) upon execution and delivery of this Agreement, the Bank Financing
commitment and the High Yield Bridge Financing commitment, and affirmation by
Sprint PCS that the conditions to financing have been met, the Company and the
Subsidiary will have the right to operate in the jurisdictions listed on
SCHEDULE 2(gg) hereto.
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(hh) ANTI-DILUTION; CHANGE OF CONTROL. Other than as set forth on
SCHEDULE 2(hh) hereto, neither the execution of this Agreement, the Certificates
of Designations or the Shareholders' Agreements, nor the consummation of the
transactions contemplated hereby and thereby, will:
(i) afford any holder of the Series A Preferred Stock, the
BET Warrant, the Paribas Warrant or any other security of the Company
that is exercisable or exchangeable for Common Stock with an
anti-dilution adjustment or other similar right or protection; or
(ii) afford any holder of the Series A Preferred Stock, the
BET Warrant, the Paribas Warrant or any other security of the Company
with any rights or protections, including, without limitation, rights to
require the Company to redeem or repurchase any such securities, as a
result of a "change of control" or other similar provision applicable
thereto.
(ii) FOUNDERS STOCK AGREEMENT. Pursuant to the terms of the
Founders Stock Agreement, (i) no shares of Non-Voting Common Stock will vest
or convert into shares of Common Stock in connection with the transactions
contemplated hereby, other than (A) the vesting and conversion of 331,027
shares of Non-Voting Common Stock held by the Founders into shares of Common
Stock upon consummation of the Initial Closing, and (B) the vesting and
conversion of 258,567 shares of Non-Voting Common Stock held by the Founders
into shares of Common Stock upon consummation of the Additional Closing; and
(ii) no additional shares of Non-Voting Common Stock will vest or convert
into shares of Common Stock following the Additional Closing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The
Investor hereby represents and warrants to the Company as of the date hereof, as
of the Initial Closing Date, and as of the Additional Closing Date (as though
made as of each such date) as follows:
(a) INVESTMENT INTENT. The Investor is acquiring the Shares for
investment only and not with a view to resale or distribution in a manner that
would violate applicable securities laws.
(b) ACCREDITED INVESTOR. The Investor is, and each person in whose
name the Shares will be registered pursuant to Section 1(e) will be, an
"Accredited Investor," as such term is defined in Rule 501(a)(1), (2), (3) (7)
or (8) under the Securities Act.
(c) NO REGISTRATION. The Investor understands that the Shares have
not been and will not be registered under the Securities Act or the securities
laws of any state of the United States, and that the sale contemplated hereby is
being made in reliance on an exemption from such registration requirements. The
Investor understands and agrees that the Shares may not be reoffered or resold
in the United States or by or on behalf of a U.S. Person (as defined in
Regulation S promulgated under the Securities Act) or a person in the United
States unless the Shares have been registered under the Securities Act and any
applicable state securities laws or an exemption from such registration
requirements is available. The Investor understands that the certificates
representing the Shares will bear a legend to such effect.
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SECTION 4. COVENANTS OF THE COMPANY.
(a) INITIAL PUBLIC OFFERING. The Company shall use its best effort to
consummate, not later than April 15, 2000 (unless the Sprint Agreement is
amended to permit a later date, but in any event not later than June 30, 2000),
a registered public offering of equity securities that generates at least $100
million in gross proceeds to the Company. Without limiting the foregoing, the
Company shall use its best efforts to:
(i) prepare and file with the Securities and Exchange
Commission (the "COMMISSION") a registration statement relating to such
offering on the appropriate form; and
(ii) file such amendments to such registration statement and
take such other actions as may be necessary to cause such registration
statement to be declared effective by the Commission.
(b) CONDUCT OF BUSINESS. (i) Except as the Investor may otherwise
consent to in writing, from the date hereof and through the Termination Date (as
defined below), the Company shall not, and shall cause the Subsidiary not to, do
any thing or take any action or omit to do anything or to take any action that:
(ii) would cause any representation or warranty of the Company
in this Agreement to be untrue as of the Additional Closing Date, other
than any such action or omission in the ordinary course of business and
expressly contemplated by the Business Plan that would cause Schedules
2(k) and 2(i) (as such schedule relates to repayment of the debt owed to
BET and potential qualification in additional states) to be incomplete;
or
(iii) would be a Major Transaction under the Additional
Shareholders' Agreement if the Additional Shareholders' Agreement were in
effect.
For purposes of this Agreement, "TERMINATION DATE" means the first to occur of
(i) the Additional Closing Date, and (iii) the date on which this Agreement is
terminated in accordance with Section 7 hereof.
(c) PROVISION OF FINANCIAL INFORMATION. From the date hereof and
through the Termination Date, the Company agrees to furnish to the Investor the
following:
(i) within 15 days after the end of each fiscal month,
internal monthly financial and operating statements for such month
prepared by the Company under the direction of a senior executive officer
of the Company, together with a statement certified by the Chief
Financial Officer, Vice President--Finance or Chief Executive Officer of
the Company certifying that such financial statements:
(A) are in accordance with the books and records of the
Company and the Subsidiary; and
(B) fairly present the consolidated financial position
and results of operations of the Company as of the dates and for the
periods presented.
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(ii) within 30 days after the end of each quarterly fiscal
period, unaudited balance sheets and an income statement as of the end of
such period, together with statements of retained earnings and cash flow
for such period ("QUARTERLY FINANCIALS") and a letter or memorandum
discussing the summary financial information for such period and setting
forth a comparison by reasonable categories of such financial information
to the comparable figures for the prior year and a reasonable explanation
of any differences (a "MANAGEMENT LETTER") (with the Management's
Discussion and Analysis of Financial Condition and Results of Operation
section of any Form 10-Q or Form 10-K or similar document filed with the
Commission for such quarter being sufficient to satisfy this
requirement), together with a statement certified by the Chief Financial
Officer, Vice President--Finance or Chief Executive Officer of the
Company certifying that such financial statements:
(A) are in accordance with the books and records of the
Company and the Subsidiary;
(B) have been prepared in accordance with GAAP; and
(C) fairly present the consolidated financial position
and results of operations of the Company as of the dates and for the
periods presented.
(iii) within 90 days (or such lesser period as is either (A)
required under applicable laws for similar disclosure to any
securityholders of the Company or (B) in which similar disclosure is
provided to other financing sources of the Company, including, without
limitation, any banks) after the end of each fiscal year, (1) audited
balance sheets and an income statement as of the end of such fiscal year,
together with statements of retained earnings and cash flow for such
fiscal year, all in reasonable detail and certified by a recognized
national firm of independent accountants selected by the Company as
presenting fairly the financial position and results of operations of the
Company and as having been prepared in accordance with GAAP, including
their opinion thereon, (2) the accounting firm's management letter, and
(3) a Management Letter (with the Management's Discussion and Analysis of
Financial Condition and Results of Operation section of any Form 10-Q or
Form 10-K or similar document filed with the Commission for such quarter
being sufficient to satisfy this requirement); and
(iv) promptly upon becoming available, (A) copies of all
financial statements, reports, press releases, notices, proxy statements
and other documents sent by the Company to its shareholders or released
to the public and copies of all regular and periodic reports, if any,
filed by the Company with any securities regulatory agency or any
securities exchange, and (2) any other financial or other information
available to management of the Company as the Investor shall have
reasonably requested.
The financial statements and information delivered pursuant to
this paragraph (c) shall be the consolidated and consolidating financial
statements of the Company and the Subsidiary.
(d) REQUIRED NOTICES. At all times from the date hereof and through
the Termination Date, the Company shall promptly give written notice to the
Investor of:
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(i) any facts or circumstances or the occurrence of any event
or the failure of any event to occur, which has or is reasonably likely
to have, (A) a material adverse effect on the condition (financial or
otherwise), operations, properties, prospects, results of operations,
business, assets, or liabilities of the Company or the Subsidiary or (B)
a material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby or to satisfy its obligations hereunder;
(ii) any complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any
authority with respect to the Company or the Subsidiary or the
transactions contemplated hereby;
(iii) the institution or the threat of institution of any
litigation or similar action with respect to the Company or the
Subsidiary or the consummation of the transactions contemplated hereby;
and
(iv) the occurrence of any event, or the discovery of any
facts or circumstances which will or is reasonably likely to result in
the failure (A) of any representation or warranty set forth herein to
continue to be true or (B) to satisfy any condition set forth in Section
5 or 6.
The Company shall keep the Investor apprised of material changes with respect to
such events promptly upon the occurrence of such events.
(e) NO SHOP. Other than in connection with the sale of the Company as
an entirety, at all times from the date hereof through the earliest of the
consummation of a Qualifying Public Offering (as defined below), the Additional
Closing Date and December 31, 2001, the Company shall not, and shall not
authorize any of its officers or directors or any other person on its behalf to,
solicit, encourage, negotiate or accept any offer from any party concerning:
(i) the issuance or sale any equity securities of the
Company, other than in a registered, public offering of equity securities
in the United States; or
(ii) any other agreement or arrangement that would be
inconsistent with the consummation of the transactions contemplated
hereby,
(in the case of either clause (i) or (ii), a "PROHIBITED TRANSACTION"), nor
shall the Company participate in any discussions or negotiations regarding, or
furnish any information with respect to, or facilitate in any other manner, any
Prohibited Transaction; PROVIDED, HOWEVER, that, beginning July 1, 2000, the
Company may participate in discussions or negotiations regarding, furnish
information with respect to, facilitate and consummate a Prohibited Transaction
if and only if, prior to consummating any Prohibited Transaction, the Company
shall offer the Investor the opportunity to consummate the Additional Purchase
on the terms set forth in this Agreement, which offer shall be in writing and
shall set forth in reasonable detail the terms of the proposed Prohibited
Transaction (the "NO SHOP OFFER"). The Investor shall have 20 days to review
the No Shop Offer, during which time the Company shall provide the Investor with
such information concerning the Company (including, without limitation, the
financial and other information of the type reviewed by the Investor prior to
the date of this Agreement) that the Investor reasonably requests. Prior to the
expiration of such 20-day period, the Investor may notify the Company in writing
(the "ACCEPTANCE NOTICE") that either:
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(A) it is accepting the No Shop Offer, in which case the
Company and the Investor shall, on the date set forth in the Acceptance
Notice, which date shall be no less than five days and no more than 30
days from the giving of the Acceptance Notice, consummate the Additional
Purchase in accordance with the terms of this Agreement, and the Company
shall not consummate the Prohibited Transaction (except that the Company
may consummate the Prohibited Transaction following the Additional
Closing if done so in accordance with the terms hereof and of the
Shareholders' Agreement and the Certificates of Designations);
(B) it is rejecting the No Shop Offer, but it is electing to
participate in the Prohibited Transaction, in which case the Investor
shall have the right to participate in the Prohibited Transaction at the
level, not to exceed one-third of the total Prohibited Transaction, set
forth in the Acceptance Notice; PROVIDED, HOWEVER, that the Investor's
participation in the Prohibited Transaction shall be on identical terms
to the participation by the other investors in the Prohibited
Transaction; or
(C) it is rejecting the No Shop Offer and is electing not to
participate in the Prohibited Transaction.
In the event that the Investor fails to deliver an Acceptance Letter prior to
the expiration of such 20-day period, the Investor shall be deemed to have
rejected the No Shop Offer and to have elected not to participate in the
Prohibited Transaction. On or prior to the date hereof, the Company shall
terminate any existing discussions regarding a possible Prohibited Transaction.
The Company shall promptly notify the Investor in writing of any inquiries or
proposals from any third party regarding a possible Prohibited Transaction.
(f) USE OF FUNDS. The Company shall use the proceeds of the sale of
the Initial Shares in accordance with SCHEDULE 2(ff)(i) hereto, and shall use
the proceeds of the sale of the Additional Shares, the Bank Financing and the
High Yield Bridge Financing (or any high yield financing consummated in lieu
thereof) in accordance with SCHEDULE 2(ff)(ii) hereto.
SECTION 5. CONDITIONS TO OBLIGATIONS OF THE INVESTOR. The
obligations of the Investor to purchase the Initial Shares at the Initial
Closing and to purchase the Additional Shares at the Additional Closing are
subject to the satisfaction, on or prior to the Initial Closing Date or the
Additional Closing Date, as the case may be, of the following conditions:
(a) REPRESENTATIONS TRUE. Each representation and warranty made by
the Company herein shall be true and correct, on and as of the Initial Closing
Date or the Additional Closing Date, as the case may be; PROVIDED, HOWEVER, that
on the Additional Closing Date, Schedules 2(k) and 2(i) (as such schedule
relates to repayment of the debt owed to BET and potential qualification in
additional states) hereto may be amended to include any matters that have arisen
by virtue of actions taken by the Company since the Initial Closing Date,
provided that such actions were not taken in violation of Section 4(b) hereof.
(b) COMPLIANCE WITH COVENANTS. The Company shall have complied with
all agreements and covenants contained herein or in the Shareholders' Agreements
required to be performed by it on or prior to the Initial Closing Date or the
Additional Closing Date, as the case may be.
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<PAGE>
(c) OFFICER'S CERTIFICATE. The Company shall have delivered to the
Investor a certificate of a senior executive officer of the Company, in form and
substance satisfactory to the Investor, certifying that the conditions set forth
in paragraphs (a), (b), (g), (h) and (j) have been satisfied.
(d) SECRETARY'S CERTIFICATE. The Company shall have delivered to the
Investor a certificate of its Secretary, in form and substance satisfactory to
the Investor, certifying:
(i) a true and correct copy of the Certificate of
Incorporation of the Company, including all amendments thereto, certified
as of a recent date by the Secretary of State of the State of Delaware;
(ii) a true and correct copy of the by-laws of the Company;
(iii) a certificate of good standing of the Company issued as
of a recent date by the Secretary of State of the State of Delaware;
(iv) resolutions of the board of directors of the Company
authorizing the execution and delivery by the Company of this Agreement,
the Certificates of Designations and the Shareholders' Agreements, and
the performance of the Company's obligations hereunder and thereunder;
(v) true and correct forms of stock certificates for the
Senior Preferred Stock, the Voting Preferred Stock and the Common Stock;
(vi) true and correct copies of all governmental and
third-party consents, approvals and filings required to be obtained or
made in order to consummate the transactions contemplated hereby; and
(vii) the incumbency of the officers of the Company.
(e) CERTIFICATES OF DESIGNATIONS. Each of the Certificates of
Designations shall have been filed with the Secretary of State of the State of
Delaware, and evidence thereof satisfactory to the Investor shall have been
provided to the Investor.
(f) SHAREHOLDERS' AGREEMENTS. The Initial Shareholders' Agreement or
the Additional Shareholders' Agreement, as the case may be, shall have been duly
executed and delivered by the Company.
(g) FINANCING COMMITMENTS. The Company shall have received:
(i) commitments, in form and substance satisfactory to the
Investor, with respect to the Bank Financing and the High Yield Bridge
Financing; and
(ii) a letter from DLJ, dated as of the Initial Closing Date,
in form and substance satisfactory to the Investor, addressed to the
Company and entitling the Investor to rely thereon, indicating that DLJ
is highly confident of the ability to consummate a Qualifying Public
Offering on or prior to June 30, 2000.
The Company shall have performed all of its obligations under the Bank Financing
commitment and the High Yield Bridge Financing commitment, including the payment
of all fees thereunder,
24
<PAGE>
required to be performed through the Initial Closing Date or the Additional
Closing Date, as the case may be.
(h) SPRINT AGREEMENT. None of the Initial Closing, the Additional
Closing, the Bank Financing or the High Yield Bridge Financing shall violate or
conflict with the terms of the Sprint Agreement.
(i) OPINION OF COUNSEL. The Investor shall have received from
Greenberg Traurig P.A., counsel to the Company, an opinion addressed to the
Investor, dated as of the Initial Closing Date or the Additional Closing Date,
as the case may be, in form and substance satisfactory to the Investor.
(j) REGISTRATION RIGHTS AGREEMENT. The Amended and Restated
Registration Rights Agreement, dated as of the date hereof, by and among the
Company, the Founders, the holders of Series A Preferred Stock listed on the
signature pages thereto, Paribas, BET and the Investor, shall have been duly
executed and delivered by the Company and the other parties thereto.
(k) AMENDMENT TO FOUNDERS STOCK AGREEMENT. The Second Amendment to
the Founders Stock Agreement, dated as of February 22, 2000, by and among the
Company and the Founders, shall have been duly executed and delivered by the
Company and the Founders.
(l) NO PROHIBITION. No governmental or regulatory body or court of
competent jurisdiction shall have enacted, issued, promulgated or enforced any
statute, rule, regulation, executive order, decree, judgement, preliminary or
permanent injunction or other order which is in effect and which prohibits,
enjoins or otherwise restrains the consummation of the transactions contemplated
hereby.
(m) CONSENTS. Each governmental or third party consent, approval or
filing required to be obtained or made and any waiting period required to have
expired in order to consummate the transactions contemplated by this Agreement
shall have been obtained, or made, as the case may be, and any such waiting
period shall have expired.
SECTION 6. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE INVESTOR. In
addition to the conditions set forth in Section 5 hereof, the obligation of the
Investor to purchase the Additional Shares at the Additional Closing is subject
to the satisfaction, on or prior to the Additional Closing Date, of the
following additional conditions:
(a) INITIAL PURCHASE CONSUMMATED. The Initial Purchase shall
previously have been consummated in accordance with the terms of this Agreement.
(b) NOTICE BY THE COMPANY. The Company shall have notified the
Investor in writing, no later than 5:00 p.m. New York City time on June 16,
2000, that it is requesting that the Investor purchase the Additional Shares.
(c) OTHER FINANCINGS CONSUMMATED. Prior to or simultaneously with the
Additional Closing:
(i) the Company shall have executed, or shall execute
simultaneously with the Additional Closing, a definitive credit agreement
with respect to the Bank Financing,
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<PAGE>
and the Term Loan B facility thereunder shall have been funded or shall
be funded simultaneously with the Additional Closing; and
(ii) the Company shall have consummated, or shall consummate
simultaneously with the Additional Closing, the High Yield Bridge
Financing or other high yield financing providing the Company with no
less than $125 million of gross proceeds (in either case, the "HIGH YIELD
FINANCING").
On the Additional Closing Date, the Company shall deliver to the Investor:
(iii) a letter, addressed to the Investor and executed on
behalf of the Company by a senior executive officer of the Company, in
form and substance satisfactory to the Investor, entitling the Investor
to rely on the representations and warranties of the Company contained in
the documentation relating to the Bank Financing and in the documentation
relating to the High Yield Financing; and
(iv) a letter, addressed to the Investor, from Greenberg
Traurig P.A., counsel to the Company, in form and substance satisfactory
to the Investor, entitling the Investor to rely on the opinions of such
counsel provided to the lender(s) of the Bank Financing and to the
underwriter(s) or initial purchaser(s) of the High Yield Financing.
(d) NO QUALIFYING PUBLIC OFFERING. The Company shall not have entered
into any underwriting, purchase or other similar agreement relating to a
registered public offering of equity securities generating at least $50 million
in gross proceeds to the Company (a "QUALIFYING PUBLIC OFFERING"), unless such
agreement has expired, has been terminated or otherwise is no longer in full
force and effect. The condition contained in this paragraph (d) shall in no way
relieve the Company from its obligations set forth in Section 4(a) hereof.
(e) CONDITION TO SPRINT AGREEMENT SATISFIED. The condition set forth
in Section 11.3.6 of the Sprint Agreement, as amended by Section 7 of Addendum I
to the Sprint Agreement and Section 2 of Addendum II to the Sprint Agreement,
shall have been satisfied, or shall be satisfied simultaneously with the
Additional Closing.
SECTION 7. TERMINATION. The obligation of the parties hereunder may
be terminated by the mutual written consent of the Company and the Investor. In
addition, the obligations of the parties hereunder will terminate automatically
without further action on the part of the Company or the Investor and without
liability on the part of the Company or the Investor (provided that neither
party is otherwise in breach or default of its obligations under this Agreement)
if (i) on or prior to the Additional Closing Date, the Company consummates a
Qualifying Public Offering, or (ii) the Additional Closing shall not have
occurred on or before June 30, 2000. Notwithstanding any termination of this
Agreement, the provisions of this Section 7 and of Section 4(e) and Sections 9
through 23 shall continue to be in full force and effect.
SECTION 8. REPURCHASE OF INITIAL SHARES. In the event that (a) the
Company does not consummate a Qualifying Public Offering on or prior to June
30, 2000 and (b) the Additional Closing has not occurred on or prior to June
30, 2000, then the Company is obligated to repurchase the Initial Shares no
later than June 30, 2001 for an aggregate repurchase price in cash of
$25,000,000, together with interest on such amount commencing on June 30,
2000 through the
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<PAGE>
repurchase date. The interest rate applicable to such repurchase shall
initially be 7% and shall increase by 2.5% each 90 days following June 30,
2000 until such repurchase is consummated.
SECTION 9. TRANSFER TAXES. The Company agrees that it will pay, and
will hold the Investor harmless from any and all liability with respect to, any
transfer, documentary or stamp taxes ("TRANSFER TAXES") that may be determined
to be payable in connection with the execution and delivery of this Agreement or
any modification, amendment or alteration of the terms or provisions of this
Agreement, and that it will similarly pay and hold the Investor harmless from
all such Transfer Taxes in respect of the issuance of any of the Shares to the
Investor.
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein shall survive the Initial
Closing and the Additional Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Investor. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall
constitute additional representations and warranties by the Company under this
Agreement.
SECTION 11. EXPENSES. The Company hereby agrees to pay its own
expenses, and to pay or promptly to reimburse the Investor for all out-of-pocket
expenses incurred by the Investor in connection with the transactions
contemplated by this Agreement, including, without limitation, fees and expenses
of counsel to the Investor.
SECTION 12. INDEMNIFICATION.
(a) GENERAL INDEMNIFICATION. The Company hereby agrees to indemnify,
defend and hold the Investor and its affiliates, and each of their respective
officers, directors, partners, managing directors, affiliates, employees,
agents, consultants, representatives, successors and assigns (each, an "INVESTOR
ENTITY") harmless from and against all Losses (as defined below) incurred or
suffered by an Investor Entity (whether incurred or suffered directly or
indirectly through ownership of Shares, Voting Preferred Shares or Conversion
Shares) arising out of, relating to, or resulting from any breach of any of the
representations, warranties, covenants or agreements made by it in this
Agreement or in any agreement, certificate or other instrument delivered
pursuant hereto including, without limitation, the Certificates of Designations
and the Shareholders' Agreements. For purposes of this Agreement, "LOSSES"
means all claims, losses (including, without limitation, losses of earnings),
liabilities, obligations, payments, damages (actual, punitive or consequential),
charges, judgements, fines, penalties, amounts paid in settlement, costs and
expenses (including, without limitation, interest which may be imposed in
connection therewith), costs and expenses of investigation, actions, suits,
proceedings, demands, assessments and fees, expenses and disbursements of
counsel, consultants and other experts.
(b) INDEMNIFICATION PRINCIPLES. Any indemnification payment by the
Company to the Investor pursuant to this Section 12 shall include an additional
amount so that the Investor does not, directly or indirectly, bear any portion
of such payment made by the Company on account of the Investor's direct or
indirect investment in the Company as contemplated by this Agreement. Any
payment by the Company to the Investor pursuant to this Section 12 shall be
treated for federal income tax purposes as a purchase price adjustment.
(c) CLAIM PROCEDURE. (i) Any Investor Entity seeking indemnification
under this Section 12 shall, promptly upon becoming aware of the facts
indicating that a claim for indemnification
27
<PAGE>
may be warranted, give a claim notice relating to such Loss (a "CLAIM
NOTICE") to the Company, which Claim Notice shall specify the nature of the
claim with reasonable specificity; PROVIDED, HOWEVER, that a failure or delay
in giving a Claim Notice shall not affect the obligation of the Company to
provide indemnification hereunder unless, and only to the extent that, the
Company is materially prejudiced thereby.
(ii) If an Investor Entity determines to seek indemnification
under this Section 12 with respect to Losses resulting from the assertion
of liability by a third party, the Company shall be entitled, if it so
elects by written notice delivered to such Investor Entity within 10 days
after receiving the applicable Claim Notice, to assume the defense
thereof with counsel satisfactory to such Investor Entity.
Notwithstanding the foregoing, such Investor Entity shall have the right
to employ its own counsel to participate in its defense in any such case,
but the fees and expenses of such counsel shall be at its own expense
unless (A) the Company shall not have employed counsel satisfactory to
the Investor Entity to represent the Investor Entity within a reasonable
time after delivery of the notice referred to in the preceding sentence
or (B) such Investor Entity shall reasonably determine that there is a
conflict of interest between such Investor Entity and the Company with
respect to such claim, in each of which case the fees and expenses of
such counsel shall be borne by the Company. The Company shall not,
without such Investor Entity's written consent, settle or compromise any
of such claims, or consent to entry of any judgement in respect thereof,
unless such settlement, compromise or consent includes as an
unconditional term thereof the giving by the claimant or the plaintiff to
such Investor Entity a release from all liability in respect of such
claims.
(iii) In the event that an Investor Entity asserts the
existence of a claim with respect to Losses other than claims resulting
from the assertion of liability by third parties, the prevailing party
shall be entitled to reimbursement of costs and expenses incurred in
connection with such claim, including, without limitation, attorney fees.
SECTION 13. REMEDIES. In case any one or more of the covenants or
agreements set forth in this Agreement shall have been breached by the Company,
the Investor may proceed to protect and enforce its rights either by suit in
equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Agreement, and to exercise
all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that each party may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the Company and the Investor and their respective
successors and assigns (to the extent permitted below). In addition, and
whether or not any express assignment has been made, except as otherwise
expressly stated in this Agreement, the provisions of this Agreement which are
for the benefit of the Investor as a purchaser or holder of Shares are also for
the benefit of, and enforceable by, any permitted subsequent holder of such
Shares. The parties acknowledge that, subject to compliance with applicable
securities laws, the Investor may transfer and assign all or a part of its
rights and obligations under this Agreement to one or more other parties with
the
28
<PAGE>
consent of the Company, which consent shall not be unreasonably withheld.
This Agreement shall not be assigned by the Company.
SECTION 15. ENTIRE AGREEMENT. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 16. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by fax, nationally
recognized overnight courier or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
such party to the other parties:
(a) if to the Company, to:
UbiquiTel Holdings, Inc.
3 Bala Plaza
Bala Cynwyd, PA 19004
Attn: Donald A. Harris
Fax: (610) 660-4920
with a copy to:
Greenberg Traurig P.A.
1750 Tysons Boulevard
Tysons Corner, Virginia 22102
Attn: Lee R. Marks
Fax: (703) 749-1301
(b) if to the Investor, to:
DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attn.: Andrew Rush and Tim White
Fax: (212) 892-7272
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attn.: Ian B. Blumenstein
Fax: (212) 751-4864
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
29
<PAGE>
SECTION 17. AMENDMENTS. The terms and provisions of this Agreement
may be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, pursuant to the written consent of the Company and the Investor.
SECTION 18. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
SECTION 19. HEADINGS. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
SECTION 20. DEFINITION OF PERSON. For purposes of this Agreement,
"PERSON" means any individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
SECTION 21. GOVERNING LAW; WAIVER OF JURY TRIAL. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without giving effect to the principles of conflicts of law. Each of
the parties hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of New York and of the
United States of America, in each case located in the County of New York, for
any action, proceeding or investigation in any court or before any governmental
authority ("LITIGATION") arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by registered mail to its respective
address set forth in this Agreement shall be effective service of process for
any Litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any Litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United States
of America, in each case located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such Litigation brought in any such court has been brought
in an inconvenient forum. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO
TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 22. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability, shall not render invalid or
unenforceable any other provision of this Agreement.
SECTION 23. NO PARTNERSHIP. The obligations of each of the parties
to this Agreement are several and not joint. Nothing in this Agreement shall
imply or be deemed to imply a partnership, joint venture or other relationship
between the parties.
30
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
UBIQUITEL HOLDINGS, INC.
By: _______________________________
Name:
Title:
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: DLJ MERCHANT BANKING II, INC.,
its Managing General Partner
By: _______________________________
Name:
Title:
31
<PAGE>
EXHIBIT 10.16
UBIQUITEL HOLDINGS, INC.
2000 EQUITY INCENTIVE PLAN
<PAGE>
UBIQUITEL HOLDINGS, INC.
2000 EQUITY INCENTIVE PLAN
<TABLE>
<CAPTION>
<S> <C>
1. Purpose..................................................................................................1
2. Definitions..............................................................................................1
3. Administration...........................................................................................4
(a) Authority of the Committee......................................................................4
(b) Manner of Exercise of Committee Authority.......................................................4
(c) Limitation of Liability.........................................................................5
4. Stock Subject to Plan....................................................................................5
(a) Limitation on Overall Number of Shares Subject to Awards........................................5
(b) Application of Limitations......................................................................5
5. Eligibility; Per-Person Award Limitations................................................................5
6. Specific Terms of Awards.................................................................................6
(a) General.........................................................................................6
(b) Options.........................................................................................6
(c) Stock Appreciation Rights.......................................................................7
(d) Restricted Stock................................................................................8
(e) Deferred Stock..................................................................................9
(f) Bonus Stock and Awards in Lieu of Obligations..................................................10
(g) Dividend Equivalents...........................................................................10
(h) Other Stock-Based Awards.......................................................................10
7. Certain Provisions Applicable to Awards.................................................................11
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.........................................11
(b) Term of Awards.................................................................................11
(c) Form and Timing of Payment Under Awards; Deferrals.............................................11
(d) Exemptions from Section 16(b) Liability........................................................11
8. Performance and Annual Incentive Awards.................................................................12
(a) Performance Conditions.........................................................................12
(b) Performance Awards Granted to Designated Covered Employees.....................................12
(c) Annual Incentive Awards Granted to Designated Covered Employees................................14
(d) Written Determinations.........................................................................15
(e) Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m).......................15
9. Change in Control.......................................................................................16
(a) Effect of "Change in Control.".................................................................16
(b) Definition of "Change in Control...............................................................16
(c) Definition of "Change in Control Price.".......................................................17
10. General Provisions......................................................................................17
(A) Compliance With Legal and Other Requirements...................................................17
(b) Limits on Transferability; Beneficiaries.......................................................18
(c) Adjustments....................................................................................18
(d) Taxes..........................................................................................19
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(e) Changes to the Plan and Awards.................................................................19
(f) Limitation on Rights Conferred Under Plan......................................................20
(g) Unfunded Status of Awards; Creation of Trusts..................................................20
(h) Nonexclusivity of the Plan.....................................................................20
(i) Payments in the Event of Forfeitures; Fractional Shares........................................20
(j) Governing Law..................................................................................20
(k) Plan Effective Date and Stockholder Approval; Termination of Plan..............................20
</TABLE>
(ii)
<PAGE>
UBIQUITEL HOLDINGS, INC.
2000 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of this 2000 Equity Incentive Plan (the "Plan")
is to assist UbiquiTel Holdings, Inc. (the "Company") and its subsidiaries in
attracting, motivating, retaining and rewarding high-quality executives and
other employees, officers, Directors and independent contractors by enabling
such persons to acquire or increase a proprietary interest in the Company in
order to strengthen the mutuality of interests between such persons and the
Company's stockholders, and providing such persons with annual and long term
performance incentives to expend their maximum efforts in the creation of
shareholder value. The Plan is also intended to qualify certain compensation
awarded under the Plan for tax deductibility under Section 162(m) of the Code to
the extent deemed appropriate by the Committee of the Board of Directors of the
Company unless otherwise stated, all references to section numbers are to
sections of this Plan.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1.
(a) "Annual Incentive Award" means a conditional right granted
to a Participant under Section 8(c) to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest, granted to a
Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means Change in Control as defined
with related terms in Section 9.
<PAGE>
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c).
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to
administer the Plan. The Committee shall consist of at least two directors, each
member of which shall be (i) a "non-employee director" within the meaning of
Rule 16b-3 under the Exchange Act, unless administration of the Plan by
"non-employee directors" is not then required in order for exemptions under Rule
16b-3 to apply to transactions under the Plan, and (ii) an "outside director"
within the meaning of Section 162(m) of the Code, unless administration of the
Plan by "outside directors" is not then required in order to qualify for tax
deductibility under Section 162(m) of the Code.
(j) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i).
(k) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e).
(l) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(m) "Director" means a member of the Board.
(n) "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.
(o) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(p) "Effective Date" means the effective date of the Plan,
which shall be February 1, 2000.
(q) "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
employees of the Company or of any Subsidiary, and independent contractors with
the Company or any Subsidiary. The foregoing notwithstanding, only employees of
the Company or any Subsidiary shall be Eligible Persons for purposes of
receiving any Incentive Stock Options. An employee on leave of absence may be
considered as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.
(r) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
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(s) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.
(t) "Fair Market Value" means the fair market value of Stock
(with no discount for minority ownership or lack of liquidity), Awards or other
property as determined by the Committee or the Board, or under procedures
established by the Committee or the Board. Unless otherwise determined by the
Committee or the Board, the Fair Market Value of Stock as of any given date if
the Company is publicly-held as of such date, shall be the closing sale price
per share reported on a consolidated basis for stock listed on the principal
stock exchange or market on which Stock is traded on the date as of which such
value is being determined or, if there is no sale on that date, then on the last
previous day on which a sale was reported.
(u) "Incentive Stock Option" or "ISO" means any Option
intended to be designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(v) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii).
(w) "Limited SAR" means a right granted to a Participant under
Section 6(c).
(x) "Option" means a right granted to a Participant under
Section 6(b), to purchase Stock or other Awards at a specified price during
specified time periods.
(y) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h).
(z) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one of the
other corporations in the chain.
(aa) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.
(bb) "Performance Award" means a right, granted to an Eligible
Person under Section 8, to receive Awards based upon performance criteria
specified by the Committee or the Board.
(cc) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(dd) "Restricted Stock" means Stock granted to a Participant
under Section 6(d), that is subject to certain restrictions and to a risk of
forfeiture.
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(ee) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and
Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act
(ff) "Stock" means the Company's Common Stock, par value
$0.001 per share, and such other securities as may be substituted (or
resubstituted) for Stock pursuant to Section 10(c).
(gg) "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c).
(hh) "Subsidiary" means UbiquiTel LLC, and any other
corporation or other entity in which the Company has a direct or indirect
ownership interest of 50% or more of the total combined voting power of the then
outstanding securities or interests of such corporation or other entity entitled
to vote generally in the election of directors or in which the Company has the
right to receive 50% or more of the distribution of profits or 50% or more of
the assets on liquidation or dissolution.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered
by the Committee; provided, however, that except as otherwise expressly provided
in this Plan or in order to comply with Code Section 162(m) or Rule 16b-3 under
the Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee or the Board may deem necessary or advisable
for the administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person in a manner
consistent with the treatment of other Eligible Persons.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The Committee,
and not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and stockholders. The express grant of any
specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may delegate
to
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officers or managers of the Company or any subsidiary, or committees
thereof, the authority, subject to such terms as the Committee or the Board
shall determine, (i) to perform administrative functions, (ii) with respect
to Participants not subject to Section 16 of the Exchange Act, to perform
such other functions as the Committee or the Board may determine, and (iii)
with respect to Participants subject to Section 16, to perform such other
functions of the Committee or the Board as the Committee or the Board may
determine to the extent performance of such functions will not result in the
loss of an exemption under Rule 16b-3 otherwise available for transactions by
such persons, in each case to the extent permitted under applicable law and
subject to the requirements set forth in Section 8(d). The Committee or the
Board may appoint agents to assist it in administering the Plan.
(c) LIMITATION OF LIABILITY. The Committee and the Board, and
each member thereof, shall be entitled, in good faith, to rely or act upon any
report or other information furnished to him or her by any executive officer,
other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, counsel, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.
4. STOCK SUBJECT TO PLAN.
(a) LIMITATION ON OVERALL NUMBER OF SHARES SUBJECT TO AWARDS.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with Awards
under the Plan, including the number of shares of Stock which may be issued
pursuant to ISOs, shall be the sum of (i) 2,040,000, plus (ii) the number of
shares with respect to Awards previously granted under the Plan that terminate
without being exercised, expire, are forfeited or canceled, and the number of
shares of Stock that are surrendered in payment of any Awards or any tax
withholding with regard thereto. Any shares of Stock delivered under the Plan
may consist, in whole or in part, of authorized and unissued shares or treasury
shares.
(b) APPLICATION OF LIMITATIONS. The limitation contained in
Section 4(a) shall apply not only to Awards that are settleable by the delivery
of shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee or the Board may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.
5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted
under the Plan only to Eligible Persons. Within three years from the Effective
Date, the Committee shall determine, and submit to the Company's shareholders
for approval, the maximum number of shares of Stock that may be granted, and the
maximum amount that may be earned as an Annual
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Incentive Award or other cash Award, in each fiscal year during any
part of which the Plan is in effect by an Eligible Person.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee or the Board may impose
on any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive or modify, at any time,
any term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee or the Board is authorized to require other
forms of consideration under the Plan, no consideration other than services may
be required for the grant (but not the exercise) of any Award.
(b) OPTIONS. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of
Stock purchasable under an Option shall be determined by the
Committee or the Board, provided that such exercise price
shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on the date of
grant of the Option and shall not, in any event, be less than
the par value of a share of Stock on the date of grant of such
Option. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation and
an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less
than 110% of the Fair Market Value of the Stock on the date
such Incentive Stock Option is granted.
(ii) TIME AND METHOD OF EXERCISE. The Committee or
the Board shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole
or in part (including based on achievement of performance
goals and/or future service requirements), the time or times
at which Options shall cease to be or become exercisable
following termination of employment or upon other conditions,
the methods by which such exercise price may be paid or deemed
to be paid (including in the discretion of the Committee or
the Board a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Stock, other
Awards or awards granted under other plans of the Company or
any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a
deferred basis), and
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the methods by or forms in which Stock will be delivered or deemed to
be delivered to Participants.
(III) ISOS. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of
Section 422 of the Code. No term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify
either the Plan or any ISO under Section 422 of the Code,
unless the Participant has first requested the change that
will result in such disqualification. Thus, if and to the
extent required to comply with Section 422 of the Code,
Options granted as Incentive Stock Options shall be subject to
the following special terms and conditions:
(A) the Option shall not be exercisable more
than ten years after the date such Incentive Stock Option is
granted; provided, however, that if a Participant owns or is
deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be
(to the extent required by the Code at the time of the grant)
for no more than five years from the date of grant; and
(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the Stock with respect to which Incentive Stock
Options granted under the Plan and all other option plans of
the Company or its Parent Corporation during any calendar year
exercisable for the first time by the Participant during any
calendar year shall not (to the extent required by the Code at
the time of the grant) exceed $100,000.
(c) STOCK APPRECIATION RIGHTS. The Committee and the Board
each is authorized to grant SAR's to Participants on the following terms and
conditions:
(i) RIGHT TO PAYMENT. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of
one share of Stock on the date of exercise (or, in the case of
a "Limited SAR" that may be exercised only in the event of a
Change in Control, the Fair Market Value determined by
reference to the Change in Control Price, as defined under
Section 9(c)), over (B) the grant price of the SAR as
determined by the Committee or the Board. The grant price of
an SAR shall not be less than the Fair Market Value of a share
of Stock on the date of grant except as provided under Section
7(a).
(ii) OTHER TERMS. The Committee or the Board shall
determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be
exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the
time or
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times at which SARs shall cease to be or become
exercisable following termination of employment or upon
other conditions, the method of exercise, method of
settlement, form of consideration payable in settlement,
method by or forms in which Stock will be delivered or
deemed to be delivered to Participants, whether or not a
SAR shall be in tandem or in combination with any other
Award, and any other terms and conditions of any SAR.
Limited SARs that may only be exercised in connection
with a Change in Control or other event as specified by
the Committee or the Board, may be granted on such terms,
not inconsistent with this Section 6(c), as the Committee
or the Board may determine. SARs and Limited SARs may be
either freestanding or in tandem with other Awards.
(d) RESTRICTED STOCK. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee or
the Board may impose, which restrictions may lapse separately
or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or
future service requirements), in such installments or
otherwise, as the Committee or the Board may determine at the
date of grant or thereafter. Except to the extent restricted
under the terms of the Plan and any Award agreement relating
to the Restricted Stock, a Participant granted Restricted
Stock shall have all of the rights of a stockholder, including
the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee or
the Board). During the restricted period applicable to the
Restricted Stock, subject to Section 10(b) below, the
Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the
Participant.
(ii) FORFEITURE. Except as otherwise determined by
the Committee or the Board at the time of the Award, upon
termination of a Participant's employment during the
applicable restriction period, the Participant's Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the
Committee or the Board may provide, by rule or regulation or
in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock
granted under the Plan may be evidenced in such manner as the
Committee or the Board shall determine. If certificates
representing Restricted Stock are registered in the name of
the Participant, the Committee or the Board may require that
such certificates bear an
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appropriate legend referring to the restrictions
applicable to such Restricted Stock, that the Company
retain physical possession of the certificates, and that
the Participant deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.
(iv) DIVIDENDS AND SPLITS. As a condition to the
grant of an Award of Restricted Stock, the Committee or the
Board may require that any cash dividends paid on a share of
Restricted Stock be automatically reinvested in additional
shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined
by the Committee or the Board, Stock distributed in connection
with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has
been distributed.
(e) DEFERRED STOCK. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:
(i) AWARD AND RESTRICTIONS. Satisfaction of an Award
of Deferred Stock shall occur upon expiration of the deferral
period specified for such Deferred Stock by the Committee or
the Board (or, if permitted by the Committee or the Board, as
elected by the Participant). In addition, Deferred Stock shall
be subject to such restrictions (which may include a risk of
forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on
achievement of performance goals and/or future service
requirements), separately or in combination, in installments
or otherwise, as the Committee or the Board may determine.
Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee or the
Board at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of
Deferred Stock carries no voting or dividend or other rights
associated with share ownership.
(ii) FORFEITURE. Except as otherwise determined by
the Committee or the Board, upon termination of a
Participant's employment during the applicable deferral period
thereof to which forfeiture conditions apply (as provided in
the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee
or the Board may provide, by rule or regulation or in any
Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred
Stock shall be waived in whole or in part in the event of
terminations resulting
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from specified causes, and the Committee or the Board
may in other cases waive in whole or in part the forfeiture
of Deferred Stock.
(iii) DIVIDEND EQUIVALENTS. Unless otherwise
determined by the Committee or the Board at date of grant,
Dividend Equivalents on the specified number of shares of
Stock covered by an Award of Deferred Stock shall be either
(A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having
a Fair Market Value equal to the amount of such dividends, or
(B) deferred with respect to such Deferred Stock and the
amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or
permit the Participant to elect.
(f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.
(g) DIVIDEND EQUIVALENTS. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.
(h) OTHER STOCK-BASED AWARDS. The Committee and the Board each
is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the
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Committee or the Board shall determine. Cash awards, as an element of
or supplement to any other Award under the Plan, may also be granted pursuant
to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Subsidiary, or any business entity to be acquired by
the Company or a Subsidiary, or any other right of a Participant to receive
payment from the Company or any Subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee or the
Board shall require the surrender of such other Award or award in consideration
for the grant of the new Award. In addition, Awards may be granted in lieu of
cash compensation, including in lieu of cash amounts payable under other plans
of the Company or any subsidiary, in which the value of Stock subject to the
Award is equivalent in value to the cash compensation (for example, Deferred
Stock or Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be exercised is
equal to the Fair Market Value of the underlying Stock minus the value of the
cash compensation surrendered (for example, Options granted with an exercise
price "discounted" by the amount of the cash compensation surrendered).
(b) TERM OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee or the Board; but the term of any
Option or SAR shall not exceed ten years (or such shorter term as may be
required in respect of an ISO under Section 422 of the Code).
(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee or
the Board shall determine, including, without limitation, cash, Stock that have
been held for at least 6 months, other Awards or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Committee or the Board
or upon occurrence of one or more specified events (in addition to a Change in
Control). Installment or deferred payments may be required by the Committee or
the Board (subject to Section 10(e)) or permitted at the election of the
Participant on terms and conditions established by the Committee or the Board.
Payments may include, without limitation, provisions for the payment or
crediting of a reasonable interest rate on installment or deferred payments or
the grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
(d) EXEMPTIONS FROM SECTION 16(B) LIABILITY. It is the intent
of the Company that this Plan comply in all respects with applicable provisions
of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither
the grant of any Awards to nor other transaction by
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a Participant who is subject to Section 16 of the Exchange Act is
subject to liability under Section 16(b) thereof (except for transactions
acknowledged in writing to be non-exempt by such Participant). Accordingly,
if any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such
transaction, such provision will be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 or Rule
16a-1(c)(3) so that such Participant shall avoid liability under Section
16(b). In addition, the purchase price of any Award conferring a right to
purchase Stock shall be not less than any specified percentage of the Fair
Market Value of Stock at the date of grant of the Award then required in
order to comply with Rule 16b-3.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) PERFORMANCE CONDITIONS. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). If and to the extent required under Code Section 162(m), any
power or authority relating to a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.
(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section 8(b).
(i) PERFORMANCE GOALS GENERALLY. The performance
goals for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of
performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels
of performance targeted by the Committee result in the
achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of
the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
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(ii) BUSINESS CRITERIA. One or more of the following
business criteria for the Company, on a consolidated basis,
and/or specified Subsidiaries or business units of the Company
(except with respect to the total stockholder return and
earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such
Performance Awards (except that the Committee may adopt
additional business criteria or amend the listed criteria
provided that, within three years from the Effective Date, it
submits such additional or amended criteria to the Company's
shareholders for approval): (1) total stockholder return; (2)
such total stockholder return as compared to total return (on
a comparable basis) of a publicly available index such as, but
not limited to, the Standard & Poor's 500 Stock; (3) net
income; (4) pretax earnings; (5) earnings before interest
expense, taxes, depreciation and amortization; (6) pretax
operating earnings after interest expense and before bonuses,
service fees, and extraordinary or special items; (7)
operating margin; (8) earnings per share; (9) return on
equity; (10) return on capital; (11) return on investment;
(12) operating earnings; (13) working capital or inventory;
(14) ratio of debt to stockholders' equity; (15) control of
churn; (16) increase in number of subscribers (measured by
percentages, ratios, comparisons, or absolute numbers); (17)
control of operating costs; and (18) meeting build-out and
coverage POPs targets. One or more of the foregoing business
criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a
Covered Employee under Section 8(c) hereof that are intended
to qualify as "performanced-based compensation under Code
Section 162(m).
(iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING
PERFORMANCE GOALS. Achievement of performance goals in respect
of such Performance Awards shall be measured over a
performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later
than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date
as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) PERFORMANCE AWARD POOL. The Committee may
establish a Performance Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in
connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during
the given performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may
specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount
which need not bear a strictly mathematical relationship to
such business criteria.
13
<PAGE>
(v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid
or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or
settlement of Performance Awards.
(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES. If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated by the
Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Annual Incentive Award shall be contingent
upon achievement of preestablished performance goals and other terms set forth
in this Section 8(c).
(i) ANNUAL INCENTIVE AWARD POOL. The Committee may
establish an Annual Incentive Award pool, which shall be an
unfunded pool, for purposes of measuring Company performance
in connection with Annual Incentive Awards. The amount of such
Annual Incentive Award pool shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii)
during the given performance period, as specified by the
Committee in accordance with Section 8(b)(iii). The Committee
may specify the amount of the Annual Incentive Award pool as a
percentage of any such business criteria, a percentage thereof
in excess of a threshold amount, or as another amount which
need not bear a strictly mathematical relationship to such
business criteria.
(ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later
than the end of the 90th day of each fiscal year, or at such
other date as may be required or permitted in the case of
Awards intended to be "performance-based compensation" under
Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool
established by such date under Section 8(c)(i) or as
individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii) in
the given performance year, as specified by the Committee; in
other cases, such amount shall be based on such criteria as
shall be established by the Committee. In all cases, the
maximum Annual Incentive Award of any Participant shall be
subject to the limitation set forth in Section 5.
14
<PAGE>
(iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the
end of each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award pool, and
the maximum amount of potential Annual Incentive Award payable
to each Participant in the Annual Incentive Award pool, or (B)
the amount of potential Annual Incentive Award otherwise
payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any
Participant as an Annual Incentive Award shall be reduced from
the amount of his or her potential Annual Incentive Award,
including a determination to make no Award whatsoever. The
Committee shall specify the circumstances in which an Annual
Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end
of a fiscal year or settlement of such Annual Incentive Award.
(d) WRITTEN DETERMINATIONS. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
8(b), and the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards under
Section 8(c), shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). The Committee may not delegate any
responsibility relating to such Performance Awards or Annual Incentive Awards if
and to the extent required to comply with Code Section 162(m).
(e) STATUS OF SECTION 8(b) AND SECTION 8(c) AWARDS UNDER CODE
SECTION 162(M). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.
15
<PAGE>
9. CHANGE IN CONTROL.
(a) EFFECT OF "CHANGE IN CONTROL." If and to the extent
provided in the Award, in the event of a "Change in Control," as defined in
Section 9(b), the following provisions shall apply:
(i) Any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully
exercisable and vested as of the time of the Change in
Control, subject only to applicable restrictions set forth in
Section 10(a);
(ii) Limited SARs (and other SARs if so provided by
their terms) shall become exercisable for amounts, in cash,
determined by reference to the Change in Control Price;
(iii) The restrictions, deferral of settlement, and
forfeiture conditions applicable to any other Award granted
under the Plan shall lapse and such Awards shall be deemed
fully vested as of the time of the Change in Control, except
to the extent of any waiver by the Participant and subject to
applicable restrictions set forth in Section 10(a) hereof; and
(iv) With respect to any such outstanding Award
subject to achievement of performance goals and conditions
under the Plan, such performance goals and other conditions
will be deemed to be met if and to the extent so provided by
the Committee in the Award agreement relating to such Award.
(b) DEFINITION OF "CHANGE IN CONTROL. A "Change in Control"
shall be deemed to have occurred upon:
(i) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or other form of corporate transaction or
series of transactions(but not including a public offering of stock registered
under the Securities Act of 1933, in each case, with respect to which persons
who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a liquidation or
dissolution of the Company or the sale of all or substantially all of the assets
of the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale (any such event being
referred to as a "Corporate Transaction") is subsequently abandoned);
(ii) Individuals who, as of the date on which the
Award is granted, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date on which the Award was granted whose
election, or nomination for election by the Company's
16
<PAGE>
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the
Incumbent Board; or
(iii) the acquisition (other than from the Company)
by any person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of more than 30% of either the then
outstanding shares of the Company's Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally in
the election of directors (hereinafter referred to as the ownership of a
"Controlling Interest") excluding, for this purpose, any acquisitions by (1) the
Company or its Subsidiaries, (2) any person, entity or "group" that as of the
date on which the Award is granted owns beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling
Interest or (3) any employee benefit plan of the Company or its Subsidiaries.]
(c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) or any liquidation of shares following a
sale of substantially all of the assets of the Company, or (ii) the highest Fair
Market Value per share at any time during the 60-day period preceding and the
60-day period following the Change in Control.
10. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Company
may, to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Stock or other Company securities are listed or
quoted, or compliance with any other obligation of the Company, as the Committee
or the Board, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
17
<PAGE>
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.
(b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or
other right or interest of a Participant under the Plan, including any Award or
right which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such Participant
to any party (other than the Company or a Subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers and exercises are permitted by the Committee or the Board
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee or the Board may impose thereon, and further
subject to any prohibitions or restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such Participant,
except as otherwise determined by the Committee or the Board, and to any
additional terms and conditions deemed necessary or appropriate by the Committee
or the Board.
(c) ADJUSTMENTS. If any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that a
substitution or adjustment is determined by the Committee or the Board to be
appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Committee or the Board shall, in such
manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual Incentive
Awards and any Annual Incentive Award pool or performance goals relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any Subsidiary
or any business unit, or the financial statements of the Company or any
Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the
18
<PAGE>
Committee's assessment of the business strategy of the Company, any
Subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and
any other circumstances deemed relevant; provided that no such adjustment
shall be authorized or made if and to the extent that such authority or the
making of such adjustment would cause Options, SARs, Performance Awards
granted under Section 8(b) or Annual Incentive Awards granted under Section
8(c) hereof to Participants designated by the Committee as Covered Employees
and intended to qualify as "performance-based compensation" under Code
Section 162(m) and the regulations thereunder to otherwise fail to qualify as
"performance-based compensation" under Code Section 162(m) and regulations
there under.
(d) TAXES. The Company and any Subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan, without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to stockholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive
any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the
right so that pooling of interest accounting shall be available, including
the substitution of Stock having a Fair Market Value equal to the cash
otherwise payable hereunder for the right which caused the transaction to be
ineligible for pooling of interest accounting.
19
<PAGE>
(f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Subsidiary; (ii) interfering in
any way with the right of the Company or a Subsidiary to terminate any Eligible
Person's or Participant's employment at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).
(i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the State of Delaware without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL; TERMINATION
OF PLAN. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12
20
<PAGE>
months of its adoption by the Board by stockholders of the Company eligible
to vote in the election of directors, by a vote sufficient to meet the
requirements of Code Sections 162(m) and 422. Awards may be granted subject
to stockholder approval, but may not be exercised or otherwise settled in the
event stockholder approval is not obtained. The Plan shall terminate at such
time as no shares of Stock remain available for issuance under the Plan and
the Company has no further rights or obligations with respect to outstanding
Awards under the Plan.
21
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF UBIQUITEL INC.
Name State of Incorporation
---- ----------------------
UbiquiTel Operating Company Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this registration statement on Form S-1 of UbiquiTel Inc.
Arthur Andersen LLP
New York, New York
March 10, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Spokane District
(wholly owned by Sprint Spectrum L.P.) Selected Financial Data" and "Experts"
and to the use of our report dated February 29, 2000, with respect to the
financial statements of the Spokane District (wholly owned by Sprint Spectrum
L.P.), included in the Registration Statement (Form S-1) and related
Prospectus of UbiquiTel Inc. dated March 10, 2000.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Kansas City, Missouri
March 10, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED BALANCE SHEET OF UBIQUITEL INC. AS OF DECEMBER 31, 1999 AND THE
RELATED AUDITED STATEMENT OF OPERATIONS FOR THE PERIOD FROM INCEPTION (SEPTEMBER
29, 1999) TO DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> SEP-29-1999
<PERIOD-END> DEC-31-1999
<CASH> 23,959,190
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,994,826
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 6,143,627
<BONDS> 5,811,869
0
17,009
<COMMON> 19,417
<OTHER-SE> 18,199,488
<TOTAL-LIABILITY-AND-EQUITY> 30,191,410
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,958,189
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,902
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,987,091)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,987,091)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
