<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 2000
REGISTRATION NO. 333-32236
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 3
TO
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 1300
MIAMI, FLORIDA 33131 1750 TYSONS BOULEVARD DALLAS, TEXAS 75201
TELEPHONE NO.: (305) 579-0500 TYSONS CORNER, VIRGINIA 22102 TELEPHONE NO.: (214) 746-7700
FACSIMILE NO.: (305) 579-0717 TELEPHONE NO.: (703) 749-1300 FACSIMILE NO.: (214) 746-7777
FACSIMILE NO.: (703) 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>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED SECURITY(2) PRICE(2) REGISTRATION FEE(2)
<S> <C> <C> <C> <C>
Common Stock, par value $0.001..... 16,675,000(1) $14.00 $233,450,000 $61,631(3)
</TABLE>
(1) Includes 2,175,000 shares that are issuable upon exercise of the
underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933.
(3) Of such registration fee, $56,925 was previously paid to the Securities and
Exchange Commission.
------------------------------
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 MAY 15, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 2000
[LOGO]
14,500,000 SHARES OF COMMON STOCK
OF
UBIQUITEL INC.
- ---------------------------------------------------------
<TABLE>
<S> <C>
THE OFFERING:
- - We are offering 14,500,000 shares of our
common stock.
- - We have granted the underwriters an option
to purchase an additional 2,175,000 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 $12.00 and $14.00 per
share.
- - Closing: , 2000.
PROPOSED SYMBOL & MARKET:
- - We have applied for listing on the Nasdaq
National Market under the symbol "UPCS."
</TABLE>
<TABLE>
----------------------------------------------------------------------------------
Per Share Total
----------------------------------------------------------------------------------
<S> <C> <C>
Public offering price: $ $
Underwriting fees(1):
Proceeds to UbiquiTel Inc.:
----------------------------------------------------------------------------------
</TABLE>
(1) Plus the other underwriting compensation described under
"Underwriting."
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]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................. 1
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 Historical Consolidated
Financial and Operating Data..... 34
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 36
Business........................... 46
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Sprint PCS Agreements.......... 71
Description of Certain
Indebtedness..................... 85
Management......................... 90
Principal Stockholders............. 101
Certain Transactions............... 103
Regulation of the Wireless
Telecommunications Industry...... 108
Description of Capital Stock....... 113
Shares Eligible for Future Sale.... 121
Underwriting....................... 123
Legal Matters...................... 127
Experts............................ 127
Available Information.............. 127
Index to Financial Statements...... F-1
</TABLE>
<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.
UBIQUITEL
OVERVIEW
We are the exclusive provider of Sprint PCS digital wireless personal
communications services, generally known as PCS, to four 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. We are among 18 companies, which we believe are unrelated to each
other and to Sprint PCS, that have entered into management agreements with
Sprint PCS to provide Sprint PCS products and services in markets throughout the
United States. 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. However, Sprint PCS does not currently offer PCS services
in every state in the United States.
The majority of our network will cover portions of California, Nevada,
Washington, Idaho, Montana, Utah, Indiana and Kentucky. We have commenced
limited operations in one of our markets, which together with our recent
acquisition of the Spokane, Washington market from Sprint PCS, cover
approximately 500,000 residents. We currently have approximately 9,000
subscribers. We expect to cover approximately 55% of the resident population in
our markets by the end of 2001 and expect to cover approximately 63% upon
completion of our build-out.
We are a development stage company with very limited operations and
revenues, significant losses and substantial future capital requirements. From
our inception on September 29, 1999 through December 31, 1999, we incurred
losses of approximately $2.0 million. On a pro forma basis, after giving effect
to various transactions described in "Unaudited Pro Forma Condensed Consolidated
Financial Data," losses from our inception through December 31, 1999 would have
been approximately $47.1 million and loss before extraordinary item would have
been approximately $42.0 million for the three months ended March 31, 2000. We
expect to continue 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.
1
<PAGE>
BUSINESS STRATEGY
Our business strategy includes the following elements:
- Capitalize on affiliation with Sprint PCS;
- Capitalize on experienced management team;
- Execute optimal network build-out plan;
- Utilize strategic third party relationships in network build-out;
- Implement effective operating structure with a focus on customer service;
and
- Focus on midsize and smaller markets.
BACKGROUND
We were organized on September 29, 1999 as a corporation under the laws of
Delaware. Our address and telephone number are 1 Bala Plaza, Suite 402, Bala
Cynwyd, Pennsylvania 19004, (610) 660-9510.
2
<PAGE>
SUMMARY FINANCIAL DATA
(In thousands)
UBIQUITEL INC.
The selected summary financial data presented below for the period from
September 29, 1999 (inception) through December 31, 1999, are derived from the
audited consolidated financial statements of UbiquiTel Inc. and subsidiaries.
The selected summary financial data presented below as of and for the
three-month period ended March 31, 2000 have been derived from unaudited
consolidated financial statements of UbiquiTel Inc. and its subsidiaries, which
have been prepared on the same basis as UbiquiTel Inc. and subsidiaries audited
financial statements and, in the opinion of UbiquiTel, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for these
periods. The results of operations for the three months ended March 31, 2000 are
not necessarily indicative of the results for the full year. The data set forth
below should be read in conjunction with UbiquiTel Inc.'s consolidated financial
statements and accompanying notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
FROM
SEPTEMBER 29,
1999 (INCEPTION) THREE MONTHS
TO DECEMBER 31, ENDED
1999 MARCH 31, 2000
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.............................................. $ -- $ 69
Expenses:
General and administrative expenses....................... 554 907
Non-cash compensation expense for general and
administrative matters.................................. 1,395 --
Non-cash compensation related to stock options granted to
employees............................................... -- 189
Interest expense (income)................................. 29 (35)
------- -------
Loss before extraordinary item.............................. (1,978) (992)
======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 2000
---------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $33,729
Total assets.............................................. 52,363
Long-term debt............................................ 5,812
Total stockholders' equity................................ 37,487
</TABLE>
3
<PAGE>
SPOKANE DISTRICT
The selected summary financial data presented below for each of the three
years in the period ended December 31, 1999 are derived from the audited
financial statements of the Spokane District (wholly owned by Sprint Spectrum
L.P.), the predecessor of UbiquiTel Inc. and subsidiaries. The selected summary
financial data presented below as of March 31, 2000 and for the three-month
periods ended March 31, 1999 and March 31, 2000 have been derived from unaudited
financial statements of the Spokane District (wholly owned by Sprint Spectrum
L.P.), the predecessor of UbiquiTel Inc. and subsidiaries, which have been
prepared on the same basis as the Spokane District's audited financial
statements and, in the opinion of Sprint Spectrum L.P.'s management, include all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of the financial position and results of operations for these
periods. The results of operations for the three months ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the full
year. The data set forth below should be read in conjunction with the Spokane
District's financial statements and accompanying notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............................................ $ 1,246 $ 3,280 $ 5,625 $ 1,136 $ 1,574
Expenses:
Cost of service and equipment......................... 2,903 3,970 5,046 747 779
Selling, general and administrative expense........... 8,168 4,470 5,419 997 1,214
Depreciation.......................................... 2,968 3,112 3,471 828 931
------- ------- ------- ------- -------
Expenses in excess of net revenues...................... $12,793 $ 8,272 $ 8,311 $ 1,436 $ 1,350
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
2000
---------------
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Total assets purchased.................................... $19,025
</TABLE>
4
<PAGE>
UBIQUITEL INC. ON A PRO FORMA BASIS
The unaudited selected summary pro forma financial data presented below for
the period ended December 31, 1999 and the three months ended March 31, 2000,
and as of March 31, 2000, gives effect to various transactions described in
"Unaudited Pro Forma Condensed Consolidated Financial Data." The data set forth
below should be read in conjunction with UbiquiTel Inc.'s and the Spokane
District's financial statements and accompanying notes, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Unaudited
Pro Forma Condensed Consolidated Financial Data" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999 2000
-------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.............................................. 5,625 1,643
Operating loss............................................ (11,059) (2,577)
Loss before extraordinary item............................ (47,093) (11,652)
<CAPTION>
AS OF MARCH 31, 2000
---------------------------
(UNAUDITED)
BALANCE SHEET DATA:
<S> <C> <C> <C>
Cash and cash equivalents................................. 382,946
Total assets.............................................. 452,348
Total liabilities and stockholders' equity................ 452,348
</TABLE>
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered........................................ 14,500,000 shares
Common Stock to be Outstanding After the Offering........... 64,763,604 shares
Proposed Nasdaq National Market Symbol...................... "UPCS"
</TABLE>
Unless otherwise indicated, all information in this prospectus:
- reflects the conversion of all outstanding shares of preferred stock into
shares of common stock and the cancellation of our non-voting common stock
upon the closing of this offering;
- gives effect to a two-for-one stock split to be effective as of the date
of this prospectus;
- assumes no exercise of the underwriters' over-allotment option;
- excludes 4,080,000 shares of common stock reserved for issuance under our
2000 equity incentive plan including outstanding options to purchase
1,215,000 shares of our common stock at a weighted average exercise price
of $3.63 per share;
- excludes 2,550,000 shares of common stock issuable upon the exercise of
outstanding options at an exercise price of $0.50 per share;
- excludes 1,148,804 shares of common stock issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $0.005 per
share;
- excludes 3,579,000 shares of common stock issuable upon the exercise of
outstanding warrants at an exercise price of $11.37 per share that were
issued in connection with our sale of our senior subordinated discounted
notes; and
- excludes 286,183 shares of common stock (subject to adjustment) issuable
upon the exercise of warrants expected to be outstanding prior to the
offering at an exercise price equal to the initial public offering price
per share that will be issued in exchange for warrants originally issued
in connection with our sale of senior subordinated discount notes.
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 DESCRIBED
IN OUR MANAGEMENT AGREEMENT, SPRINT MAY TERMINATE THE AGREEMENT AND PURCHASE OUR
OPERATING ASSETS AT A DISCOUNT TO MARKET VALUE WITHOUT FURTHER STOCKHOLDER
APPROVAL, AND WE WOULD NO LONGER BE ABLE TO OFFER SPRINT PCS SERVICES
Our agreements with Sprint PCS require that we provide network coverage to a
minimum network coverage area within specified time frames. We may amend our
agreements with Sprint PCS in the future to expand our network coverage. A
failure to meet our build-out requirements for any one of our individual markets
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, and we may be required
to sell our operating assets to Sprint PCS. This sale may take place without
further stockholder approval and for a price equal to 72% of our entire business
value. Our entire business value includes the value of our right to use the
spectrum licenses in our markets, our business operations and other assets. The
provisions of our management agreement that allow Sprint PCS to purchase our
operating assets at a discount could adversely affect the value of our common
stock, may limit our ability to sell our business and may reduce the value a
buyer would be willing to pay for our business. See "The Sprint PCS
Agreements--Management Agreement--Rights on Termination."
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 radio communications and network control sites,
complete the purchase and installation of equipment, build out the physical
infrastructure and test the network. Some of the radio communications sites are
likely to require us to obtain zoning variances or other local governmental or
third party approvals or permits. Additionally, we must retain rights to a
sufficient number of tower sites, which requires us to obtain local regulatory
approvals. The local governmental authorities in various locations in our
markets have, at times, placed moratoriums on the construction of additional
towers and radio communications sites. We may also have to make changes to our
radio base station network design as a result of difficulties in the site
acquisition process. Additionally, the Federal Communications Commission
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, limit our network capacity or reduce the number of new
Sprint PCS subscribers. Any significant delays could have a material adverse
effect on our business.
7
<PAGE>
IF WE FAIL TO MEET THE TECHNICAL STANDARDS DESCRIBED IN OUR MANAGEMENT
AGREEMENT, SPRINT MAY TERMINATE THE AGREEMENT AND PURCHASE OUR OPERATING ASSETS
AT A DISCOUNT TO MARKET VALUE WITHOUT FURTHER STOCKHOLDER APPROVAL, 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 requirements. Sprint PCS can, at any time
with at least 30 days' prior notice to us, adjust the technical requirements for
the network. A failure to meet these 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, and we may be required to sell
our operating assets to Sprint PCS. This sale may take place without further
stockholder approval and for a price equal to 72% of our entire business value.
The provisions of our management agreement that allow Sprint PCS to purchase our
operating assets at a discount could adversely affect the value of our common
stock, may limit our ability to sell our business and may reduce the value a
buyer would be willing to pay for our business. See "The Sprint PCS
Agreements--The Management Agreement--Rights on Termination."
THE TERMINATION OF OUR MANAGEMENT AGREEMENT WITH SPRINT PCS OR SPRINT PCS'
FAILURE TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT WOULD SEVERELY RESTRICT
OUR ABILITY TO CONDUCT OUR BUSINESS AND, IF OUR MANAGEMENT AGREEMENT IS
TERMINATED, SPRINT PCS MAY PURCHASE OUR OPERATING ASSETS AT A DISCOUNT TO MARKET
VALUE WITHOUT FURTHER STOCKHOLDER APPROVAL
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 PCS 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 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. If our management
agreement is terminated, we may be required to sell our operating assets to
Sprint PCS. This sale may take place without further stockholder approval and
for a price equal to 72% of our entire business value. The provisions of our
management agreement that allow Sprint PCS to purchase our operating assets at a
discount could adversely affect the value of our common stock, may limit our
ability to sell our business and may reduce the value a buyer would be willing
to pay for our business. See "The Sprint PCS Agreements--The Management
Agreement--Rights on Termination."
WE MAY NOT RECEIVE AS MUCH SPRINT PCS TRAVEL REVENUE AS WE ANTICIPATE BECAUSE
SPRINT PCS CAN CHANGE THE RATE WE RECEIVE OR FEWER 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
8
<PAGE>
we receive or pay for each Sprint PCS travel minute. The unilateral change by
Sprint PCS in the travel revenue we are paid 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 revenue than we anticipate or
we may have to pay more Sprint PCS travel fees than the travel revenue we
collect. For more information, see "Business--Travel and Roaming."
THE INABILITY TO USE SPRINT PCS' SUPPORT 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 other administrative 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 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'
9
<PAGE>
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 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 revenue
it must pay to us, the per minute charge we must pay to Sprint PCS for
travel fees, and the costs for Sprint PCS to perform support 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;
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- If Sprint PCS terminates our management agreement because we fail to meet
the build-out of our network or the technical standards as required under
our management agreement, Sprint PCS may force us to sell our operating
assets at a discount to market value without further stockholder approval,
which could adversely affect the value of our common stock, may limit our
ability to sell our business and may reduce the value a buyer would be
willing to pay for our business; 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 us, 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. If the Federal
Communications Commission were to determine that our management agreement with
Sprint PCS needs to be modified to increase the level of licensee control, we
have agreed with Sprint PCS to use our best efforts to modify the agreement to
comply with applicable law. If we cannot agree with Sprint PCS to modify the
agreement, it may be terminated. If the agreement is 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
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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.
WE RELY ON THE USE OF THE SPRINT PCS BRAND NAME AND LOGO TO MARKET OUR
SERVICES, AND A LOSS OF USE OF THIS BRAND AND LOGO OR A DECREASE IN THE MARKET
VALUE OF THIS BRAND AND LOGO WOULD HINDER OUR ABILITY TO MARKET OUR PRODUCTS
The Sprint PCS brand and logo is highly recognizable. If we lose our rights
to use the Sprint PCS brand and logo under our trademark and service mark
license agreements, we would lose the advantages associated with marketing
efforts conducted by Sprint PCS. If we lose the rights to use this brand and
logo, customers may not recognize our brand readily and we may have to spend
significantly more money on advertising to create brand recognition. See "The
Sprint PCS Agreements--The Trademark and Service Mark License Agreements."
OUR RELATIONSHIP WITH SPRINT PCS OR ITS SUCCESSOR MAY BE ADVERSELY AFFECTED BY
THE PROPOSED MERGER OF SPRINT AND MCI WORLDCOM, WHICH COULD RESTRICT OUR ABILITY
TO OPERATE SUCCESSFULLY
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. If the merger is
completed, the results of the merger may alter the nature of our relationship
with Sprint PCS, which could restrict our ability to operate successfully. Also,
any negative impact on Sprint as a result of the merger could have a negative
impact on us as a Sprint PCS affiliate.
IF SPRINT PCS DOES NOT RENEW OUR MANAGEMENT AGREEMENT, 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 the management agreement
or terminates it 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.
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
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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; AND IF WE FAIL TO OBTAIN REQUIRED ADDITIONAL CAPITAL, WE
MAY NOT HAVE SUFFICIENT FUNDS TO COMPLETE OUR BUILD-OUT IN ACCORDANCE WITH THE
TERMS OF OUR MANAGEMENT AGREEMENT WITH SPRINT PCS AND SPRINT PCS MAY TERMINATE
OUR MANAGEMENT AGREEMENT AND PURCHASE OUR OPERATING ASSETS AT A DISCOUNT TO
MARKET VALUE WITHOUT FURTHER APPROVAL OF OUR STOCKHOLDERS
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, or on terms acceptable to us or within
limitations permitted by the covenants under our senior credit facility or the
covenants under the indenture that governs our senior subordinated discount
notes. Failure to obtain additional funds, should the need for them develop,
could result in the delay or abandonment of our development and expansion plans.
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 under our debt
agreements. If Sprint PCS terminates our management agreement as result of this
breach, we may be required to sell our operating assets to Sprint PCS at a
discount to market value without further stockholder approval. The provisions in
our management agreement that allow Sprint PCS to purchase our operating assets
at a discount could adversely affect the value of our common stock, may limit
our ability to sell our business and may reduce the value a buyer would be
willing to pay for our business.
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 outsource portions of our business, we depend heavily on
third-party vendors, suppliers, consultants, contractors and local telephone
companies. We have retained those persons to:
- design and engineer our systems;
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- construct radio communications sites, network control centers and towers;
- lease radio communications sites;
- install transmission lines; and
- deploy our wireless personal communications services network systems.
We lease a portion of the radio communications 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 radio communications sites 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 radio communications sites, network
control centers and towers, lease radio communications 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 telephone companies 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
In April 2000, we issued 300,000 units consisting of senior subordinated
discount notes due 2010 and warrants to purchase 3,579,000 shares of our common
stock, which yielded gross proceeds to us of $152.3 million. In March 2000, we
signed a $250.0 million senior credit facility, and made borrowings of
$75.0 million under the credit facility in April 2000. As a result, we have a
substantial amount of long-term 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;
- 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 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 our assets and the assets of our
subsidiaries that secure our debt, lenders may control our assets or
subsidiaries upon a default; and
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- 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 senior
credit facility and the indenture that governs the senior subordinated discount
notes limit our ability to take several of these actions. Under our current
business plan, we expect to incur substantial debt before achieving break-even
cash flow. Our failure to generate sufficient funds to pay our debts or to
successfully undertake any of these actions could, among other things,
materially adversely affect the market value of our common stock.
WE MAY NOT RECEIVE THE FUNDS UNDER OUR SENIOR CREDIT FACILITY, WHICH COULD
PREVENT US FROM MEETING OUR NETWORK BUILD-OUT OBLIGATIONS UNDER OUR AGREEMENTS
WITH SPRINT PCS
We signed our $250.0 million senior credit facility in March 2000.
Concurrently with our sale of senior subordinated discount notes, we borrowed
$75.0 million of term loans under the credit facility, which were funded into an
escrow account. The escrow account will remain the property of our lenders and
will not be released to us if an event of default has occurred under the credit
agreement. Additionally, the escrow funds will not be released until specified
conditions have been satisfied. These conditions include, among others, evidence
that we have used all of the proceeds from our sale of our senior subordinated
discount notes and from this offering to pay fees and expenses in connection
with these offerings, to fund the build-out of our network or for other general
corporate and working capital purposes. Additional borrowings under our senior
credit facility must be placed into escrow until the conditions to release our
initial borrowing of $75.0 million have been satisfied. Accordingly, there can
be no assurance that we will receive the proceeds from the senior credit
facility. If we fail to receive these funds, we may not be able to meet our
network build-out obligations under our agreements with Sprint PCS.
IF WE DEFAULT UNDER OUR SENIOR SECURED CREDIT FACILITY, OUR LENDER MAY DECLARE
OUR DEBT IMMEDIATELY DUE AND PAYABLE AND SPRINT PCS MAY FORCE US TO SELL OUR
ASSETS WITHOUT STOCKHOLDER APPROVAL
Our $250.0 million senior secured credit facility requires that we comply
with specified financial ratios and other performance covenants. If we fail to
comply with these covenants or we default on our obligations under our senior
credit facility, our lender may accelerate the maturity of our debt. If our
lender accelerates our debt, Sprint PCS has the option to purchase our operating
assets at a discount to market value and assume our obligations under the senior
credit facility, without further stockholder approval. If Sprint PCS does not
exercise this option, our lender may sell our assets to third parties without
approval of our stockholders. If Sprint PCS provides notice to our lender that
we are in breach of our management agreement with Sprint PCS and, as a result,
our obligations under the credit agreement are accelerated and Sprint PCS does
not elect to operate our business, our lender may designate a third party to
operate our business without the approval of our stockholders.
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OUR INDEBTEDNESS PLACES RESTRICTIONS ON US WHICH MAY LIMIT OUR OPERATING
FLEXIBILITY AND OUR ABILITY TO PAY DIVIDENDS
The indenture that governs our senior subordinated discount notes and the
credit agreement that governs our senior credit facility 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
- entering into transactions with affiliates.
These restrictions could limit our ability to obtain debt financing,
repurchase stock, refinance or pay principal or interest on our outstanding
debt, consummate acquisitions for cash or debt or react to changes in our
operating environment.
WE MAY NOT BE ABLE TO RESPOND EFFECTIVELY TO THE SIGNIFICANT COMPETITION IN
THE WIRELESS COMMUNICATIONS SERVICES INDUSTRY OR KEEP PACE WITH OUR COMPETITORS
IN THE INTRODUCTION OF NEW PRODUCTS, SERVICES AND EQUIPMENT, WHICH COULD IMPAIR
OUR ABILITY TO ATTRACT NEW CUSTOMERS
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. Additionally, 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 customers away from us.
WE MAY NOT BE ABLE TO COMPETE WITH LARGER, MORE ESTABLISHED WIRELESS PROVIDERS
WHO HAVE RESOURCES TO COMPETITIVELY PRICE THEIR PRODUCTS AND SERVICES, WHICH
COULD RESULT IN A REDUCTION OF OUR SUBSCRIBERS
We will compete in some of our markets with more than three wireless
providers, some of which have an infrastructure in place and have been
operational for a number of years. Some of our competitors:
(1) have substantially greater financial, technological, marketing and sales
and distribution resources than us;
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(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 telephone service, cable
television access and access to the Internet, with their wireless
communications services.
We may be unable to compete successfully with these larger competitors who
have substantially greater resources or who offer more services than we do to a
larger subscriber base, which could result in a reduction in new subscribers.
WE MAY NOT BE ABLE TO RESPOND TO THE RECENT TREND IN THE CONSOLIDATION OF THE
WIRELESS COMMUNICATIONS INDUSTRY, OR COMPETE WITH POTENTIAL ACQUIRORS FOR
ACQUISITIONS, WHICH COULD RESULT IN A REDUCTION OF OUR SUBSCRIBERS, DECLINE IN
PRICES FOR OUR PRODUCTS AND SERVICES AND ADDITIONAL DILUTION TO OUR STOCKHOLDERS
IF WE ISSUE OUR COMMON STOCK IN ACQUISITIONS
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 12 million subscribers and the recent partnership of Bell
Atlantic-GTE and Vodafone AirTouch with over 19 million subscribers. We may not
be able to respond to pricing pressures that may result from a consolidation in
our industry, which could result in a reduction of new subscribers and cause
market prices for our products and services to decline in the future. Also, if
we expand our operations through acquisitions, we will compete with other
potential acquirors, some of which may have greater financial or operational
resources than us. If we issue additional shares of our common stock in
connection with any acquisition, this may result in dilution to our
stockholders.
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, WHICH WOULD
REQUIRE US TO IMPLEMENT NEW TECHNOLOGY AT SUBSTANTIALLY INCREASED COSTS AND
LIMIT OUR ABILITY TO COMPETE EFFECTIVELY
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
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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 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."
OUR SERVICES MAY NOT BE BROADLY USED AND ACCEPTED BY CONSUMERS, WHICH COULD
REDUCE THE AMOUNT OF OUR NEW SUBSCRIBER REVENUE
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.
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.
UNAUTHORIZED USE OF OUR PCS NETWORK COULD DISRUPT OUR BUSINESS
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 CURRENT STOCKHOLDERS HAVE OTHER INVESTMENTS IN TELECOMMUNICATIONS
BUSINESSES, WHICH MAY RESULT IN A CONFLICT OF INTEREST WITH US
Some of our principal stockholders as well as some of our directors
affiliated with these stockholders have investments in, or serve on boards of,
other telecommunications businesses.
As a result, conflicts of interest may arise from these investments and
other directorships. Additionally, these stockholders may invest in other
telecommunications businesses that compete
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with us. Our interests may conflict with the interests of these companies, and
any conflicts may not be resolved in our favor.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS 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.
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.
USE OF HAND-HELD PHONES MAY POSE HEALTH RISKS, WHICH COULD RESULT IN A
REDUCTION IN SUBSCRIBERS AND INCREASED EXPOSURE TO LITIGATION
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.
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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 SEASONAL 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.
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.
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 77.6% of our
outstanding common stock on a fully diluted basis, or approximately 75.1% if the
underwriters' over-allotment option is exercised in full, each 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."
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 any future offerings of
equity securities.
20
<PAGE>
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.
21
<PAGE>
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 $179.4 million, or
approximately $206.5 million if the underwriter's over-allotment option is
exercised in full, assuming an initial public offering price of $13.00 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 sale of preferred stock
and senior subordinated discount notes and borrowings under our senior credit
facility, for the period from December 31, 1999 through December 31, 2003, as
presented in the following table:
<TABLE>
<CAPTION>
AMOUNT
(IN MILLIONS)
<S> <C>
SOURCES:
Gross proceeds from this offering......................... $188.5
Gross proceeds from preferred stock(1).................... 25.0
Gross proceeds from senior subordinated discount
notes(2)................................................ 152.3
Senior credit facility(3)................................. 195.0
Existing cash balance..................................... 24.0
------
Total sources........................................... $584.8
======
USES:
Capital expenditures...................................... $239.0
Operating losses and working capital...................... 113.0
Acquisition of Spokane PCS assets......................... 35.0
Debt repayment and accrued interest(4).................... 8.4
Payments to preferred stockholders upon completion of this
offering(5)............................................. 1.0
Fees and expenses(6)...................................... 23.4
Cash on hand.............................................. 165.0
------
Total uses.............................................. $584.8
======
</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) On April 11, 2000, we issued 300,000 units consisting of $300,000,000
principal amount of senior subordinated discount notes, generating gross
proceeds of approximately $152.3 million, and warrants to purchase 3,579,000
shares of our common stock.
(3) On March 31, 2000, we signed a senior credit agreement with Paribas to
provide a senior credit facility for up to $250.0 million of borrowings that
replaced our prior $25.0 million credit facility. Through December 31, 2003,
we expect to borrow $195.0 million of the $250.0 million available under the
senior credit facility. Borrowings under our senior credit facility will be
initially funded into an escrow account and not released to us until
specified conditions have been satisfied. See "Risk Factors--Other Risks
Particular to Us."
22
<PAGE>
(4) Debt repayment is composed of repayment of senior subordinated debt of
$8.0 million, an $80,000 prepayment premium and approximately $300,000 of
accrued interest. The senior subordinated debt was incurred in December 1999
to fund working capital requirements and the build-out of our
Reno/Tahoe/Northern California market. This debt consisted of a 10-year note
with annual interest rate at 12%. We granted warrants to purchase 4,978,150
shares of our common stock at $.005 per share in connection with this debt.
We allocated $2.2 million of the $8.0 million proceeds from this debt to the
warrants.
(5) The holders of our preferred stock are entitled to receive dividends at a
rate of 7% per year. We have not paid any dividends to our holders of
preferred stock as of the date of this prospectus. Our preferred stock will
convert into common stock on a one-for-one basis upon completion of this
offering and, upon conversion, we will be required to pay all accrued
dividends.
(6) 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 our senior
subordinated discount notes and origination and other fees and expenses
related to our senior credit facility.
The foregoing represents our best estimate of the allocation of the net
proceeds of this offering, the proceeds from the sale of preferred stock and
senior subordinated discount notes and borrowings under our senior credit
facility based upon our current markets and our current plans for these markets.
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 March 31, 2000, and as adjusted to reflect:
- our acquisition of the Spokane, Washington PCS network and related assets
from Sprint PCS;
- receipt of gross proceeds of $152.3 million from our senior subordinated
discount notes offering and the issuance of related warrants;
- receipt of gross proceeds of $188.5 million from this offering (assuming
the midpoint of the range shown on the cover page of this prospectus);
- initial borrowings of $75.0 million in term loans under our
$250.0 million senior credit facility;
- exercise of a warrant to purchase 4,978,150 shares of our common stock,
which was issued in connection with our senior subordinated note;
- repayment of our senior subordinated note;
- conversion of our preferred stock into common stock;
- cancellation of our non-voting common stock;
- payments to preferred stockholders upon closing of this offering; and
- issuance of shares of preferred stock to preferred stockholders
convertible into 77,002 shares of common stock and 136,758 shares of
common stock to our founding stockholders to maintain a specific
percentage stock ownership in connection with our senior subordinated
discount notes.
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
----------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 33,729 $307,946
Cash, restricted............................................ -- 75,000(1)
-------- --------
Total cash and cash equivalents............................. $ 33,729 $382,946
======== ========
Long-term debt:
Senior credit facility.................................... $ -- $ 75,000(1)
Senior subordinated debt.................................. 5,812(2) --
Senior subordinated discount notes........................ -- 121,587(3)
-------- --------
Total long-term debt.................................... $ 5,812 $196,587
Redeemable warrants......................................... 2,758 570
Stockholders' equity:
Convertible preferred stock............................... 19 --
Non-voting common stock................................... 16 --
Voting common stock and additional paid-in capital........ 72,487 287,495(4)
Accumulated deficit....................................... (35,035) (38,610)
-------- --------
Total stockholders' equity.............................. 37,487 248,885
-------- --------
Total capitalization.................................... $ 46,057 $446,042
======== ========
</TABLE>
- ------------------------
(1) This amount was funded into an escrow account and will not be released to us
until specified conditions have been satisfied. See "Risk Factors--Other
Risks Particular to Us."
(2) Actual reflects the $5.8 million of the senior subordinated note allocated
to long-term debt.
(3) As adjusted reflects the $121.6 million of the $152.3 million of gross
proceeds from our senior subordinated discount notes allocated to long-term
debt.
(4) Of such amount, $32.4 million represents the value assigned to the warrants
and $1.0 million represents the value assigned to the shares of preferred
stock issued in connection with the senior subordinated discount notes.
24
<PAGE>
DILUTION
Our net tangible book value at March 31, 2000, was $(12.8) million or
$(1.84) per share of voting common stock. Net tangible book value per share
represents the amount of total tangible assets less total liabilities and
convertible preferred stock and redeemable warrants, divided by the number of
voting common stock shares outstanding. After giving effect to:
- the sale in this offering of 14,500,000 shares of common stock at an
assumed initial public offering price of $13.00 per share (the midpoint of
the range shown on the cover of this prospectus) and the receipt of net
proceeds therefrom;
- the receipt of approximately $145.1 million of net proceeds from our
senior subordinated discount notes;
- the effect of the conversion of shares of preferred stock into 38,237,694
shares of common stock upon the closing of this offering;
- the effect of the exercising of warrants issued in connection with the
senior subordinated notes into 3,579,000 shares of common stock; and
- the effect of the exercising of warrants issued in connection with the
senior subordinated notes into 286,183 shares of common stock; and
- the issuance of shares of preferred stock to preferred stockholders
convertible into 77,002 shares of common stock and 136,758 shares of
common stock to our founding stockholders to maintain a specific
percentage stock ownership.
Our as adjusted net tangible book value as of March 31, 2000, would have
been approximately $208.8 million or $3.23 per share. This represents an
immediate dilution of $9.77 per share to new purchasers of common stock in this
offering and an immediate increase in net tangible book value to existing
stockholders of $5.07 per share. The following table illustrates the per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Net tangible book value per share as of March 31, 2000...... $(1.84)
Increase in net tangible book value per share attributable
to this offering.......................................... 5.07
------
As adjusted net tangible book value per share after this
offering.................................................. 3.23
------
Dilution per share to new purchasers of common stock........ $ 9.77
======
</TABLE>
The following table summarizes, on an as adjusted basis as of March 31,
2000, 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 this offering,
assuming an offering price of $13.00 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 $9.1 million
payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 50,263,604 77.6% $ 44,216,048 19.0% $ 0.88
New purchasers of common stock...... 14,500,000 22.4 188,500,000 81.0 13.00
---------- ------ ------------ ------ ------
Total............................. 64,763,604 100.0 232,716,048 100.0
========== ====== ============ ======
</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 8,187,804 shares of common stock at
prices ranging from $0.005 to $11.37 per share. See "Management--2000 Equity
Incentive Plan" and "Description of Capital Stock--Warrants." The exercise of
these stock options and warrants would result in additional dilution to the new
purchasers of common stock in this offering.
25
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
We derived unaudited pro forma condensed consolidated financial and
operating data as of and for the three months ended March 31, 2000 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
for the purpose of the pro forma statements of operations and as of March 31,
2000 for the purpose of the pro forma balance sheet:
- our acquisition of the Spokane, Washington PCS network and related assets
from Sprint PCS;
- receipt of gross proceeds of $152.3 million from our senior subordinated
discount notes and the issuance of related warrants;
- receipt of gross proceeds of $188.5 million from this offering (assuming
the midpoint of the range shown on the cover page of this prospectus);
- initial borrowings of $75.0 million in term loans under our
$250.0 million senior credit facility;
- exercise of a warrant to purchase 4,978,150 shares of our common stock,
which was issued in connection with our senior subordinated note;
- repayment of our senior subordinated note;
- conversion of our preferred stock into common stock;
- cancellation of our non-voting common stock;
- payments to preferred stockholders upon closing of this offering; and
- issuance of shares of preferred stock to preferred stockholders
convertible into 77,002 shares of common stock and 136,758 shares of our
common stock to our founding stockholders to maintain a specified
percentage stock ownership in connection with our senior subordinated
discount notes.
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 CONSOLIDATED STATEMENT OF OPERATIONS
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL EXCLUDING ADJUSTMENTS FOR AS
UBIQUITEL SPOKANE THIS OFFERING PRO FORMA THIS OFFERING ADJUSTED
---------- ---------- ------------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues................... $ 69 $ 1,574 $ -- $ 1,643 $ -- $ 1,643
Costs of services and
equipment.................... -- 779 -- 779 -- 779
-------- ------- ------- -------- ------ --------
Gross profit................... 69 795 -- 864 -- 864
Operating expenses:
Selling, general and
administrative............. 907 1,214 -- 2,121 -- 2,121
Non-cash compensation related
to stock options granted to
employees.................. 189 -- -- 189 -- 189
Depreciation and
amortization............... -- 931 200 (1) 1,131 -- 1,131
-------- ------- ------- -------- ------ --------
Operating loss................. (1,027) (1,350) (200) (2,577) -- (2,577)
Interest income (expense),
net........................ 35 -- (9,110)(2) (9,075) -- (9,075)
-------- ------- ------- -------- ------ --------
Loss before extraordinary
item......................... (992) (1,350) (9,310) (11,652) -- (11,652)
Less: preferred stock
dividend..................... (30,333) -- -- (30,333) -- (30,333)
-------- ------- ------- -------- ------ --------
Loss available to common
stockholders................. (31,325) (1,350) (9,310) (41,985) -- (41,985)
Extraordinary item--write-off
of deferred financing costs
on early extinguishment of
debt......................... (1,723) -- -- (1,723) -- (1,723)
-------- ------- ------- -------- ------ --------
Net loss available to common
stockholders................. $(33,048) $(1,350) $(9,310) $(43,708) $ -- $(43,708)
======== ======= ======= ======== ====== ========
Basic and diluted loss per
common share before
extraordinary item........... $ (4.59) $ (0.84) $ (0.65)
Extraordinary item............. (0.25) (0.03) (0.03)
-------- -------- --------
Basic and diluted net loss per
common share................. $ (4.84) $ (0.87) $ (0.68)
======== ======== ========
Weighted average shares
outstanding.................. 6,834 50,264 64,764
======== ======== ========
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
For the purpose of determining the pro forma effect of transactions
described above on our consolidated statement of operations for the three months
ended March 31, 2000, the following adjustments have been made:
(1) Represents the amortization of intangible asset recorded from the Spokane
acquisition consisting of goodwill and customer lists in the amount of
$15,975 over a period of 20 years which is the initial term of the Sprint
PCS management agreement.
(2) Represents additional interest expense based on the following:
<TABLE>
<S> <C>
Accrued interest and prepayment premium on senior
subordinated debt......................................... $ 80
Interest expense on $75,000 drawdown from senior credit
facility assuming an interest rate of 10%................. 1,875
Unused commitment fee of 1.375% on senior credit facility
assuming only minimum drawdowns........................... 601
Amortization of deferred financing fees from senior credit
facility over a period of 8.5 years....................... 209
Amortization of deferred financing costs relating to senior
subordinated discount notes over 10 years................. 248
Interest expense on senior subordinated discount notes...... 5,330
Amortization of the discount on senior subordinated discount
notes..................................................... 767
------
$9,110
======
</TABLE>
Excluded from the pro forma results of operations is a non-recurring charge of
$2,188 for the remaining discount on the senior subordinated note upon the early
extinguishment of the debt. This charge will be reflected as an extraordinary
item in the 2000 financial statements.
28
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL EXCLUDING ADJUSTMENTS FOR AS
UBIQUITEL SPOKANE THIS OFFERING PRO FORMA THIS OFFERING ADJUSTED
---------- ---------- ------------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues................. $ -- $ 5,625 $ -- $ 5,625 $-- $ 5,625
Costs of services and
equipment.................. -- 5,046 -- 5,046 -- 5,046
------- ------- -------- -------- -------- --------
Gross profit................. -- 579 -- 579 -- 579
Operating expenses:
Selling, general and
administrative........... 554 5,419 -- 5,973 -- 5,973
Non-cash compensation for
general and
administrative matters... 1,395 -- -- 1,395 -- 1,395
Depreciation and
amortization............. -- 3,471 799(1) 4,270 -- 4,270
------- ------- -------- -------- -------- --------
Operating loss............... (1,949) (8,311) (799) (11,059) -- (11,059)
Interest expense........... 29 -- 36,005(2) 36,034 -- 36,034
------- ------- -------- -------- -------- --------
Net loss..................... (1,978) (8,311) (36,804) (47,093) -- (47,093)
Less: preferred stock
dividends.................. (9) -- -- (9) -- (9)
------- ------- -------- -------- -------- --------
Loss available to common
stockholders............... $(1,987) $(8,311) $(36,804) $(47,102) $-- $(47,102)
======= ======= ======== ======== ======== ========
Basic and diluted loss per
common share............... $ (0.29) (0.94) (0.73)
======= ======== ========
Weighted average shares
outstanding................ 6,834 50,264 64,764
======= ======== ========
</TABLE>
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
For the purpose of determining the pro forma effect of transactions
described above on our consolidated statement of operations for the year ended
December 31, 1999, the following adjustments have been made:
(1) Represents the amortization of intangible asset recorded from the Spokane
acquisition consisting of goodwill and customer lists in the amount of
$15,975 over a period of 20 years for goodwill which is the initial term of
the Sprint PCS management agreement and five years for customer lists which
is based on management's expectation to build-out the Spokane market.
(2) Represents additional interest expense based on the following:
<TABLE>
<S> <C>
Accrued interest and prepayment premium on senior
subordinated debt......................................... $ 91
Interest expense on $75,000 drawdown from senior credit
facility assuming an interest rate of 10%................. 7,500
Unused commitment fee of 1.375% on senior credit facility
assuming only minimum drawdowns........................... 2,200
Amortization of deferred financing fees from senior credit
facility over a period of 8.5 years....................... 835
Amortization of deferred financing costs relating to senior
subordinated discount notes over 10 years................. 991
Interest expense on senior subordinated discount notes...... 21,319
Amortization of the discount on senior subordinated discount
notes..................................................... 3,069
-------
$36,005
=======
</TABLE>
Excluded from the pro forma results of operations is a non-recurring charge of
$2,188 for the remaining discount on the senior subordinated note upon the early
extinguishment of the debt. This charge will be reflected as an extraordinary
item in the 2000 financial statements.
30
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
UBIQUITEL INC. AND SUBSIDIARIES
AS OF MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL EXCLUDING ADJUSTMENTS FOR AS
UBIQUITEL SPOKANE(1) THIS OFFERING PRO FORMA THIS OFFERING ADJUSTED
---------- ---------- ------------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents...... $ 33,729 $ -- $ 94,920 (2) $128,649 $179,297 (13) $307,946
Cash, restricted............... -- -- 75,000 (3) 75,000 -- 75,000
Prepaid expenses and other
assets....................... 2,067 93 -- 2,160 (937) 1,223
Property and equipment......... 9,022 18,932 -- 27,954 -- 27,954
Deferred financing costs,
net.......................... 7,363 -- 16,705 (4) 24,068 -- 24,068
Intangible assets.............. -- -- 15,975 (5) 15,975 -- 15,975
Other assets................... 182 -- -- 182 -- 182
-------- ------- -------- -------- -------- --------
TOTAL ASSETS............... $ 52,363 $19,025 $202,600 $273,988 $178,360 $452,348
======== ======= ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Accounts payable and accrued
expenses..................... $ 6,306 $ -- $ -- $ 6,306 $ -- $ 6,306
Senior credit facility......... -- -- 75,000 (6) 75,000 -- 75,000
Senior subordinated debt....... 5,812 -- (5,812)(7) -- -- --
Senior subordinated discount
notes........................ -- -- 121,587 (8) 121,587 -- 121,587
Redeemable warrants............ 2,758 -- (2,188)(9) 570 -- 570
STOCKHOLDERS' EQUITY:
Convertible preferred stock.... 19 -- -- 19 (19)(14) --
Common stock and additional
paid-in-capital.............. 72,503 -- 35,613 (10) 108,116 179,379 (15) 287,495
Accumulated deficit............ (35,035) -- (2,575)(11) (37,610) (1,000)(16) (38,610)
Sprint Spectrum L.P.'s equity
in assests to be sold........ -- 19,025 (19,025)(12) -- -- --
-------- ------- -------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY..... $ 52,363 $19,025 $202,600 $273,988 $178,360 $452,348
======== ======= ======== ======== ======== ========
</TABLE>
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000
(DOLLARS IN THOUSANDS)
For the purpose of determining the pro forma effect of transactions
described above on our consolidated balance sheet as of March 31, 2000 the
following adjustments have been made:
(1) The historical balance sheet of the Spokane, Washington District does not
reflect an amount for liabilities and stockholders' equity. The financial
statements provided by the Spokane predecessor were abbreviated financial
statements and identify only the assets to be sold. Sprint Spectrum L.P.'s
equity in assets to be sold is an assumed amount. As indicated in Note 4 of
the notes to the unaudited pro forma condensed consolidated balance sheet,
the purchase price for the Spokane acquisition was approximately $35,000 and
is reflected in the pro forma adjustments excluding this offering.
(2) Represents the following adjustments to cash and cash equivalents:
<TABLE>
<S> <C>
Proceeds from senior subordinated discount notes............ $152,277
Cash used to pay Spokane purchase price..................... (35,000)
Cash used to pay origination fees and expenses for senior
credit facility............................................ (7,100)
Cash used to pay fees and expenses for senior subordinated
discount notes............................................. (7,177)
Cash used to pay prepayment premium on senior subordinated
debt....................................................... (80)
Cash used to retire outstanding senior subordinated debt.... (8,000)
--------
$ 94,920
========
</TABLE>
(3) Represents the proceeds from the initial drawdown of $75,000 of the senior
credit facility to be held in escrow until specific conditions have been
satisfied as defined in the agreement.
(4) Represents the adjustments to deferred financing fees as follows:
<TABLE>
<S> <C>
Write-off of unamortized deferred financing fees related to
senior subordinated debt................................... $ (307)
Estimated origination fees and expenses related to senior
credit facility............................................ 7,100
Expenses related to senior subordinated discount notes...... 7,177
Additional warrants issued in connection with senior
subordinated discount notes................................ 1,734
Issuance of shares of preferred stock to preferred
stockholders convertible into 77,002 shares of common stock
to maintain a specific percentage stock ownership upon the
issuance of the warrants related to senior subordinated
discount notes............................................. 1,001
-------
$16,705
=======
</TABLE>
(5) The preliminary allocation of the purchase price for the acquisition of the
Spokane, Washington PCS network assets, which is based on our initial
determination of relative values, is reflected as follows and is expected to
be finalized in 2000:
<TABLE>
<CAPTION>
ALLOCATION
----------
<S> <C>
Prepaid expenses............................................ $ 93
Property and equipment, net................................. 18,932
Intangible assets including goodwill (20 year amortization)
and customer lists (5 year amortization)................... 15,975
-------
$35,000
=======
</TABLE>
The amortization period of 20 years for goodwill is based on the initial term
of the Sprint PCS management agreement. The amortization period of 5 years
for customer lists is based on management's expectation to build out the
Spokane market.
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(6) Represents initial drawdown of the senior credit facility of $75,000.
(7) Represents retirement of senior subordinated debt.
(8) Represents value ascribed to the senior subordinated discount notes from the
gross proceeds of $152,277. The remaining $30,690 was ascribed to the
warrants and is reflected in stockholders' equity.
(9) Represents exercise of a warrant to purchase 4,978,000 shares of our common
stock issued in connection with the senior subordinated debt.
(10) Represents adjustments to stockholders' equity as follows:
<TABLE>
<S> <C>
Exercise of warrants issued in connection with senior
subordinated debt.......................................... $ 2,188
Warrants issued with senior subordinated discount notes..... 30,690
Additional warrants issued in connection with senior
subordinated discount notes................................ 1,734
Issuance of shares of preferred stock to preferred
stockholders convertible into 77,002 shares of common stock
to maintain a specific percentage stock ownership in
connection with our senior subordinated discount notes..... 1,001
--------
$ 35,613
========
</TABLE>
(11) Represents fees and expenses incurred as follows:
<TABLE>
<S> <C>
Write-off of unamortized deferred financing fees related to
the senior subordinated debt............................... $ (307)
Write-off of unamortized discount relating to senior
subordinated debt.......................................... (2,188)
Expenses relating to prepayment of senior subordinated
debt....................................................... (80)
--------
$ (2,575)
========
</TABLE>
(12) Represents the elimination of Sprint Spectrum L.P.'s assumed equity in
assets to be sold.
(13) Represents:
<TABLE>
<S> <C>
Proceeds of this offering................................... $188,500
Cash used to pay estimated fees and expenses net of amounts
prepaid.................................................... (8,203)
Cash used for payments to preferred stockholders upon
closing this offering...................................... (1,000)
--------
$179,297
========
</TABLE>
(14) Represents conversion of convertible preferred stock to common stock in
connection with this offering.
(15) Represents adjustments to stockholders' equity in connection with this
offering as follows:
<TABLE>
<S> <C>
Proceeds of this offering................................... $188,500
Estimated fees and expenses of this offering................ (9,140)
Conversion of preferred stock to common stock............... 19
--------
$179,379
========
</TABLE>
(16) Represents payments to preferred stockholders upon closing of this
offering.
33
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
UBIQUITEL INC.
- In the table below, we provide you with selected historical consolidated
financial and operating data for, the period from commencement of
operations on September 29, 1999 to December 31, 1999, and balance sheet
data as of December 31, 1999, which are derived from and should be read in
conjunction with the audited consolidated financial statements of
UbiquiTel Inc. and subsidiaries included elsewhere in this prospectus; and
- selected historical consolidated financial and operating data for the
three months ended March 31, 2000 and balance sheet data as of March 31,
2000, which are derived from and should be read in conjunction with the
unaudited consolidated financial statements of UbiquiTel Inc. and
subsidiaries included elsewhere in this prospectus.
In our opinion, the unaudited interim financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, which consist only of normal recurring adjustments, necessary to
present fairly the financial position and the results of operations for the
interim periods. Financial and operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the full year.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS
SEPTEMBER 29, ENDED
1999 (INCEPTION) MARCH 31,
TO DECEMBER 31, 2000
1999, (UNAUDITED)
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
--------------------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................ $ -- $ 69
Operating expenses:
General and administrative expenses....................... 554 907
Non-cash compensation expense for general and
administrative matters.................................. 1,395 --
Non-cash compensation related to stock options granted to
employees............................................... -- 189
------- --------
Operating loss.............................................. (1,949) (1,027)
Interest expense (income)................................. 29 (35)
------- --------
Loss before extraordinary item.............................. (1,978) (992)
Extraordinary item--write-off of deferred financing costs
on early extinguishment of debt......................... -- (1,723)
Preferred stock dividends plus accretion.................. (9) (30,333)
------- --------
Net loss available to common stockholders................... $(1,987) $(33,048)
======= ========
Basic and diluted net loss per share of common stock
before extraordinary item............................... $ (0.29) $ (4.59)
Extraordinary item........................................ -- (0.25)
------- --------
Basic and diluted net loss per share of common stock(1)... $ (0.29) $ (4.84)
======= ========
BALANCE SHEET DATA:
Cash and cash equivalents................................. $23,959 $ 33,729
Total assets.............................................. 30,191 52,363
Long-term debt............................................ 5,812 5,812
Total stockholders' equity................................ 15,478 37,487
</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.
34
<PAGE>
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. The selected financial data presented below as of
March 31, 2000 and for the three-month periods ended March 31, 2000 and 1999
have been derived from unaudited condensed financial statements of the Spokane
District (wholly owned by Sprint Spectrum L.P.) which have been prepared on the
same basis as the Spokane District's audited financial statements and, in the
opinion of Sprint Spectrum L.P.'s management, include all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the financial position and results of operations for these periods. The
results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the full year.
The Spokane District did not launch operations until December 16, 1996. As a
result, we have not presented financial data for 1996 because revenues were less
than $10,000. 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>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................ $ 1,246 $ 3,280 $ 5,625 $1,136 $1,574
Expenses:
Cost of service and equipment............................. 2,903 3,970 5,046 747 779
Selling, general and administrative expense............... 8,168 4,470 5,419 997 1,214
Depreciation.............................................. 2,968 3,112 3,471 828 931
------- ------- ------- ------ ------
Expenses in excess of net revenues.......................... $12,793 $ 8,272 $ 8,311 $1,436 $1,350
======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
1998 1999 AS OF MARCH 31, 2000
----------- -------- ---------------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets to be sold................................... $19,551 $19,784 $19,025
</TABLE>
35
<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 set
forth below are indicative nor should they be relied upon as an indicator of our
future performance.
OVERVIEW
In October 1998, a limited liability company whose sole member was 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 market. The Walter Group is an international wireless
telecommunications consulting and service company based in Seattle, Washington.
The limited liability company subsequently changed its name to Ubiquitel L.L.C.
During the period from October 1998 to October 1999, Ubiquitel L.L.C. attempted
unsuccessfully to obtain financing for the build-out of the Reno/Tahoe market.
In November 1999, Ubiquitel L.L.C. assigned the management and related
agreements to us. Ubiquitel L.L.C. had no operations or financial transactions
prior to the assignment of these agreements to us.
In December 1999, we amended our management agreement with Sprint PCS to
expand or markets to include a total of 7.7 million residents in the western and
midwestern United States.
In March 2000, we entered into a new $250.0 million senior credit facility.
In April 2000, we completed a private sale of 300,000 units consisting of
our senior subordinated discount notes due 2010 and warrants to purchase, in the
aggregate, 3,579,000 shares of our common stock, after giving effect to a
two-for-one stock split to be effective as of the date of this prospectus. We
received gross proceeds of approximately $152.3 million from the sale of the
units.
In April 2000, we acquired Sprint PCS' Spokane, Washington PCS network and
related assets for $35.0 million cash. We acquired switching equipment,
transmitting and receiving equipment at 41 radio communications sites, ancillary
equipment, prepaid expenses, goodwill and customer lists. We did not acquire any
customer related assets or liabilities such as accounts receivable or accrued
liabilities. The Spokane market did not launch operations until December 16,
1996, and had no significant revenues until 1997.
We have currently commenced limited operations in one of our markets, which
together with the Spokane, Washington market, cover approximately 500,000
residents. We currently have approximately 9,000 subscribers. We expect to cover
approximately 55% of the resident population in our markets by the end of 2001
and expect to cover approximately 63% by June 30, 2004 upon completion of our
build-out. We anticipate that the net proceeds of this offering, when combined
36
<PAGE>
with the proceeds from our sale of preferred stock and senior subordinated
discount notes and the availability of borrowings under our senior credit
facility, will be adequate to fund our anticipated 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.
We are a development stage company with very limited operations and
revenues, significant losses and substantial capital requirements. From our
inception on September 29, 1999 through December 31, 1999, we incurred losses of
approximately $2.0 million. On a pro forma basis, after giving effect to various
transactions described in "Unaudited Pro Forma Condensed Consolidated Financial
Data," losses from our inception through December 31, 1999 would have been
approximately $47.1 million and loss before extraordinary item would have been
approximately $42.0 million for the three months ended March 31, 2000. We expect
to continue 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.
As a Sprint PCS affiliate, we do not own the licenses to operate our network
and instead, we pay Sprint PCS for the use of its licenses. Under our management
agreement with Sprint PCS, Sprint PCS is entitled to receive 8.0% 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 network. 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 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. However, 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' network and, to
a lesser extent, on the networks of our affiliates.
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 support 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 support 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
37
<PAGE>
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. If Sprint PCS
terminates any of these services or increases the amount it charges us for any
of these services, our operating costs may increase and our operations may be
interrupted or restricted.
In addition to the benefits and services provided through our agreement with
Sprint PCS, we will also utilize the services of third parties such as Lucent
Technologies, LCC International and SpectraSite Communications to successfully
complete the build-out and support the operations of our network. As a result of
this outsourcing, we are substantially dependent on Sprint PCS and the other
third parties for the build-out and operation of our network. If we fail to
complete the build-out on schedule or meet Sprint PCS' program requirements, we
would be in breach of our management agreement with Sprint PCS that could result
in its termination. If the management agreement is terminated, we will no longer
be able to offer Sprint PCS products and services, and we may be required to
sell our operating assets to Sprint PCS at a discount to market value and
without further stockholder approval.
Sprint and MCI WorldCom announced on October 5, 1999 that they have agreed
to merge to form a new company called WorldCom. The merger is subject to various
conditions, including the approvals of the shareholders of both companies, the
Federal Communications Commission, the Justice Department and various state
government bodies and foreign antitrust authorities. Until the merger actually
occurs, we will not know what effect it will have on Sprint's business. Any
negative impact on Sprint could have a negative impact on us as a Sprint PCS
affiliate.
RESULTS OF OPERATIONS
PROSPECTIVE INCOME STATEMENT
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
service 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. We intend to use
the Sprint PCS billing platform and rate plans which are designed to offer
simple and understandable options. We have limited flexibility to change
the pricing on these rate plans, and must obtain Sprint PCS' final
approval. We expect subscriber revenue to constitute the majority of our
revenues in the future. We do not earn revenue for the activation of new
customers.
- 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. We anticipate that travel revenue will represent a
substantial portion of our future revenue. Under our agreements with
Sprint PCS, in October 2000, Sprint PCS can change the current fee we
receive for each Sprint PCS travel minute. The change by Sprint PCS in the
travel revenue we are paid could substantially decrease our revenues.
38
<PAGE>
- 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 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 when their customers travel 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, sales and marketing and general and administrative
expenses, some of which will be incurred through our management and services
agreements with Sprint PCS and others of which we will incur directly.
- NETWORK OPERATIONS EXPENSES. Network operations expenses include radio
communications site lease costs, utilities, network control maintenance,
network control site leases, engineering personnel, transport facilities,
interconnect charges and handset and equipment costs. Sprint PCS can
adjust the program requirements at any time so long as it gives us at
least 30 days prior notice which may increase our network operations
expense. 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 support services, including
billing and collections services, customer care and subscriber activation
are also included in this expense category. If Sprint PCS terminates a
service or increases the amount it charges us for a support service, our
operating costs may increase.
DEPRECIATION AND AMORTIZATION EXPENSE. We expect to depreciate our property
and equipment using the straight-line method over five to ten years.
Amortization of intangible asset from our Spokane acquisition in the amount of
$16.0 million will be amortized over a period of 20 years.
INTEREST EXPENSE. We will accrue interest at a rate of 14% per annum on our
senior subordinated discount notes through April 15, 2005 and will pay interest
semiannually in cash thereafter. Interest on our senior credit facility will
accrue at our option at the prime rate or the federal funds rate plus specified
margins or the reserve adjusted London interbank offered rate.
39
<PAGE>
Interest expense will also include the amortized amount of deferred financing
fees relating to our senior credit facility and senior subordinated discount
notes. We expect our interest expense to increase in the future as we borrow
under our senior credit facility to fund our network build-out and operating
losses. See "Description of Certain Indebtedness."
HISTORICAL INCOME STATEMENTS
UBIQUITEL
THREE MONTHS ENDED MARCH 31, 2000
During the three months ended March 31, 2000 we earned nominal revenues
attributable to travel airtime. We continued developing our PCS business in
portions of Nevada and California.
We incurred a net loss of $33.0 million, of which $30.0 million is
attributable to our issuance of Series B preferred stock at a price less than
the midpoint of the range of the offering price shown on the cover of this
prospectus.
We are a development stage company and have incurred an aggregate loss since
inception of $35.0 million. The operating results during this three month period
are not indicative of the anticipated results of operations that we expect to
achieve following commencement of our commercial operations.
Non-cash compensation from stock option granted to employee totaled
approximately $188,643 for the period, based on the fair market value of the
common stock underlying options granted during the period. We assumed for this
purpose that the fair market value of common stock was equal to the midpoint of
the range of the offering price shown on the cover of this prospectus.
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 non-cash compensation for general and
administrative matters, 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.
Non-cash compensation for general and administrative matters 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.
40
<PAGE>
SPOKANE DISTRICT
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
1999
Net revenues increased by $0.4 million or 38.6% to $1.6 million in first
quarter 2000 compared to first quarter 1999. Net revenues primarily consisted of
subscriber revenue from monthly service charges. The increase is primarily
attributable to an increased number of subscribers.
Costs of services and equipment remained relatively steady at $0.3 million
in first quarter 2000 and 1999. As a percentage of revenues, these costs
represented approximately 50% of revenue in 2000 compared to approximately 66%
of revenue in 1999. The decrease in costs as a percentage of revenue is
primarily attributable to increased efficiencies.
Selling, general and administrative expenses increased by $0.2 million or
21.7% to $1.2 million in first quarter 2000 compared to first quarter 1999. As a
percentage of revenues, these expenses represented approximately 77% of revenues
in 2000 compared to approximately 88% in 1998. The increase is primarily
attributable to increased activity offset somewhat by increased efficiencies.
Expenses in excess of net revenues decreased by approximately $86 thousand
or 6.0% to $1.4 million in first quarter 2000 compared to first quarter 1999.
This decrease is a result of increased costs and expenses more than offset by
increased revenue.
Management notes the 2000 operations reflect the operation of the Spokane
District by Sprint PCS. Historical results are not necessarily indicative of
future operations that we will manage.
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. Net revenues primarily consisted of subscriber revenue from
monthly service charges. 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. Historical results are not necessarily indicative of
future operations that we will manage.
41
<PAGE>
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. Net revenues primarily consisted of subscriber revenue from
monthly service charges. 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.
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. Historical 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 availability under our prior $25.0 million credit facility, which has
been replaced by our $250.0 million senior credit facility. See "Description of
Certain Indebtedness."
Completion of our PCS network will require substantial capital. Our
build-out plan includes the installation of three switches and over 500 radio
communications 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 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 and expect to cover
approximately 63% upon the completion of our build-out. We anticipate that the
net proceeds of this offering, when combined with the proceeds from our sale of
preferred stock and senior subordinated discount notes and the availability of
borrowings under our $250.0 million senior credit facility, will be adequate to
fund our anticipated 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
42
<PAGE>
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 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 $2.2 million for the
three months ended March 31, 2000 and an aggregate of $2.4 million from
inception to March 31, 2000. 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 $5.4 million during the three months
ended March 31, 2000. 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 $17.4 million,
consisting primarily of the preferred stock issued during the period.
On March 31, 2000, we signed a new senior secured credit agreement with
Paribas. The new senior credit facility consists 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. Until the earlier to occur of the syndication of the senior
credit facility, or August 2000, Paribas may re-allocate the amounts among the
revolving loan, term loan A and term loan B at their discretion. Concurrently
with the closing of our senior subordinated discount notes, we borrowed
$75.0 million of term loans, which were funded into an escrow account. The
escrow account will remain the property of our lenders and will not be released
to us if an event of default has occurred under the credit agreement.
Additionally, the escrow account will not be released to us until specified
conditions have been satisfied. These conditions include, among others, evidence
that we have used all of the proceeds from our sale of senior subordinated
discount notes and from this offering to pay fees and expenses in connection
with these offerings, to fund the build-out of our network or for other general
corporate and working capital purposes. Additional borrowings under our senior
credit facility must be placed into escrow until the conditions to release our
initial borrowing of $75.0 million have been satisfied. Our senior credit
facility contains financial and other covenants customary for the wireless
industry, and is secured by a first priority lien on our assets and a pledge by
us of our capital stock in UbiquiTel Operating Company. Scheduled amortization
payments of principal for the term loans under the senior credit facility begin
on June 30, 2004.
On April 11, 2000, we issued 300,000 units consisting of senior subordinated
discount notes due 2010 and warrants to purchase 3,579,000 shares of our common
stock. The notes mature on April 15, 2010 and are limited to an aggregate
principal amount at maturity of $300.0 million. The notes generated gross
proceeds to us of $152.3 million. The notes are general, unsecured obligations
subordinated in right of payment to all senior debt, including obligations under
our senior secured credit facility. The notes accrue interest at a rate of 14%
per annum, computed on a semi-annual basis, calculated from April 11, 2000. The
notes will not bear interest payable in cash prior to April 15, 2005, and will
bear interest payable semi-annually in cash on each of April and October 15,
beginning October 15, 2005.
The indenture that governs our senior subordinated discount notes and the
credit agreement that governs our senior credit facility impose material
operating and financial restrictions on us.
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These restrictions, subject to ordinary course of business exceptions, may limit
our ability to engage in some transactions, such as making investments, selling
assets and borrowing additional money. These restrictions could limit our
ability to obtain debt financing, refinance or pay principal or interest on
outstanding debt or make acquisitions for cash or debt. Also, we will have to
dedicate a substantial portion of our cash flow from operations to the payment
of interest on, and principal of, our debt, which will reduce funds available
for other purposes.
As part of our management agreement, Sprint PCS requires us to build-out
portions of our network by various dates including December 31, 2000, March 31,
2001, September 30, 2001 and June 1, 2005. See "The Sprint PCS
Agreements--Network build-out." We expect our PCS network build-out will require
approximately $239.0 million of capital expenditures by the end of 2003. The
table below identifies our planned capital expenditures through 2003.
<TABLE>
<CAPTION>
ESTIMATED
CAPITAL EXPENDITURES
YEAR (IN MILLIONS)
- ---- --------------------
<S> <C>
2000...................................................... $120.0
2001...................................................... 61.0
2002...................................................... 25.0
2003...................................................... 33.0
</TABLE>
On March 31, 2000, we had working capital of $29.5 million, calculated by
subtracting current liabilities of $6.3 million from current assets of
$35.8 million.
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 sale of senior subordinated discount
notes and borrowings available under our $250.0 million senior credit facility.
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 our senior subordinated discount notes. Our variable rate
debt will consist of borrowings made under our $250.0 million senior credit
facility.
Our primary market risk exposure will relate to:
- the interest rate risk on long-term and short-term borrowings;
- our ability to refinance our senior subordinated discount notes at
maturity at market rates; and
- the impact of interest rate movements on our ability to meet interest
expense requirements and meet financial covenants.
We may decide, from time to time, to manage the interest rate risk on our
outstanding long-term and short-term debt 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 sale
of preferred stock and senior subordinated discount notes, our $250.0 million
senior credit facility and expected
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borrowings thereunder, and in each case the use of proceeds therefrom, only the
borrowings under our senior credit facility 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 wireless personal
communications services to four 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. We are among 18 companies,
which we believe are unrelated to each other and to Sprint PCS, that have
entered into affiliation agreements with Sprint PCS to provide Sprint PCS
products and services throughout the United States. 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. However, Sprint
PCS does not currently offer PCS services in every state in the United States.
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 recent acquisition of the Spokane, Washington market from Sprint PCS,
cover approximately 500,000 residents. We currently have approximately 9,000
subscribers. We expect to cover approximately 55% of the resident population in
our markets by the end of 2001 and expect to cover approximately 63% upon
completion of our build-out. We anticipate that the net proceeds of this
offering, when combined with the proceeds from our sale of preferred stock and
senior subordinated discount notes and the availability of borrowings under our
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 Chairman of the Board, 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 12.0%
of our common stock assuming conversion of all of our outstanding warrants and
options to purchase our common stock.
In October 1998, UbiquiTel L.L.C., 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 residents in the
Reno/Tahoe Nevada market. The Walter Group is an
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international wireless telecommunications consulting and service company based
in Seattle, Washington. UbiquiTel L.L.C. had no financial transactions from its
inception on August 24, 1998 to September 29, 1999. On September 29, 1999,
UbiquiTel Inc. was incorporated. In November 1999, UbiquiTel L.L.C. assigned all
of its material contracts including the rights to the Sprint PCS agreements to
UbiquiTel Inc., which were then subsequently assigned to UbiquiTel Operating
Company, which was formed in November 1999. On December 28, 1999, UbiquiTel Inc.
amended its agreement with Sprint PCS to expand our markets to include Northern
California, Spokane/ Montana, Southern Idaho/Utah/Nevada and Southern
Indiana/Kentucky which together with Reno/ Tahoe contain approximately
7.7 million residents.
The description of our business and other descriptions in this prospectus
contain product names, trade names and trademarks of other companies.
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 mobile radio service has increased from an estimated 340,213 at the
end of 1985 to an estimated 86.0 million as of December 31, 1999, according to
the Cellular Telecommunications Industry Association, an international
association for the wireless industry. The following chart sets forth statistics
for the domestic wireless telephone industry as a whole, as published by the
Cellular Telecommunications Industry Association.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
WIRELESS INDUSTRY STATISTICS(1)
Total service revenues (in billions)..... $14.2 $19.1 $23.6 $27.5 $33.1 $40.0
Wireless subscribers at end of period
(in millions).......................... 24.1 33.8 44.0 55.3 69.2 86.0
Subscriber growth........................ 50.8% 40.0% 30.4% 25.6% 25.1% 24.3%
Average local monthly bill(2)............ $56.21 $51.00 $47.70 $42.78 $39.43 $41.24
</TABLE>
- ------------------------
(1) Reflects domestic commercial cellular, enhanced specialized mobile radio
service and wireless personal communications services providers.
(2) Does not include revenue from roaming and long distance.
Paul Kagan Associates, Inc., an independent media and telecommunications
research firm, estimates in its publication, KAGAN'S WIRELESS 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. The
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foregoing market statistics may not reflect the future growth rates of the
wireless communications industry generally nor our growth rate specifically.
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
telecommunications products and services, product 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 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 in all 50 states,
Puerto Rico and the U.S. Virgin Islands. However, Sprint PCS does not currently
offer PCS services in every state in the United States. The graph below
illustrates Sprint PCS' subscriber growth from the beginning of 1997 through the
end of 1999. These statistics may not reflect Sprint PCS' future subscriber
growth nor our subscriber growth.
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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 us, primarily in and
around smaller metropolitan areas;
- 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
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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. However, we can provide no assurance that other national
wireless providers will not choose to focus on our markets in the future.
- 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 some 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. However, the lower population densities along these
corridors results in a higher build-out cost per resident than other areas
of our markets.
- 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 wireless services, 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.
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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 completed our 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 in this market, 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;
- 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, 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
1.5 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 approximately 72% of the
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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 over 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 and Hewlett Packard.
- 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
- St. Louis, Missouri.
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- 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 miles 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 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.
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
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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. However, Sprint
PCS does not currently offer PCS services in every state in the United States.
COST-EFFECTIVE SUPPORT SERVICES FROM SPRINT PCS. Our affiliation with
Sprint PCS provides us with the option to use Sprint PCS' established support
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 its
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 radio
communications sites. We believe that our high quality network will allow our
system to handle more customers with fewer dropped calls and better clarity than
our competitors. By leasing radio communications 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 located on
shared facilities.
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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 in the development and deployment of code division multiple
access networks. We have selected Lucent Technologies as our equipment
vendor in the Reno/Tahoe/Northern California market. We have also engaged
Lucent to perform overall program management for network development in
all of our markets. As program manager, Lucent is responsible for the
coordination, scheduling, tracking and controlling of the network
build-out, including oversight of radio communications site network
design, site acquisition, construction, radio communications site
equipment installation, integration and optimization. The term of the
agreement with Lucent is approximately 24 months. During these 24 months,
or such shorter or longer period needed 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 is an engineering and site
development firm specializing in the use of radio frequency design
techniques and software tools in the deployment of cellular and PCS
networks worldwide. We have engaged LCC International to provide radio
base station network design and optimization, site acquisition including
leasing, zoning, permitting and regulatory compliance, fixed network
design service and switch design and operation services in each of our
markets. The term of our agreement with LCC International is initially
five years through September 2004 and is automatically renewable for one
additional five year term, followed by additional and successive terms of
one year, unless terminated by either us or LCC International upon
providing the other party written notice at least 90 days in advance of
the conclusion of the initial or any renewal term. Either party may
terminate the agreement in the event of a material breach of the agreement
by the other party if the breaching party has not cured the breach within
30 days of receiving written notice. We pay LCC International fixed fees.
- SPECTRASITE COMMUNICATIONS. SpectraSite Communications is a
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 recently entered into a new
master site agreement with SpectraSite Communications for its existing
towers as well as towers that it may construct for us on build-to-suit
sites that we identify from time to time under a master design and build
agreement, the terms of which have yet to be finalized. Under the proposed
master design and build agreement, SpectraSite Communications would have
the right of first refusal to construct towers on build-to-suit sites and
we would be entitled to engage SpectraSite Communications to handle any
construction necessary to install our network equipment on shared
facilities that we license or sublicense from SpectraSite Communications
or any third party. Under the master site agreement, we intend to license
space on build-to-suit sites or sublicense space on SpectraSite
Communications' existing towers to house our network equipment. Each time
we license or sublicense tower space
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from SpectraSite Communications, we will enter into a separate site
agreement, which will have an initial term of ten years for build-to-suit
sites and five years for non-build-to-suit sites. The initial term for
each site agreement will be automatically renewable for three additional
five year terms unless SpectraSite Communications no longer has rights to
the tower space or we provide written notice to SpectraSite Communications
of our intention not to renew within 90 days of the expiration of the then
current term of the site agreement. We will be able to terminate a site
agreement during its initial term if we pay SpectraSite Communications
liquidated damages equal to the rent due for the remainder of the initial
term for non-build-to-suit sites or the lesser of rent due for the balance
of the initial term or the total construction costs for build-to-suit
sites. We will pay SpectraSite fixed monthly rent during the initial five
year term of each master site agreement in annual installments beginning
at the inception of each agreement. During any renewal term, our base rent
shall increase each year on the anniversary date of the renewal term by an
amount equal to 3% of the base rent payable for the immediately preceding
year. SpectraSite Communications has preferential access to more than
2,400 existing towers throughout the United States. We will evaluate the
available inventory for possible shared facilities sites for our network
equipment.
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
support services, 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 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.
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 believe that an opportunity exists for us to provide a high
quality, digital product to these markets with less competition than frequently
seen in the larger markets. We will capitalize on this
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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.
As described earlier, to achieve our build-out as rapidly and efficiently as
possible, we have entered into outsourcing or other relationships with Lucent
Technologies, LCC International and SpectraSite Communications.
The following table lists the location, the basic trading areas, commonly
referred to as "BTAs", megahertz of spectrum, estimated total residents and
percent coverage for each of our markets under our Sprint PCS management
agreement. The estimated total residents does not represent expected customers
but rather our total potential customers within each market. However, our
network build-out plan focuses on providing service to the residents in the most
densely populated and strategic areas of our markets which is represented by the
estimated percent coverage.
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We have commenced limited operations in the Reno/Tahoe/Northern California
market. Together with the Spokane market, we currently provide service to over
9,000 subscribers.
<TABLE>
<CAPTION>
ESTIMATED
TOTAL ESTIMATED
MEGAHERTZ RESIDENTS PERCENT
BTA NO.(1) OF SPECTRUM(2) (000'S)(3) COVERAGE(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 30 315
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 30 218
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) A basic trading area, or BTA, is a collection of counties surrounding a
metropolitan area in which there is a commercial community of interest. The
BTA number indicated in the table is assigned to that market by the Federal
Communications Commission for the purpose 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) Estimated 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 for each
of our four markets.
More than 75% of our radio communications sites will be shared facilities on
existing structures, which will result in higher radio communications site lease
expenses. These higher lease expenses will be offset in part by certain
operating expense savings resulting from shared facilities. Shared facilities
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.
Although Sprint PCS does not currently offer PCS services in every state in the
United States, 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.
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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.
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.
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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.
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 fewer people may travel on our network."
NON-SPRINT PCS ROAMING
Non-Sprint PCS roaming includes both inbound non-Sprint PCS roaming, when a
non-Sprint PCS subscriber uses our portion of the Sprint PCS network, and
outbound non-Sprint PCS roaming, when a Sprint PCS subscriber based in our
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.
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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
net 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
3.1 million new wireless subscribers. These statistics may not reflect Sprint
PCS' future growth rate nor our growth rate. We plan to enhance Sprint PCS'
proven strategies with strategies tailored to our specific markets.
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 over 350 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 over 150 stores in our markets.
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
Kmart, Staples, Circuit City,
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OfficeMax, Montgomery Ward, Office Depot, Ritz Camera, Target and Heileg-Meyers.
These retailers currently have over 200 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 high capacity, commonly referred to as
broadband, personal communications services to be provided utilizing digital
technology.
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 radio
communications site. The radio communications site is connected by microwave or
traditional
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telephone lines to a switch that uses computers to control the operation of the
cellular or digital wireless personal communications services system. The
switch:
- controls the transfer of calls from radio communications site to radio
communications site as a subscriber's handset travels;
- coordinates calls to and from handsets;
- allocates calls among the radio communications sites within the system;
and
- connects calls to the local wireline telephone system or to a long
distance carrier.
Wireless communications providers establish interconnection agreements with
local telephone companies and long distance telephone companies, thereby
integrating their system with the existing communications system. Because the
signal strength of a transmission between a handset and a radio communications
site declines as the handset moves away from the radio communications site, the
switching office and the radio communications site 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
radio communications site where the signal strength is stronger.
Digital wireless broadband personal communications services differ from
traditional analog cellular service principally in that digital 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 re-use 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 stronger
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.
Digital wireless 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. Digital 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 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 digital wireless
personal communications services operators now have dual-mode or tri-mode
handsets available to their
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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 all use digital
code division multiple access technology. We believe that code division multiple
access provides important system performance benefits such as:
GREATER CAPACITY
We believe, based on studies by code division multiple access manufacturers,
that code division multiple access systems can provide system capacity that is
approximately seven to ten times greater than that of current analog technology
and approximately three times greater than time division multiple access and
global system for mobile communications systems.
PRIVACY AND SECURITY
One of the benefits of code division multiple access technology is that it
combines a constantly changing coding scheme with a low power signal to enhance
call security and privacy.
SOFT HAND-OFF
Code division multiple access systems transfer calls throughout the code
division multiple access network using a technique referred to as a soft
hand-off, which connects a mobile customer's call with a new radio
communications site while maintaining a connection with the radio communications
site currently in use. Code division multiple access networks monitor the
quality of the transmission received by multiple radio communications sites
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 radio communications site. Analog, time division multiple
access and global system for mobile communications networks use a "hard
hand-off" and disconnect the call from the current radio communications site as
it connects with a new one without any simultaneous connection to both radio
communications sites.
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 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
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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 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
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 traditional telephone networks. While some of these
technologies and services are currently operational, others are being developed
or may be developed in the future.
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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 traditional telephone network 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;
- 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
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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 April 14, 2000, we employed 35 full-time employees. None of our
employees are represented by a labor union. We believe that our relations with
our employees are good.
PROPERTIES
Our headquarters are located in 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>
Office Space lease 1 Bala Plaza, Suite 402 6,000 10 years
Bala Cynwyd, Pennsylvania
Switch lease 5355 Capital Court 5,760 10 years
Unit Number 102
Reno, Nevada
</TABLE>
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings that we believe would,
if adversely determined, individually or in the aggregate, have a material
adverse effect on our financial condition or results of operations.
ENVIRONMENTAL COMPLIANCE
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.
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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. 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 and urge you to review them carefully.
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. Sprint PCS
owns the spectrum licenses and we are granted use of these licenses through our
agreements with Sprint PCS. 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
support services. Our relationship and agreements with Sprint PCS provide
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:
- 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.
In addition, 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 $250.0 million senior credit facility. This
consent replaced an existing consent and agreement between the parties that had
modified our management agreement in substantially the same manner for the
benefit of Paribas under UbiquiTel Operating Company's previous $25.0 million
credit facility.
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;
- share with Sprint the costs associated with its relocation of interfering
microwave sources in our markets;
- 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
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- manage that portion of Sprint PCS' customer base assigned to our markets.
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 Federal Communications Commission, 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 as depicted
in the table below. 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.
<TABLE>
<CAPTION>
PHASE 0 PHASE 1 PHASE 2 PHASE 3
MARKET SEPTEMBER 21, 2000 DECEMBER 31, 2000 MARCH 31, 2001 SEPTEMBER 30, 2001
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Reno/Tahoe/ Northern Reno, NV Yuba City/Marysville, CA Eureka, CA
California Sparks, NV Oroville, CA
Carson City, NV Chico, CA
Lake Tahoe, NV Red Bluff, CA
Redding,CA
Spokane/Montana Pullman, WA Newport,WA
Lewiston, ID Sandpoint, ID
Moscow,ID
Southern Idaho/ Logan, UT Boise, ID Twin Falls, ID
Utah/Nevada Brigham, UT Nampa, ID Pocatello, ID
Caldwell, ID Idaho Falls, ID
Mountain Home, ID Rexburg, ID
Jackson, WY St. Anthony, ID
Ketchum, ID
Cedar City, UT
St. George, UT
Mesquite, NV
Southern Indiana/ Terre Haute, IN Vincennes, IN
Kentucky Bloomington, IN Washington, IN
Bedford, IN Petersburg, IN
Evansville, IN Jasper, IN
Owensboro, KY Cannelton, IN
Rockport, IN
Bedford, IN
Mitchell, IN
New Castle, IN
Rushville, IN
Connersville, IN
Liberty, IN
Clarkesville, TN
</TABLE>
The management agreement also includes minimum build-out plan requirements
for select cities in the Spokane/Montana market, with a launch date of June 1,
2005.
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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
traditional telephone services based on wireless technology specifically
designed for the competitive local telephone market in areas where Sprint owns
the local telephone company unless we name the Sprint-owned local telephone
company 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" 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' 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' 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
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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 at any time so long as
it gives us at least 30 days prior notice. We have the right to appeal to Sprint
PCS' management adjustments which could cause an unreasonable increase in cost
to us if the adjustment:
- causes us to incur a cost exceeding 5% of the sum of our equity plus our
outstanding long term debt, or
- 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 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.
CHANGE OF CONTROL. Sprint PCS must consent to a change of control of us,
but this consent cannot be unreasonably withheld.
ASSIGNMENT. We cannot assign the Sprint PCS agreements to any person
without the prior consent of Sprint PCS, except that we can assign the
agreements to any affiliate of ours that is not a significant competitor of
Sprint PCS in the telecommunications business.
RIGHTS OF FIRST REFUSAL. Sprint PCS has rights of first refusal to buy our
assets, without further stockholder approval, 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.
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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.
However, Sprint PCS' rights of termination have been modified by the consent
and agreement and are discussed more particularly under "Consent and 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.
TRANSFER OF SPRINT PCS NETWORK. Sprint PCS can sell, transfer or assign its
wireless personal communications services network to a third party if the third
party agrees to be bound by the terms of the Sprint PCS agreements.
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 in the management agreement);
- 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:
- the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint PCS; or
- 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, without further stockholder approval, to sell our operating
assets to Sprint PCS for an amount equal to 72% of our Entire Business
Value;
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- require us to purchase, subject to governmental approval, the licensed
spectrum for an amount equal to the greater of:
- the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint; or
- 10% of our Entire Business Value;
- take any action as Sprint PCS deems necessary to cure our breach of the
management agreement, including assuming responsibility for, and
operating, our 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:
- the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint PCS; or
- 10% of our Entire Business Value.
If we give Sprint PCS timely notice of non-renewal, or we both give notice
of non-renewal, or the management agreement can be terminated for failure to
comply with legal requirements or regulatory considerations, Sprint PCS may:
- purchase all of our operating assets, without further stockholder
approval, for an amount equal to 80% of our Entire Business Value; or
- require us to purchase, subject to governmental approval, the licensed
spectrum for an amount equal to the greater of:
- the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint PCS; or
- 10% of our Entire Business Value.
If 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;
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- 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.
THE SERVICES AGREEMENT
The services agreement outlines various support 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.
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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. 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.
THE CONSENT AND AGREEMENT
OVERVIEW
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 $250.0 million credit facility. The consent replaced an
existing consent and agreement between the parties that had modified our
management agreement in substantially the same manner for the
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benefit of Paribas under UbiquiTel Operating Company's previous $25.0 million
credit facility. The consent generally provides, among other things, the
following.
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 markets 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 markets 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 also has acknowledged that notice of
an event of termination under the Sprint PCS agreements constitutes
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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.
RIGHTS UPON DEFAULT
Besides modifying the rights and remedies available to Sprint PCS upon an
event of termination under your management agreement, the consent 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:
- UbiquiTel Operating Company has defaulted on its obligations under the
credit facility but no event of termination has occurred under the
management agreement; or
- we have breached the management agreement with Sprint PCS.
The consent generally permits, without stockholder approval 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 extended beyond the
initial six-month period, we will be
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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
markets, 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 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
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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,
without stockholder approval, 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, without stockholder approval, to
purchase our operating assets or capital stock under the following terms:
- The purchase price will be the greater of:
- 72% of our Entire Business Value; or
- 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 days of
its receipt of the offer, on acceptable conditions, and in an amount of
time acceptable to us and Paribas;
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- 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:
- to sell the assets or stock to an entity that meets the requirements of a
qualified successor under the Sprint PCS agreements; or
- 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, without
stockholder approval, 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 trading area where the buyer proposes to
purchase the spectrum from Sprint PCS, the buyer may only buy 5 MHz of
spectrum;
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- 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 mobile
identification number 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 mobile identification number
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.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following are summaries of the material provisions of our senior credit
facility and the indenture governing the senior subordinated discount notes of
our subsidiary, UbiquiTel Operating Company.
SENIOR CREDIT FACILITY
On March 31, 2000, UbiquiTel Operating Company entered into a
$250.0 million senior secured credit facility with Paribas.
The credit facility provides for:
- an aggregate of $120,000,000 of senior secured A term loans, which may be
drawn at any time until April 2002, and which mature in October 2007;
- an aggregate of $75,000,000 of senior secured B term loans, which were
drawn down in full on April 11, 2000 and funded into an escrow account,
and which mature in October 2008; and
- a $55,000,000 senior secured revolving credit facility which matures in
October 2007 and includes a $5,000,000 subfacility for the issuance of
letters of credit.
The $75,000,000 million of senior secured B term loans that were funded into
an escrow account will remain the property of our lenders and will not be
released to us if an event of default has occurred under the credit agreement.
Additionally, these funds will not be released to us until specified conditions
have been satisfied. These conditions include, among others, evidence that we
have used all of the proceeds from our sale of senior subordinated discount
notes and from this offering to pay fees and expenses in connection with these
offerings, to fund the build-out of our network or for other general corporate
and working capital purposes. Additional borrowings under our senior credit
facility must be placed into escrow until the conditions to release our initial
borrowing of $75,000,000 have been satisfied.
UbiquiTel Operating Company must repay the A term loans, if borrowed, in 14
consecutive quarterly installments, beginning in June 2004. The amount of each
of the first four installments is $2,500,000, the amount of each of the next
four installments is $3,750,000, the amount of each of the next four
installments is $16,250,000, and the amount of each of the last two installments
is $15,000,000.
UbiquiTel Operating Company must repay the B term loans in eighteen
consecutive quarterly installments, beginning in June 2004. The amount of each
of the first 12 installments is $187,500, the amount of each of the next four
installments is $2,812,500, and the amount of each of the last two installments
is $30,750,000.
The amount that UbiquiTel Operating Company can borrow and that can be
outstanding under the revolving credit facility reduces in eight quarterly
reductions, beginning in December 2005. The amount of each of the reductions is
$6,875,000.
Until the earlier to occur of the syndication of the senior credit facility,
or August 2000, Paribas may re-allocate the amounts among the A term loans, B
term loans and revolving credit facility at their discretion. If these amounts
are re-allocated by Paribas, the installment payments set forth above will also
be subject to re-allocation.
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Interest on the A term loans accrues, at our option, either at:
- the reserve adjusted London interbank offered rate, plus a margin of
between 3.75% and 2.25%; or
- the higher of The Chase Manhattan Bank's prime rate or the federal funds
rate plus 0.5%, plus a margin of between 2.0% and 1.0%.
Interest on the B term loans and the revolving credit loans accrues, at our
option, either at:
- the reserve adjusted London interbank offered rate, plus an applicable
margin of between 4.25% and 2.75%, depending on the level of UbiquiTel
Operating Company's ratio of debt to earnings before interest, taxes,
depreciation and amortization; or
- the higher of The Chase Manhattan Bank's prime rate or the federal funds
rate plus 0.5%, plus an applicable margin of between 2.5% and 1.5%,
depending on the level of UbiquiTel Operating Company's ratio of debt to
earnings before interest, taxes, depreciation and amortization.
Interest on any overdue amounts will accrue at a rate per annum equal to
2.0% plus the rate otherwise applicable to that amount.
The credit facility requires that UbiquiTel Operating Company pay commitment
fees to the lender. Initially, the commitment fee is based on a percentage of
the undrawn amounts of the revolving credit facility and the A term loan
facility. The commitment fees are payable quarterly in arrears and a separate
agent's fee is payable to the administrative agent.
The commitment fee is:
- if 67% or more of the total amount of the facilities is drawn, the
commitment fee is 0.75% of the undrawn amount;
- if less than or equal to 67% and greater than 33% of the total amount of
the facilities is drawn, the commitment fee is 1.125% of the undrawn
amount; or
- if less than or equal to 33% of the total amount of the facilities is
drawn, the commitment fee is 1.375% of the undrawn amount.
We paid origination fees of $7.0 million in connection with the credit
facility.
We must repay the term loans, and the commitments under the revolving credit
facility will be reduced, in an aggregate amount equal to:
- 50% of excess cash flow in each fiscal year;
- 100% of the net proceeds of specified asset sales outside the ordinary
course of business, in excess of a $1.0 million yearly threshold;
- 100% of the net cash proceeds of specified incurrences of indebtedness;
and
- 100% of the net cash proceeds of specified issuances of equity securities,
other than proceeds from this offering.
We have guaranteed all of the obligations of UbiquiTel Operating Company
under the credit facility. UbiquiTel Operating Company's obligations under the
credit facility are secured by security interests in substantially all of its
assets, and by a pledge of all of UbiquiTel Operating Company's capital stock.
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The credit facility contains customary covenants, including covenants
limiting indebtedness, dividends and distributions on, and redemptions and
repurchases of, capital stock and other similar payments, and the acquisition
and disposition of assets. The credit facility also requires that UbiquiTel
Operating Company comply with specified financial covenants, including interest
coverage ratios and indebtedness to total capital ratios and other covenants,
including a requirement to cover a specified percentage of the population in our
market areas. We are currently in compliance with all covenants under the credit
facility.
The credit facility provides for customary events of default, including
cross-defaults, judgment defaults and events of bankruptcy. In case of an event
of default, our lender may declare our debt due and payable.
SENIOR SUBORDINATED DISCOUNT NOTES
On April 11, 2000, UbiquiTel Operating Company issued 300,000 units
consisting of senior subordinated discount notes due 2010 and warrants to
purchase 3,579,000 shares of our common stock, which yielded gross proceeds of
$152.3 million. The notes were issued under an indenture, dated as of April 11,
2000, among us, UbiquiTel Operating Company and American Stock Transfer & Trust
Company, as trustee. The notes:
- mature on April 15, 2010 and are limited to an aggregate principal amount
at maturity of $300.0 million;
- generated gross proceeds to us of $152.3 million;
- are general, unsecured obligations of UbiquiTel Operating Company,
subordinated in right of payment to all senior debt, including all
obligations under the senior credit facility;
- accrue interest at a rate of 14% per annum, computed on a semiannual
basis, calculated from April 11, 2000, will not bear interest payable in
cash prior to April 15, 2005, and will bear interest payable semiannually
in cash on each April 15 and October 15, beginning October 15, 2005; and
- are guaranteed by us.
UbiquiTel Operating Company may elect to redeem all or part of the notes at
any time on or after April 15, 2005 and before maturity, at the following
redemption prices:
<TABLE>
<CAPTION>
REDEMPTION PRICE
PER $1,000 OF
PRINCIPAL
YEAR BEGINNING AMOUNT
- -------------- ----------------
<S> <C>
April 15, 2005.............................................. $1,070.00
April 15, 2006.............................................. 1,046.67
April 15, 2007.............................................. 1,023.33
April 15, 2008 and thereafter............................... 1,000.00
</TABLE>
In addition, on or before April 15, 2003, UbiquiTel Operating Company may
redeem up to 35% of the principal amount at maturity of notes issued under the
indenture, at a redemption price equal to $1,140 for each $1,000 of accreted
value of a note to the redemption date, with the net proceeds of one or more
equity offerings (other than the proceeds from this offering).
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However, at least 65% of the aggregate principal amount at maturity of notes
issued under the indenture must remain outstanding immediately after giving
effect to the redemption.
If a change of control occurs, each noteholder may require UbiquiTel
Operating Company to repurchase its notes. The repurchase price will be:
- $1,010 per $1,000 of accreted value of the notes, if the repurchase occurs
before April 15, 2005, or
- $1,010 per $1,000 of principal amount of the notes, plus any accrued
interest, if the repurchase occurs on or after April 15, 2005.
A change of control will occur if:
- we sell substantially all of our and our subsidiaries' assets;
- we adopt a plan for our liquidation or dissolution;
- any person or group of persons, other than certain current stockholders or
their affiliates, become the beneficial owner of more than 50% of the
voting power of our stock; or
- a majority of our board of directors no longer consists of continuing
directors, which are directors who were serving on April 11, 2000, or who
were nominated to serve as a director by a majority of the continuing
directors at the time. Changes in directors elected by particular
investors, such as holders of our preferred stock, are ignored for
purposes of determining continuing directors.
The UbiquiTel Operating Company credit facility prohibits the purchase of
outstanding notes before repayment of the borrowings under the credit facility.
UbiquiTel Operating Company is also required to offer to repurchase the
notes if all or some of the net proceeds of an asset sale are not used to
acquire an entity engaged in a permitted business, to purchase other long-term
assets used or useful in a permitted business or to repay any senior
indebtedness.
We are required, under the terms of a registration rights agreement, to:
- file an exchange offer registration statement on or before June 25, 2000
covering the exchange of the notes for registered notes;
- use our reasonable best efforts to cause the exchange offer registration
statement to be declared effective under the Securities Act on or before
October 8, 2000;
- use our reasonable best efforts to cause the exchange offer registration
statement to be effective continuously;
- keep the exchange offer open for a period of not less than 20 business
days; and
- cause the exchange offer to be consummated no later than the 30th business
day after it is declared effective.
We may also be required to file a shelf registration statement to register
for public resale the notes held by any holder who may not otherwise participate
in the exchange offer.
If we fail to file the exchange offer or shelf registration statement, or
fail to cause the exchange offer or shelf registration statement to become
effective, or fail to consummate the exchange offer as specified above, a
registration default shall be deemed to have occurred and we
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will be required to pay liquidated damages to each holder of the notes. The
liquidated damages payable to each holder of the notes will be in an amount
equal to $0.05 per week per $1,000 in principal amount of the notes held by such
holder for each week or portion thereof that the registration default continues
for the first 90-day period immediately following the occurrence of such
registration default. This amount will increase by an additional $0.05 per week
per $1,000 in principal amount of the notes with respect to each subsequent
90-day period, up to a maximum amount equal to $0.50 per $1,000 in principal
amount of the notes. The provision for liquidated damages will continue until
such registration default has been cured. We will not be required to pay
liquidated damages for more than one registration default at any given time.
The indenture contains restrictive covenants which, among other things,
restrict UbiquiTel Operating Company's and its restricted subsidiaries' ability
to:
- incur additional indebtedness;
- pay dividends, make investments or redeem or retire stock;
- cause encumbrances or restrictions to exist on the ability of its
subsidiaries to pay dividends and make investments in, or transfer
property or assets;
- create liens on their assets;
- sell assets;
- engage in transactions with affiliates;
- engage in businesses other than a permitted business; or
- engage in mergers or consolidations.
The indenture also provides for customary events of default, including
cross-defaults, judgment defaults and events of bankruptcy. In the case of an
event of default, our trustee or the holders of at least 25% in principal amount
of the outstanding notes may declare the notes immediately due and payable. We
are currently in compliance with all covenants under the indenture governing the
notes.
We paid commitment and other fees to our initial purchasers of the notes and
warrants of approximately $6.0 million.
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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.
EXECUTIVE OFFICERS AND DIRECTORS:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Donald A. Harris.................. 47 Chairman of the Board, President and Chief
Executive Officer
Dean E. Russell................... 48 Chief Operating Officer
Paul F. Judge..................... 34 Senior Vice President--Corporate Development
and Finance
Andrew W. Buffmire................ 53 Senior Vice President--Business Development
Robert A. Berlacher............... 45 Director
Peter Lucas....................... 45 Director
Eve M. Trkla...................... 37 Director
Joseph N. Walter.................. 47 Director
OTHER KEY EMPLOYEES:
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Debra A. Gerstenberg.............. 36 Vice President of Human Resources
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 inceptions and was appointed Chairman of the Board in
May 2000. 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 traditional 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
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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 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 Corporate 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 one of our founders 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.
ANDREW W. BUFFMIRE will join the Company in May 2000 as Senior Vice
President Business Development. He will be responsible for the development and
negotiation of strategic business transactions. Prior to joining us,
Mr. Buffmire was a Director in the Sprint PCS Affiliates Program. He joined
Sprint PCS in January of 1996 during its initial development stage. At Sprint
PCS he led the state related regulatory compliance, network infra-structure and
interconnection negotiations for the market entry of Sprint PCS and provided
legal counsel for various aspects of the network build-out. Before joining
Sprint PCS, Mr. Buffmire was an attorney in private legal practice in Salt Lake
City, Utah for 16 years, with the exception of two years (1985-1987), when he
was the founder, general counsel and registered principal of an NASD registered
investment banking firm. Mr. Buffmire interned with the Commission of the
European Economic Community (EU) in Brussels, Belgium. He has a Bachelor of Arts
Degree in International Relations from the University of Southern California, a
Juris Doctor Degree from the University of Utah and a Master of Laws degree from
the London School of Economics and Political Science.
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
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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. 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 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 reports to our Chief Operating Officer and is responsible for
implementing and directing the 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
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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 reports to our Chief Operating Officer and is responsible for the
quality and technical performance of all network operations. 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 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. The five
directors currently comprising our board of directors were all elected pursuant
to our stockholders agreement. 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 and one designee of DLJ
Merchant Banking pursuant to the terms of our stockholders 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 stockholders agreements will
terminate and 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 the closing of this offering, the board of directors will establish
an audit committee, one of whose members shall be the designee of DLJ Merchant
Banking pursuant to our stockholders agreement, and a compensation committee.
The audit committee will be 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 will be responsible for reviewing and approving
all compensation arrangements for our officers, and is also responsible for
administering the equity incentive plan.
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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. The limitation on our
directors' liability may not apply to liabilities arising under the federal
securities laws. 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. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors and executive officers
pursuant to our certificate of incorporation and bylaws, we have been informed
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees or agents 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 $100,000 during the year ended December 31,
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
ANNUAL UNDERLYING
COMPENSATION OPTION
-------------------- AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) (# OF SHARES) COMPENSATION($)
<S> <C> <C> <C> <C>
Donald A. Harris......................... 19,231(1) -- 2,550,000(2 ) 1,193,505(3 )
Chairman of the Board, 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.
(2) In December 1999, we granted Mr. Harris stock options to purchase up to
2,550,000 shares of our common stock at an exercise price of $0.50 per
share. Subject to earlier vesting upon a
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change of control, the options vest in three equal annual installments
beginning on November 29, 2000.
(3) Of such amount, $993,505 represents non-cash compensation expense recorded
by us in connection with issuing shares of our non-voting common stock to
Mr. Harris under the founders stock agreement. The remaining $200,000
represents a payment by us to Mr. Harris for services rendered prior to our
incorporation.
In November 1999, we entered into an employment agreement with our President
and Chief Executive Officer that provides for an annual base salary of $200,000
for a three year term. See "Employment Agreements." Our Chief Operating Officer
will receive an annual base salary of $165,000 in 2000. Our Senior Vice
President--Business Development and Finance will receive an annual base salary
of $125,000 in 2000. We are currently conducting a search for a Chief Financial
Officer and expect to provide annual compensation customary for a position of
this type within our industry.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during the fiscal
year ended December 31, 1999 to each of the named executive officers. No stock
appreciation rights were granted to these individuals during that year.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
(IN THOUSANDS)
EXCEPT PER SHARE DATA
-----------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE
NUMBER OF MID-POINT AT ASSUMED
SECURITIES % OF TOTAL OF ESTIMATED MID-POINT OF
UNDERLYING OPTIONS RANGE OF ESTIMATED
UNEXERCISED GRANTED TO EXERCISE OR OFFERING PRICE RANGE OF
OPTIONS EMPLOYEES IN BASE PRICE TO PUBLIC EXPIRATION OFFERING PRICE
NAME GRANTED(1) FISCAL YEAR ($)/(SH)(2) ($)/(SH)(3) DATE TO PUBLIC(4)
<S> <C> <C> <C> <C> <C> <C>
Donald A. Harris..... 2,550,000 80% $0.50 $13.00 11/29/09 $31,875,000
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM(5)
-------------------------
NAME 5%($) 10%($)
<S> <C> <C>
Donald A. Harris..... $41,033,682 $52,113,407
</TABLE>
- ------------------------
(1) Subject to earlier vesting upon a change of control, the options granted to
Mr. Harris vest annually in three equal installments beginning November 29,
2000.
(2) 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.
(3) Represents the mid-point of the estimated range of the offering price on the
cover page of this prospectus.
(4) Potential realizable value is based on the product of the mid-point of the
estimated range of the offering price on the cover of this prospectus minus
the exercise price multiplied by the number of shares underlying the
options.
(5) 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 equal to the mid-point of the estimated
range of the offering price on the cover of this prospectus. 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.
AGGREGATED 1999 FISCAL YEAR-END OPTION VALUES
The following table provides summary information regarding options held by
each of our named executive officers as of December 31, 1999. There was no
public market for the common stock as of December 31, 1999. Accordingly, the
value of unexercised in-the-money options is
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<PAGE>
based on the mid-point of the estimated range of the offering price on the cover
page of this prospectus less the exercise price payable for such shares.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED VALUE YEAR-END(#) AT FISCAL YEAR-END
NAME ON EXERCISE(#) REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
- ---- -------------- -------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Donald A. Harris..... -- -- 0/2,550,000 $0/$31,875,000
</TABLE>
OPTION GRANTS IN FISCAL YEAR 2000
None of our executive officers or directors have been granted stock options
or stock appreciation rights in fiscal 2000 through the date of this prospectus.
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 20,000 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 Chairman of the Board, 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 2,550,000 shares of our common
stock at a purchase price of $0.50 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
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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.
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 4,080,000 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.
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.
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We have granted an aggregate of 1,215,000 non-qualified options pursuant to
our equity incentive plan of which 650,000 were granted in 1999 and the balance
of 565,000 were granted in January 2000. We granted an additional 2,550,000
non-qualified options in 1999.
NONCOMPETITION AGREEMENTS
In connection with the granting of any stock options or equity-based awards
under our 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 May 1, 2000, by the following individuals or groups:
- each person or entity who is known by us to own beneficially more than
5.0% of our common 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 May 1, 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 PERCENTAGE
NUMBER OF SHARES OWNERSHIP PRIOR OWNERSHIP AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED TO THIS OFFERING THIS OFFERING
- ------------------------ ------------------ ---------------- ---------------
<S> <C> <C> <C>
9,338,000 18.6% 14.4%
Eve M. Trkla(1).........................
Brookwood Ubiquitel Investors, LLC
5,402,700 10.7 8.3
Peter Lucas(2)..........................
CBT Wireless Investments, L.L.C.
4,978,150 9.9 7.7
BET Associates, L.P.(3).................
4,297,696 8.6 6.6
Donaldson, Lufkin & Jenrette Merchant
Banking Partners II, L.P.(4)..........
4,029,802 8.0 6.2
Donald A. Harris(5).....................
4,002,000 8.0 6.2
New Ventures, L.L.C.(6).................
3,335,000 6.6 5.1
SpectraSite Communications, Inc.(7).....
3,001,800 6.0 4.6
Stephen C. Marcus(8)....................
2,614,034 5.2 4.0
Joseph N. Walter(9).....................
The Walter Group, Inc.
2,701,050 5.4 4.2
Robert A. Berlacher(10).................
Lancaster Investment Partners.........
819,324 1.6 1.3
Paul F. Judge...........................
7,550,176 15.0 11.7
All officers and directors as a group
(7 persons)...........................
</TABLE>
- ------------------------
(FOOTNOTES ON FOLLOWING PAGE)
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(1) The address of Brookwood Ubiquitel Investors, LLC, is 55 Tozer Road,
Beverly, Massachusetts 01915. Ms. Trkla, a director of ours, is a principal
of Brookwood Ubiquitel Investors 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.
(2) 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.
(3) The address of BET Associates, L.P., is 3103 Philmont Avenue, Huntington
Valley, Pennsylvania 19006.
(4) 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 stockholder
agreement.
(5) Includes 240,000 shares held by the Harris Family Trust as to which shares
Mr. Harris disclaims beneficial ownership. Mr. Harris serves as our Chairman
of the Board, President and Chief Executive Officer and as a director.
(6) The address of New Ventures, L.L.C., is 211 North Union Street, Suite 300,
Alexandria, Virginia 22314.
(7) The address of SpectraSite Communications is 160 Regency Forest Drive,
Suite 400, Cary, North Carolina 27511.
(8) The address of Stephen Marcus is 915 Exeter Crest, Villanova, Pennsylvania
19085.
(9) The address of The Walter Group, Inc., is 120 Lakeside Avenue, Suite 310,
Seattle, Washington 98122-6578. Joseph N. Walter, a director of ours, 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.
(10) Includes 2,001,000 shares held of record by Lancaster Investment
Partners, L.P. Robert A. Berlacher, a director of ours, is President of LIP
Advisors, Inc., the general partner of Lancaster Investor Partners, L.P. The
address of Mr. Berlacher and Lancaster Investment Partners, L.P. is 1150
First Avenue, Suite 600, King of Prussia, Pennsylvania 19406.
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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. All of these related party
transactions that are material to Ubiquitel are described below. 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.
COMMON STOCK STOCK ISSUANCES
The following tables set forth, as of May 1, 2000, all shares of our voting
and non-voting common stock that have been issued to our stockholders. All of
these amounts have been adjusted to give effect to our two-for-one stock split.
ISSUANCES OF VOTING COMMON STOCK IN NOVEMBER 1999 AND APRIL 2000:
<TABLE>
<CAPTION>
TOTAL
NAME NUMBER OF SHARES PURCHASE PRICE
- ---- ---------------- --------------
<S> <C> <C>
The Walter Group, Inc..................... 2,614,034 $ 1,281
Donald A. Harris.......................... 2,028,802 994
James Parsons............................. 905,158 444
Paul F. Judge............................. 819,324 402
US Bancorp................................ 603,440 296
--------- -------
Totals.................................. 6,970,758 $ 3,417
========= =======
</TABLE>
These amounts include shares that were issued in April 2000, at no
additional costs, to our founding stockholders to maintain certain specified
stock percentages. These additional shares were issued as a result of our
contractual obligations under a founders stock agreement. See "--Stockholders'
Agreements" below.
ISSUANCES OF NON-VOTING COMMON STOCK IN NOVEMBER 1999:
<TABLE>
<CAPTION>
TOTAL
NAME NUMBER OF SHARES PURCHASE PRICE
- ---- ---------------- --------------
<S> <C> <C>
The Walter Group.......................... 12,000,320 $ 6,000
James Parsons............................. 4,155,200 2,078
Donald A. Harris.......................... 9,313,280 4,657
US Bancorp................................ 2,770,240 1,385
Paul F. Judge............................. 3,760,960 1,880
---------- -------
Totals.................................. 32,000,000 $16,000
========== =======
</TABLE>
The shares of non-voting common stock were issued to the holders pursuant to
the terms of a founders stock agreement. The holders of our shares of non-voting
common stock are not entitled
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to equity participation rights, such as rights to receive dividends or other
distributions in the event we are sold, merged or liquidated, until such time as
the shares of non-voting common stock are converted into shares of voting common
stock. The shares of non-voting common stock vest as shares of voting common
stock only if we issue shares or instruments convertible into shares of our
capital stock that would cause the founding stockholders to own less than
certain specified percentages. See "--Stockholders' Agreements" below.
All outstanding shares of our non-voting common stock will be cancelled upon
consummation of this offering for nominal value.
PREFERRED STOCK ISSUANCES
The following tables set forth, as of May 1, 2000, shares of our preferred
stock that have been issued to our stockholders that are deemed to beneficially
own, as of April 12, 2000, more than 5% of our common stock, or who serve as our
executive officers or directors.
ISSUANCES OF SERIES A PREFERRED STOCK IN NOVEMBER 1999:
<TABLE>
<CAPTION>
TOTAL
NAME NUMBER OF SHARES PURCHASE PRICE
- ---- ---------------- --------------
<S> <C> <C>
Brookwood Ubiquitel Investors, L.L.C...... 9,338,000 $ 4,669,000
CBT Wireless Investments, L.L.C........... 5,402,700 2,701,350
New Ventures, L.L.C....................... 4,002,000 2,001,000
Stephen C. Marcus......................... 3,001,800 1,800,900
SpectraSite Communications, Inc........... 3,335,000 1,667,500
Donald A. Harris.......................... 2,001,000 1,000,500
Lancaster Investment Partners............. 2,001,000 1,000,500
Robert A. Berlacher....................... 700,050 50,025
---------- -----------
Totals.................................. 29,781,550 $14,889,775
========== ===========
</TABLE>
Our director, Ms. Trkla, is affiliated with Brookwood Ubiquitel Investors,
L.L.C. Our director, Peter Lucas, is affiliated with CBT Wireless Investments,
L.L.C. Our director, Mr. Berlacher, is affiliated with Lancaster Investment
Partners.
The amounts listed above are adjusted to reflect the number of shares of
common stock that the preferred stockholders will receive upon conversion of our
preferred stock into common stock, after giving effect to our two-for-one stock
split.
ISSUANCES OF SERIES B PREFERRED STOCK IN FEBRUARY 2000 AND APRIL 2000:
<TABLE>
<CAPTION>
TOTAL
NAME NUMBER OF SHARES PURCHASE PRICE
- ---- ---------------- --------------
<S> <C> <C>
DLJ Merchant Banking...................... 4,297,696 $25,000,000
</TABLE>
This amount includes shares that were issued in April 2000, at no additional
cost, to DLJ Merchant Banking, to maintain certain specified stock percentages.
These additional shares were issued as a result of our contractual obligations
under a preferred stock purchase agreement with DLJ Merchant Banking. These
anti-dilution rights granted to DLJ Merchant Banking will expire upon the
closing of this offering. The amount listed above is adjusted to reflect the
number of
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shares of common stock that DLJ Merchant Banking will receive upon conversion of
our preferred stock into common stock, after giving effect to our two-for-one
stock split.
In the event that we do not complete this offering prior to July 31, 2000,
DLJ Merchant Banking has agreed to purchase additional shares of our preferred
stock for an aggregate purchase price of $100.0 million. DLJ Merchant Banking's
agreement to purchase the additional shares is subject to specified conditions
precedent, including a condition that we have not experienced a material adverse
change in our business or operations.
TERMS OF PREFERRED STOCK
The holders of our preferred stock are entitled to the number of votes equal
to the number of shares of common stock into which they may be converted. The
holders of our preferred stock are also entitled to receive dividends at a rate
of 7% per year and dividends will accrue if not paid. We have not paid any
dividends to our holders of preferred stock as of the date of this prospectus.
Our preferred stock will convert into common stock on a one-for-one basis upon
the completion of this offering and, upon conversion, we will be required to pay
all accrued dividends. We have the option to pay accrued dividends in cash or
stock. Until such conversion, our holders of preferred stock will be entitled to
liquidation preferences and rights to approve specified transactions, including
certain major transactions by us.
We intend to pay accrued dividends to the holders of our preferred stock in
cash upon the closing of this offering. Assuming we close our offering on
May 31, 2000, we will pay the following cash dividends to the holders of
preferred stock that are listed in the tables above as follows:
<TABLE>
<CAPTION>
NAME AMOUNT OF CASH DIVIDEND
- ---- -----------------------
<S> <C>
Brookwood Ubiquitel Investors, L.L.C.............. $137,895
CBT Wireless Investments, L.L.C................... 78,782
New Ventures, L.L.C............................... 59,098
Stephen C. Marcus................................. 53,188
SpectrasteSite Communications, Inc................ 49,248
Donald A. Harris.................................. 29,549
Lancaster Investment Partners..................... 29,549
Robert A. Berlacher............................... 1,477
DLJ Merchant Banking.............................. 465,069
</TABLE>
STOCKHOLDERS' AGREEMENTS
In connection with the issuance of common stock to our founders in November
1999, we entered into a founders stock agreement. The founders stock agreement
provides, among other things, that the founding stockholders will become vested
in shares of voting common stock to maintain certain specified percentages of
voting common stock. As a result of the founders stock agreement, our founding
stockholders vested, at no additional costs to the founding stockholders, in a
total of 136,758 shares of our voting common stock in April 2000. These shares
are reflected in the tables set forth above. Our founding stockholders have also
entered into a co-sale agreement, which provides certain co-sale rights if a
founding stockholder desires to sell our shares.
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In connection with the issuance of our preferred stock, we entered into
stockholders' agreements. The stockholders' agreements include provisions
relating to the election of our directors, as well as tag-along, bring-along,
preemptive and first offer rights. Our stockholders' agreement with DLJ Merchant
Banking gives DLJ Merchant Banking the right to cause us to acquire all of its
equity holdings in us if we have not completed an initial public offering of our
common stock which results in at least $50 million of gross proceeds by
February 24, 2005.
All of these agreements will terminate upon the closing of this offering.
REGISTRATION RIGHTS AGREEMENTS
We have also granted registration rights to all of our current stockholders.
Under these agreements, we are required to register shares of common stock upon
request. The registration rights agreements will survive the closing of this
offering. See "Description of Capital Stock--Registration Rights."
WARRANTS
In December 1999, we borrowed $8.0 million from BET Associates and issued
BET Associates a warrant to purchase 2,489,175 shares of our common stock. On
April 12, 2000, BET Associates exercised the warrant for a purchase price of
$24,891 and was issued 2,489,175 shares of our common stock, which will be
converted into 4,978,150 shares as a result of our two-for-one stock split to be
effective as of the date of this prospectus. We agreed to certain repurchase
provisions relating to the common stock issued to BET Associates under the
warrant. The repurchase provisions will terminate upon the closing of this
offering.
Upon the closing of our senior subordinated discount note offering, we
issued to Donaldson, Lufkin & Jenrette Securities Corporation warrants to
purchase shares of our common stock. These warrants are expected to be cancelled
prior to the offering and we will issue new warrants to Donaldson, Lufkin &
Jenrette Securities Corporation to purchase up to 286,183 shares of our common
stock at an exercise price equal to the initial public offering price per share,
subject to increase or decrease in the event that the size of this offering is
increased or decreased. These warrants will be exercisable at any time after the
first anniversary of this offering and expire on the fifth anniversary of this
offering.
LOAN WITH STOCKHOLDER
In December 1999, we borrowed $8.0 million from BET Associates. The note
evidencing the borrowing of $8.0 million provided that interest at 12% would be
payable quarterly, commencing April 1, 2000, and would mature on December 28,
2007. We paid the note in full from the proceeds of our sale of senior
subordinated discount notes on April 11, 2000. The prepayment of the BET
Associates note included unpaid interest of $276,000, and a prepayment fee of
$80,000.
CONTRACTUAL ARRANGEMENTS WITH STOCKHOLDERS
We have a master lease-agreement with SpectraSite Communications.
SpectraSite Communications did not receive any payments under our agreement
during 1999. We recently entered into a new master site agreement with
SpectraSite Communications for its existing towers as well as towers that it may
construct for us on build-to-suit sites that we identify from time to
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time under a master design and build agreements, the terms of which have yet to
be finalized. Under the proposed master design and build agreement, SpectraSite
Communications would have the right of first refusal to construct towers on
build-to-suit sites and we would be entitled to engage SpectraSite
Communications to handle any construction necessary to install our network
equipment on shared facilities that we license or sublicense from SprectraSite
Communications or any third party. Under the master site agreement, we intend to
license space on build-to-suit sites or sublicense space on SpectraSite
Communication's existing towers to house our network equipment. See
"Business--Business Strategy--Utilize Other Strategic Third Party Relationships
in Network Build-out--SpectraSite Communications" for a description of the
general terms of the master site agreement. For the three months ended
March 31, 2000, Ubiquitel accrued fees of $773,000 due to SpectraSite.
We received consulting services from The Walter Group in 1999. We paid The
Walter Group $148,000 for these consulting services in 1999. In January, 2000,
The Walter Group sold certain of its assets to Wireless Facilities Inc., a
wireless engineering and consulting firm. As a result, consulting services that
we previously received from The Walter Group are now provided by Wireless
Facilities, Inc., which is not affiliated with any of our directors, officers or
principal stockholders.
OTHER FEES PAID TO STOCKHOLDERS
An affiliate of Donaldson, Lufkin & Jenrette entered into a commitment
letter with us in February 2000 to provide up to $126.0 million of senior
subordinated increasing rate notes. The commitment letter provided that the
affiliate of Donaldson, Lufkin & Jenrette would be paid a fee upon the closing
of our senior subordinated discount notes. We paid the commitment fee of
$531,250 on April 11, 2000. Donaldson Lufkin & Jenrette was also one of the
initial purchasers under our sale of units of warrants and senior subordinated
discount notes in April 2000, for which they received approximately
$4.5 million for performing these services. Donaldson, Lufkin & Jenrette
Securities Corporation is the lead manager of this offering and will receive a
customary underwriting fee.
During 1999, we paid Mr. Parsons $911,000 and we paid US Bancorp $604,000
for services provided to us in connection with obtaining, negotiating and
closing of the sale of our preferred stock in November 1999. We also paid a fee
of $1.0 million to an entity affiliated with Mr. Parsons in April 2000 in
connection with the closing of our $250.0 million senior credit facility.
ASSIGNMENT OF SPRINT PCS AGREEMENT TO US
In October 1998, a limited liability company whose sole member was The
Walter Group entered into a management agreement with Sprint PCS whereby it
became the Sprint PCS affiliate with the exclusive right to provide PCS services
under the Sprint and Sprint PCS brand names in the Reno/Tahoe market. The
limited liability company subsequently changed its name to Ubiquitel L.L.C.
During the period from October 1998 to October 1999, Ubiquitel L.L.C. attempted
unsuccessfully to obtain financing for the build-out of the Reno/Tahoe market.
In November 1999, Ubiquitel L.L.C. assigned the management and related
agreements to us. Ubiquitel L.L.C. had no operations or financial transactions
prior to the assignment of these agreements to us.
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REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY
The Federal Communications Commission, commonly referred to as 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:
- grant or deny licenses for PCS frequencies;
- grant or deny PCS license renewals;
- rule on assignments and/or transfers of control of PCS licenses;
- govern the interconnection of PCS networks with other wireless and
wireline carriers;
- establish access and universal service funding provisions;
- impose fines and forfeitures for violations of any of the FCC's rules; and
- 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. If
the agreements cannot be modified, they may be terminated. As a result, it would
be extremely difficult for us to conduct our business. In addition to revoking
licenses, the FCC could impose monetary penalties on us.
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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. 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 provided "substantial service" during its license term and
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. The Federal Communications Commission's renewal
expectancy and procedures make it likely that Sprint PCS will retain its PCS
licenses managed by us in the foreseeable future.
INTERCONNECTION
The FCC has the authority to order interconnection between commercial mobile
radio service providers and any other common carrier. The FCC has ordered local
telephone companies to provide reciprocal compensation to commercial mobile
radio service 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 telephone companies. 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. The Federal Communications Commission rules and rulings, as
well as the state arbitration proceedings, will directly impact the nature and
cost of the facilities necessary for interconnection of the Sprint PCS systems
with local, national and international telecommunications networks. They will
also determine the nature and amount of revenues we and Sprint PCS can receive
for terminating calls originating on the networks of local telephone companies
and other telecommunications carriers.
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 telephone
companies and most commercial mobile radio service 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 commercial mobile radio service providers
be able to deliver calls from their networks to ported numbers anywhere in the
country
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by December 31, 1998. In response to a Cellular Telephone Industry Association
petition for forbearance, the FCC has extended until November 24, 2002 the
deadline to implement local number portability. The FCC has required that
commercial mobile radio service 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.
Additionally, 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 commercial
mobile radio service providers to provide traditional telephone services based
on wireless technology and other fixed services that would directly compete with
the wireline services of local telephone companies. The FCC currently is
undertaking a rulemaking proceeding in 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 commercial mobile radio service 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 until January 1, 1999 and for phase
II (requiring more precise location information be provided to the Public Safety
Answering Point until October 1, 2001. Carriers are required to begin selling
and activating Automatic Location Identification 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 traditional telephone
companies 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 the Communications Assistance for
Law Enforcement Act compliant equipment is not yet available. The Communications
Assistance for Law Enforcement Act provides that a telecommunications carrier
meeting industry Communications Assistance for Law Enforcement Act standards
shall have safe harbor for purposes of compliance with the act. Toward the end
of 1997 telecommunications industry standard-setting organizations agreed to a
joint standard to implement the act'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 commercial mobile radio service 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.
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In addition, the FCC is considering petitions from numerous parties to
establish and implement technical compliance standards pursuant to the
Communications Assistance for Law Enforcement Act requirements. The capability
and capacity requirements of the Communications Assistance for Law Enforcement
Act are likely to impose some additional switching and network costs upon us,
Sprint PCS and other wireless entities. However, it is possible that some of
these costs will be reduced or delayed if current law enforcement or legislative
initiatives are adopted and implemented during 2000 or thereafter.
OTHER FEDERAL REGULATIONS
Wireless systems must comply with certain FCC and Federal Aviation
Administration regulations regarding the siting, lighting and construction of
transmitter towers and antennas. In addition, certain FCC environmental
regulations may cause certain radio communications 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.
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. These rules are
designed to make it possible for us, Sprint PCS and other wireless entities to
acquire necessary tower sites in the face of local zoning opposition and delays.
The FCC is considering numerous requests for preemption of local actions
affecting wireless facilities siting.
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EQUAL ACCESS
Wireless providers are not required to provide equal access to common
carriers for toll services. This enables us and Sprint PCS to generate
additional revenues by reselling the toll services of Sprint PCS and other
long-distance carriers from whom we can obtain favorable volume discounts.
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. The FCC may grant such petition
if the state demonstrates that:
- market conditions fail to protect subscribers from unjust and unreasonable
rates or rates that are unjustly or unreasonably discriminatory; or
- when commercial mobile radio service is a replacement for traditional
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. These
standards and rulings have prevented states from delaying the entry of wireless
personal communications services and other wireless carriers into their
jurisdictions via certifications and similar requirements, and from delaying or
inhibiting aggressive or flexible wireless price competition after entry.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our charter
gives effect to the two-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 14,500,000 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.
AUTHORIZED CAPITAL STOCK
Our authorized capital stock consists of:
- 100,000,000 shares of common stock, par value $0.001 per share, of which
64,763,604 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
We have reserved 3,765,000 shares of common stock for issuance upon exercise
of outstanding stock options and 5,013,987 shares for issuance upon exercise of
outstanding warrants. We have not reserved any shares of preferred stock 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 board of directors without approval from the stockholders.
These rights, designations and preferences include:
- number of shares to be issued;
- dividend rights;
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- 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
5,013,987 shares of common stock.
PARIBAS WARRANTS
We issued warrants to purchase 1,148,804 shares of common stock to Paribas
in connection with our prior $25.0 million credit facility. These warrants are
exercisable at a price of $.005 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 have the option to repurchase all of the warrants held by
Paribas or all of the shares of common stock issued upon the exercise of these
warrants beginning on the sixth anniversary of the date the warrants were
issued. If we exercise this right, we must repurchase the warrants or shares at
price equal to 120% of the market price of our common stock as of the date we
repurchase the warrants or shares.
UNIT WARRANTS
As part of our units offering, we issued and sold warrants to purchase an
aggregate of 4,234,804 shares of our common stock pursuant to a warrant
agreement between us and American Stock Transfer & Trust Company, as the warrant
agent. We have filed a copy of the warrant agreement as an exhibit to the
registration statement, which includes this prospectus. Immediately prior to the
offering, we expect to amend the warrant agreement to cancel 655,804 of such
warrants subject to the warrant agreement, which were originally issued to
Donaldson, Lufkin & Jenrette Securities Corporation. Warrants to purchase
286,183 shares of our common stock will be reissued to Donaldson, Lufkin &
Jenrette Securities Corporation pursuant to a new warrant agreement as described
below under "--DLJ Warrants."
The holders of the unit warrants are entitled, in the aggregate, to purchase
3,579,000 shares of our common stock, representing approximately 5% of the
issued and outstanding shares of our common stock on a fully diluted basis,
assuming exercise of the Paribas warrants, the DLJ warrants described below, all
options outstanding or that have or may be issued under our equity incentive
plan and the completion of this offering. The unit warrants become exercisable
at any
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time after April 15, 2001 for a period of ten years from the date of issuance.
The unit warrants currently trade in the Private Offerings and Resales trading
through Automated Linkages (PORTAL) market as part of the units with our senior
subordinated discount notes and will not trade separately until the separation
date which shall be the earliest to occur of:
(1) October 8, 2000;
(2) the commencement of the exchange offer with respect to the senior
subordinated discount notes;
(3) the date a shelf registration with respect to the senior subordinated
discount notes is declared effective;
(4) upon an offer to purchase on a change of control or permitted optional
redemption of the senior subordinated discount notes;
(5) an event of default with respect to the senior subordinated discount
notes; and
(6) a date determined by Donaldson, Lufkin & Jenrette Securities Corporation
in its sole discretion.
Each of the warrants, when exercised, will entitle the holder to receive
11.93 fully paid and non-assessable shares of our common stock, at an exercise
price of $11.37 per share, subject to adjustment from time to time in several
circumstances including the following:
(1) the payment by us of dividends and other distributions on our common
stock;
(2) subdivision, combinations and reclassifications of our common stock;
(3) the issuance to all holders of common stock of such rights, options or
warrants entitling them to subscribe for our common stock or securities
convertible into, or exchangeable or exercisable for, our common stock at
a price which is less than the fair market value per share of our common
stock;
(4) certain distributions to all holders of our common stock of any of our
assets or debt securities or any rights or warrants to purchase any such
securities, excluding those rights and warrants referred to in
clause (3) above;
(5) the issuance of shares of our common stock for consideration per share
less than the then fair market value per share of our common stock at the
time of issuance of such convertible or exchangeable security, excluding
securities issued in transactions referred to in clauses (1) through (4)
above, or (6) below; and
(6) the issuance of securities convertible into or exchangeable for our
common stock for a conversion or exchange price plus consideration
received upon issuance less than the then fair market value per share of
our common stock at the time of issuance of such convertible or
exchangeable security, excluding securities issued in transactions
referred to in (1) through (4) above.
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The events described above are subject to certain exceptions described in
the warrant agreement including:
- issuances of options, convertible securities or common stock to employees,
directors or consultants of us or any of our subsidiaries pursuant to a
plan approved by our board of directors;
- rights to purchase common stock pursuant to a plan for reinvestment of
dividends or interest; and
- issuances of common stock, options or convertible securities in connection
with mergers and acquisitions with non-affiliated third parties.
We are required, under the terms of a warrant registration rights agreement
to:
- file a shelf registration statement on or before June 25, 2000 covering
the resale of the unit warrants, the issuance of the common stock issuable
upon exercise of the unit warrants and the resale of the common stock
issuable upon exercise of the unit warrants;
- use our reasonable best efforts to cause the shelf registration statement
to be declared effective under the Securities Act on or before October 8,
2000; and
- keep the shelf registration statement continuously effective until the
date on which all of the unit warrants or shares of common stock issuable
thereunder have been sold pursuant to the shelf registration statement or
the unit warrants have expired.
If we fail to file the registration statement, or fail to cause the
registration statement to become effective, or fail to maintain its
effectiveness as specified above, a registration default shall be deemed to have
occurred and we will be required to pay liquidated damages to each holder of a
unit warrant. The liquidated damages payable to each holder of a warrant will be
in an amount equal to $0.03 per week per unit warrant held by such holder for
each week or portion thereof that the registration default continues for the
first 90-day period immediately following the occurrence of such registration
default. This amount will increase by an additional $0.02 per week per warrant
with respect to each subsequent 90-day period, up to a maximum amount equal to
$0.07 per week per unit warrant. The provision for liquidated damages will
continue until such registration default has been cured. We will not be required
to pay liquidated damages for more than one registration default at any given
time.
DLJ WARRANTS
In connection with our senior subordinated discount notes offering, we
issued to Donaldson, Lufkin & Jenrette Securities Corporation warrants to
purchase an aggregate of 655,804 shares of our common stock. Immediately prior
to the offering, we expect to cancel those warrants and issue new warrants to
Donaldson, Lufkin & Jenrette Securities Corporation to purchase an aggregate of
286,183 shares at an exercise price equal to the initial public offering price
per share, subject to increase or decrease in the event that the size of this
offering is increased or decreased. These warrants will be exercisable after the
first anniversary of the consummation of this offering and will expire upon the
fifth anniversary of this offering.
The number of shares into which the warrants are exercisable and the
exercise price are subject to adjustment in the event of:
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(1) the payment by us of dividends and other distributions on our common
stock;
(2) subdivisions, combinations and reclassifications of our common stock;
(3) the issuance to all holders of common stock of such rights, options or
warrants entitling them to subscribe for our common stock or securities
convertible into, or exchangeable or exercisable for, our common stock at
a price which is less than the fair market value per share of our common
stock; and
(4) certain distributions to all holders of our common stock of any of our
assets or debt securities or any rights or warrants to purchase any such
securities, excluding those rights and warrants referred to in
clause (3) above.
The events described above will be subject to certain exceptions described
in the warrant agreement under which the DLJ warrants will be issued, including
issuances of options, convertible securities or common stock to employees,
directors or consultants of us or any of our subsidiaries pursuant to a plan
approved by our board of directors; rights to purchase common stock pursuant to
a plan for reinvestment of dividends or interest; and issuances of common stock,
options or convertible securities in connection with mergers and acquisitions
with non-affiliated third parties.
The warrant agreement under which the DLJ warrants will be issued is also
expected to provide for registration rights with respect to the warrants and
common stock issuable thereunder. It is expected that DLJ will have the right to
cause us to file one registration statement with respect thereto within five
years after the issuance of the DLJ warrants, and will have unlimited rights to
"piggyback" on other registration statements that we file within the seven year
period following the issuance of the DLJ warrants, subject to limited
exceptions.
REGISTRATION RIGHTS
We have granted registration rights to all of our current stockholders under
a 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 another person, 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.
These stockholders have agreed to waive their registration rights in connection
with any registration statements that we file on behalf of the holders of the
unit warrants or the senior subordinated discount notes. 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
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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 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, the President or by a majority of
the board of directors. These provisions could have the effect of delaying until
the next annual stockholders meeting stockholder actions that are favored by the
holders of a majority of the outstanding voting securities. These provisions may
also discourage another person or entity from making an offer to stockholders
for the common stock. This is because the person or entity making the offer,
even if it acquired a majority of our outstanding voting securities, would be
unable to call a special meeting of the stockholders and would further be unable
in most situations to obtain unanimous written consent of the stockholders. As a
result, any meeting as to matters they endorse, including the election of new
directors or the approval of a merger, would have to wait for the next duly
called stockholders meeting.
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Our bylaws will provide that a stockholder may raise new business at an
annual stockholder meeting only if the stockholder delivers written notice to us
not after the later of ninety days prior to the date of the annual meeting or
the tenth day after the day the public announcement of the date of the annual
meeting is made. The stockholder's notice must provide us with certain
information concerning the nature of the new business, and must disclose certain
information about the stockholder and the stockholder's interest, if any, in the
proposed business matter.
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 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.
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CERTAIN PROVISIONS OF THE SPRINT PCS AGREEMENTS
Pursuant to our management agreements with the Sprint PCS, under specific
circumstances and without further stockholder approval, Sprint PCS may purchase
our operating assets or capital stock for 72% or 80% of the "entire business
value" of UbiquiTel, which includes the value of our right to use the spectrum
licenses, our business operations and other assets more fully described in "The
Sprint PCS Agreements--The Management Agreement." In addition, Sprint 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 has been made to list the shares of our 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
64,763,604 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding exercisable warrants for an
aggregate of 1,148,804 shares. 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:
- one percent of the then outstanding shares of common stock, or
- the average weekly trading volume in the common stock during the four
calendar weeks preceding the date on which notice of 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 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
50,263,604 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 registration rights agreement.
Under this agreement, 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 another person, 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. These stockholders have agreed to waive
their registration rights in connection with any registration statements that we
file on behalf of the holders of the unit warrants or the senior subordinated
discount notes. 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 entered into lock-up agreements whereby we have all agreed to
refrain from engaging in any transaction that results in a sale of shares of
common stock. Specifically, during the period beginning from the date of this
prospectus and continuing and including the date 180 days after the date of this
prospectus, none of us will, 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. Donaldson,
Lufkin & Jenrette Securities Corporation has informed us that it has no current
intentions of releasing any shares subject to the lock-up agreements. Any
determination made by Donaldson, Lufkin & Jenrette Securities Corporation to
release any shares subject to the lock-up agreements would be based on a number
of factors at the time of determination, including the market price of the
common stock, the liquidity of the trading market for the common stock, general
market conditions, the number of shares proposed to be sold, and the timing,
purpose and terms of the proposed sales. There are no exceptions to the lock-up
agreements, except for shares disposed of as bona fide gifts approved by
Donaldson, Lufkin & Jenrette Securities Corporation.
Following the lock-up period, 8,834,000 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, Banc of America Securities LLC and
DLJDIRECT Inc. 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 2,175,000 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 fees.................................. $ $
Per share value of securities deemed
underwriting compensation..................... $ $
Total......................................... $ $
======== ========
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be $1,600,000.
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.
Donaldson, Lufkin & Jenrette Securities Corporation has informed us that it
has no current intentions of releasing any shares subject to the lock-up
agreements. Any determination made by Donaldson, Lufkin & Jenrette Securities
Corporation to release any shares subject to the lock-up agreements would be
based on a number of factors at the time of determination, including the market
price of the common stock, the liquidity of the trading market for the common
stock, general market conditions, the number of shares proposed to be sold, and
the timing, purpose and terms of the proposed sales. There are no exceptions to
the lock-up agreements, except for shares disposed of as bona fide gifts
approved by Donaldson, Lufkin & Jenrette Securities Corporation.
In addition, during such period, except for the registration of shares
underlying warrants, the unit warrants, options in our equity incentive plan and
options granted prior to the adoption of
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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.
Application has been 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. 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.
In April 2000, Donaldson, Lufkin & Jenrette Securities Corporation also
acted as an initial purchaser under our and UbiquiTel Operating Company's sale
of units, for which they received a fee customary for performing such services.
125
<PAGE>
In February 2000, DLJ Merchant Banking Partners II, L.P., an affiliate of
Donaldson, Lufkin & Jenrette Securities Corporation, one of the underwriters for
this offering, entered into a securities purchase agreement with us. Under that
agreement, DLJ Merchant Banking purchased shares of our 7% senior pay-in-kind
non voting convertible preferred stock convertible into 4,220,694 shares of
common stock, which was subsequently converted to voting convertible preferred
stock, referred to as our Series B preferred stock, at a purchase price
equivalent of $5.925 per share of common stock, or $25.0 million in aggregate.
In April 2000, we issued additional shares of Series B preferred stock
convertible into 77,002 shares of common stock to DLJ Merchant Banking to
maintain their percentage ownership in us prior to the completion of our sale of
units. DLJ Merchant Banking also has the right to appoint one of our directors
pursuant to the terms of a stockholders' agreement with us, and it is expected
that, if appointed, this director would be a director, officer, partner,
employee or affiliate of DLJ Merchant Banking. The shares of Series B preferred
stock convert into shares of our common stock automatically upon consummation of
this offering. Pursuant to the terms of the securities purchase agreement
related to the Series B preferred stock, in the event that we do not complete
this offering prior to July 31, 2000, DLJ Merchant Banking has agreed to
purchase additional shares of our Series B preferred stock for an aggregate
purchase price of $100.0 million. DLJ Merchant Banking's agreement to purchase
the additional shares is subject to specified conditions precedent, including a
condition that we have not experienced a material adverse change in our business
or operations.
In addition, Donaldson, Lufkin & Jenrette Securities Corporation was issued
warrants to purchase 655,804 shares of our common stock. Immediately prior to
the offering, we expect to cancel the warrants and issue new warrants to
Donaldson, Lufkin & Jenrette Securities Corporation to purchase an aggregate of
286,183 shares of common stock at an exercise price equal to the initial public
offering price per share, subject to increase or decrease in the event that the
size of this offering is increased or decreased. The warrants will be
exercisable at any time after the first anniversary of this offering, and will
expire on the fifth anniversary of this offering.
Each of Donaldson, Lufkin & Jenrette Securities Corporation and DLJ Merchant
Banking have agreed with us not to sell or otherwise transfer the warrants or
shares of common stock held by them and deemed underwriting compensation for a
period of one year following the closing of this offering.
In addition, in February 2000, DLJ Bridge Finance, Inc., an affiliate of
Donaldson, Lufkin & Jenrette, 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. This commitment letter expired upon the closing of
UbiquiTel Operating Company's senior subordinated discount notes offering. A
commitment fee of $531,250 was paid to DLJ Bridge Finance.
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;
126
<PAGE>
- 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.
Donaldson, Lufkin & Jenrette Securities Corporation and its affiliates
beneficially own more than 10% of our Series B preferred stock and more than 10%
of our senior subordinated discount notes. As a result, this offering must be
conducted in compliance with the conflict-of-interest requirements of the
National Association of Securities Dealers, Inc., the regulatory agency that
governs the compensation paid to underwriters in public securities offerings.
Under these rules, the initial public offering price of the common stock can be
no higher than that recommended by a qualified independent underwriter, as that
term is defined in the NASD's rules. Banc of America Securities LLC has agreed
to serve as qualified independent underwriter and has conducted due diligence
and will recommend the maximum price for the shares of common stock to be
offered hereby.
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 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.
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. 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
127
<PAGE>
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.
128
<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 Sheets as of December 31, 1999 and
March 31, 2000 (unaudited)............................. F-3
Consolidated Statements of Operations for the period
from inception to
December 31, 1999 and for the three months ended
March 31, 2000
(unaudited)........................................... F-4
Consolidated Statements of Stockholders' Equity for the
period from inception to December 31, 1999 and for the
three months ended March 31, 2000
(unaudited)........................................... F-5
Consolidated Statements of Cash Flows for the period
from inception to December 31, 1999 and for the three
months ended March 31, 2000
(unaudited)........................................... F-6
Notes to Consolidated Financial Statements.............. F-7
SPOKANE DISTRICT--FINANCIAL STATEMENTS
Report of Independent Auditors.......................... F-30
Statements of Assets to be Sold as of December 31, 1999
and 1998 and March 31, 2000 (unaudited)................ F-31
Statements of Revenues and Expenses for the years ended
December 31, 1999, 1998 and 1997 and for the three
months ended March 31, 2000 and 1999 (unaudited)....... F-32
Notes to Statements of Assets to be Sold and Statements
of Revenues and Expenses............................... F-33
</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, formerly known as
UbiquiTel Holdings, Inc. (see Note 16)) 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 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 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 (September 29, 1999) to
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
Arthur Andersen LLP
New York, New York
March 8, 2000 (except for Notes 15 and 16 which are dated April 12, 2000)
F-2
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 2000
------------------ ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $23,959,190 $33,729,232
Accounts receivable....................................... -- 12,181
Inventory................................................. -- 49,649
Due from Sprint PCS....................................... -- 514,500
Prepaid expenses and other assets......................... 35,636 1,490,343
----------- -----------
Total current assets.................................. 23,994,826 35,795,905
PROPERTY AND EQUIPMENT...................................... -- 1,765,949
CONSTRUCTION IN PROGRESS.................................... 4,085,942 7,255,779
DEFERRED FINANCING COSTS, net............................... 2,110,642 7,362,835
OTHER ASSETS................................................ -- 182,390
----------- -----------
Total assets.............................................. $30,191,410 $52,362,858
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 577,216 $ 1,356,443
Due to shareholders....................................... 1,663,441 1,213,747
Due to Lucent Technologies, Inc........................... 3,883,419 2,488,463
Due to SpectraSite Communications, Inc.................... -- 773,330
Accrued interest.......................................... 10,521 --
Dividends payable......................................... 9,030 473,671
----------- -----------
Total current liabilities............................. 6,143,627 6,305,654
----------- -----------
LONG-TERM DEBT.............................................. 5,811,869 5,811,869
----------- -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE WARRANTS......................................... 2,758,154 2,758,154
----------- -----------
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, par value, $0.001
per share; 90,000,000 shares authorized; 17,008,500
shares issued and outstanding........................... 17,009 17,009
Series B convertible preferred stock, par value, $0.001
per share; 35,000,000 shares authorized; 2,110,347
shares issued and outstanding........................... -- 2,110
300,000,000 shares of voting common stock, par value,
$0.0005 authorized; 6,834,000 shares issued and
outstanding............................................. 3,417 3,417
32,000,000 shares of nonvoting common stock, par value,
$0.0005 authorized; all shares are issued and
outstanding............................................. 16,000 16,000
Additional paid-in-capital................................ 17,428,425 72,483,958
Accumulated deficit during the development stage.......... (1,987,091) (35,035,313)
----------- -----------
Total stockholders' equity............................ 15,477,760 37,487,181
----------- -----------
Total liabilities and stockholders' equity................ $30,191,410 $52,362,858
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED BALANCE
SHEETS.
F-3
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION THREE MONTHS
(SEPTEMBER 29, 1999) ENDED
TO DECEMBER 31, 1999 MARCH 31, 2000
--------------------- ---------------
(UNAUDITED)
<S> <C> <C>
REVENUES.................................................... $ -- $ 68,519
COST OF REVENUES............................................ -- --
----------- ------------
Gross profit.............................................. -- 68,519
OPERATING EXPENSES
General and administrative expenses....................... 554,430 906,679
Non-cash compensation for general and administrative
matters................................................. 1,394,729 --
Non-cash compensation related to stock options granted to
employees............................................... -- 188,643
----------- ------------
Operating loss.......................................... (1,949,159) (1,026,803)
INTEREST (EXPENSE) INCOME, NET.............................. (28,902) 35,101
----------- ------------
Loss before Extraordinary Item.......................... (1,978,061) (991,702)
LESS: PREFERRED STOCK DIVIDENDS PLUS ACCRETION.............. (9,030) (30,333,641)
----------- ------------
LOSS AVAILABLE TO COMMON STOCKHOLDERS....................... (1,987,091) (31,325,343)
EXTRAORDINARY ITEM--WRITEOFF OF DEFERRED FINANCING COSTS ON
EARLY EXTINGUISHMENT OF DEBT.............................. -- (1,722,879)
----------- ------------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS................... $(1,987,091) $(33,048,222)
=========== ============
PRO FORMA NET LOSS AND LOSS PER SHARE:
HISTORICAL NET LOSS BEFORE INCOME TAXES................... (1,987,091) (33,048,222)
PRO FORMA INCOME TAX EFFECTS.............................. -- --
----------- ------------
PRO FORMA NET LOSS.......................................... (1,987,091) (33,048,222)
=========== ============
PRO FORMA BASIC AND DILUTED LOSS PER SHARE.................. $ (0.04) $ (0.66)
PRO FORMA COMMON SHARES OUTSTANDING......................... 50,263,604 50,263,604
=========== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-4
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<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, September 29,
1999 (at inception)...... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of voting common
stock.................. -- -- 6,834,000 3,417 -- -- 3,417
Issuance of non-voting
common stock........... -- -- 32,000,000 16,000 -- -- 16,000
Issuance of Series A
convertible preferred
stock, net of offering
costs.................. 17,008,500 17,009 -- -- 15,294,936 -- 15,311,945
Non-cash compensation for
general and
administrative
matters................ -- -- -- -- 1,394,729 -- 1,394,729
Non-cash compensation for
general and
administrative
matters................ -- -- -- -- 738,760 -- 738,760
Net loss................. -- -- -- -- -- (1,987,091) (1,987,091)
----------- ------- ----------- ------- ----------- ------------ -----------
BALANCE,
December 31, 1999........ 17,008,500 17,009 38,834,000 19,417 17,428,425 (1,987,091) 15,477,760
Issuance of Series B
convertible preferred
stock plus accretion... 2,110,347 2,110 -- -- 54,866,890 -- 54,869,000
Non-cash compensation
related to stock option
granted to employees... -- -- -- -- 188,643 -- 188,643
Net loss................. -- -- -- -- -- (33,048,222) (33,048,222)
----------- ------- ----------- ------- ----------- ------------ -----------
BALANCE,
March 31, 2000
(unaudited).............. 19,118,847 $19,119 38,834,000 $19,417 $72,483,958 $(35,035,313) $37,487,181
=========== ======= =========== ======= =========== ============ ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-5
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION THREE MONTHS
(SEPTEMBER 29, 1999) ENDED
TO DECEMBER 31, 1999 MARCH 31, 2000
--------------------- ---------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................. $(1,978,061) $ (991,702)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of deferred financing costs........... 18,381 81,096
Depreciation....................................... -- 24,671
Non-cash compensation for general and
administrative matters........................... 1,394,729 --
Non-cash compensation from stock option granted to
employee......................................... -- 188,643
Changes in operating assets and liabilities:
Accounts receivable................................ -- (12,181)
Inventory.......................................... -- (49,649)
Due from Sprint PCS................................ -- (514,500)
Other assets....................................... -- (182,390)
Prepaid expenses................................... (35,636) (517,435)
Accounts payable and accrued expenses.............. 373,534 (232,638)
Accrued interest................................... 10,521 (10,521)
----------- ------------
Net cash used in operating activities............ (216,532) (2,216,606)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................. (10,400) (5,400,852)
----------- ------------
Net cash used in investing activities............ (10,400) (5,400,852)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior subordinated notes
and detachable warrants............................ 8,000,000 --
Deferred financing cost.............................. (734,000) (6,762,500)
Proceeds from issuance of convertible preferred
stock.............................................. 17,008,500 25,000,000
Proceeds from issuance of common stock............... 19,417 --
Offering costs....................................... (107,795) (850,000)
----------- ------------
Net cash provided by financing activities........ 24,186,122 17,387,500
----------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS.............. 23,959,190 9,770,042
CASH AND CASH EQUIVALENTS, beginning of period......... -- 23,959,190
----------- ------------
CASH AND CASH EQUIVALENTS, end of period............... $23,959,190 $ 33,729,232
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................... $ -- $ 374,684
Cash paid for income taxes........................... -- --
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Network assets acquired but not paid................. 4,075,542 3,635,147
Extraordinary item--write-off of deferred financing
charge............................................. -- 1,722,879
Deferred financing costs incurred but not paid....... 825,000 1,118,668
Preferred stock dividends............................ 9,030 464,641
IPO costs incurred but not paid...................... -- 497,717
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-6
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
UbiquiTel Inc. and Subsidiaries (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 no consideration given 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.
On November 9, 1999, UbiquiTel Operating Company, Inc. (a Delaware
Corporation, formerly a Delaware Limited Liability Company), was formed to serve
as the operating company for UbiquiTel Inc. Also, on March 17, 2000, UbiquiTel
Leasing Company, (a Delaware Corporation) was formed to serve as the leasing
company for UbiquiTel Inc.
The consolidated financial statements contain the financial information of
UbiquiTel Inc., its subsidiaries, UbiquiTel Operating Company and UbiquiTel
Leasing Company 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
UNAUDITED INTERIM FINANCIAL INFORMATION
The financial information as of March 31, 2000 and for the three months
ended March 31, 2000 is unaudited, but includes all adjustments, consisting only
of normal recurring adjustments, that are considered necessary for fair
presentation of the Company's financial position at March 31, 2000, and the
Company's operations and cash flows for the three
F-7
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
months ended March 31, 2000 in accordance with accounting principles generally
accepted in the United States. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of results that may be expected
for the entire year.
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 March 31, 2000, the Company has not
generated significant revenues and has incurred expenses of $4,692,642 including
an extraordinary item of in the amount of $1,722,879, resulting in an
accumulated deficit during the development stage of $35,035,313 as of March 31,
2000 after the preferred stock dividends and effects of a beneficial conversion
on Series B Convertible Preferred Stock.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and short-term investments with
original maturities of three months or less.
PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets include costs incurred in connection with
the Company's initial public offering (Note 16). As of December 31, 1999 and
March 31, 2000 (unaudited) these costs amounted to $0 and $937,273,
respectively.
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 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.
F-8
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 and March 31, 2000 (unaudited), no interest costs were capitalized.
ADVERTISING COSTS
Adverting costs are expensed as incurred. The Company did not incur
advertising expense for the period from inception to December 31, 1999 and for
three months ended March 31, 2000.
DEFERRED FINANCING COSTS
Costs incurred in connection with obtaining the Company's senior
subordinated notes and $250.0 million senior secured credit facility 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 and for the three months
ended March 31, 2000 (unaudited), amortization amounted to $18,381 and $81,096
respectively, and was included in interest expense.
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
F-9
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
allowances will be established when necessary to reduce deferred tax assets to
the amount expected to be realized.
EXTRAORDINARY ITEM
On March 31, 2000, the Company finalized and executed a new $250.0 million
senior secured credit facility and terminated the old $25.0 million credit
facility. Deferred financing costs of $1,722,879 relating to the old facility
were expensed as an extraordinary item during the three month period ended
March 31, 2000.
NET LOSS PER SHARE
The Company computes net loss per common share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") and
SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the provisions of
SFAS 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 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-10
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Traveling fees of $0 and $68,519 were earned for the period from inception to
December 31, 1999 and for the three months ended March 31, 2000 (unaudited),
respectively.
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 and for the three months ended March 31, 2000 (unaudited).
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 Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." ("SFAS
121") SFAS 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.
RISKS AND UNCERTAINTIES
The Company's profitability 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 Registration Statement on 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.
F-11
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998 and June 1999, the Financial Accounting Standards Board,
commonly referred to as FASB, issued Statements of Financial Accounting
Standards, No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133") and No. 137, "Accounting for Derivative Instruments and
Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133."
These statements require companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedging accounting.
SFAS 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 has 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
F-12
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SPRINT AGREEMENTS (CONTINUED)
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 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.
F-13
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SPRINT AGREEMENTS (CONTINUED)
(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.
(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.
F-14
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT
Long-term debt outstanding as of December 31, 1999 and March 31, 2000
(unaudited) 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 a warrant to purchase 4,978,150 shares of
voting common stock at a par value of $0.0005 per share and an exercise price of
$0.005 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 provided 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-15
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
the sixth anniversary of the Facility Effective Date. No amounts have been drawn
under this Facility.
Upon acceptance and delivery of this Facility, the Company incurred
financing costs of $1,264,000. In addition, the Company issued Paribas
detachable warrants to purchase 1,148,804 shares of non-voting common stock at a
par value of $0.0005 per share and an exercise price of $0.005 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).
On February 22, 2000, UbiquiTel Operating Company, the wholly owned
subsidiary of UbiquiTel Inc. received a commitment letter from Paribas, as
Administrative Agent, and certain banks and other financial institutions party
thereto for a $250.0 million senior secured credit facility. UbiquiTel Inc. has
guaranteed the credit facility which was finalized and executed on March 31,
2000 and replaces the previous $25.0 million facility. The credit facility
consists 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 revolving loan and term loan A will mature in October 2007 and the term
loan B will mature in October 2008. The revolving loans are required to be
repaid beginning in February 2002, in eighteen quarterly consecutive
installments. The term loans A and B are required to be repaid beginning in June
2004 in fourteen and eighteen consecutive quarterly installment, respectively.
The amount of each of the quarterly consecutive installment increases
incrementally in accordance with the credit facility agreement. The amount that
can be borrowed and outstanding under the revolving loans reduces in eight
quarterly reductions of $6.875 million beginning with December 2005.
UbiquiTel Operating Company may borrow funds as either a base rate loan with
an interest rate of prime plus 2.00% for the revolving loans and term loan A and
prime plus 2.50% for term loan B or a Eurodollar Loan with an interest rate of
the London Interbank Offered Rate, commonly referred to as LIBOR, plus 3.25% for
the revolving loans and term loan A and plus 3.75% for term loan B. In addition,
an unused credit facility fee ranging from 0.75% to 1.375% will be charged
quarterly on the average unused portion of the facility.
Initial borrowings of $75.0 million under the term loan B were made on
April 11, 2000. This amount was funded into an escrow account that is controlled
by Paribas and will not be released until specified conditions have been
satisfied. These conditions include, among others, the closing of the
acquisition of the Spokane PCS assets, receipt of $100.0 million in additional
equity financing by July 31, 2000, and evidence that the company has used all
the
F-16
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
proceeds from the Notes. Additional borrowings are subject to these escrow
arrangements and will not be provided until the initial borrowings of
$75.0 million has been released.
In conjunction with the closing of this facility, the company incurred
financing fees of $7,056,168 which are being amortized over the term of the
credit facility. Deferred financing fees of $1,722,879 relating to the old
credit facility have been expensed at March 31, 2000 (unaudited) as an
extraordinary item.
The facility contains customary credit covenants including covenants
limiting indebtedness, dividends and distributions on, and redemptions and
repurchases of, capital stock and other similar payments and various financial
maintenance covenants. The credit 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, the acquisition of
related businesses, working capital needs of the Company, and customer
acquisition costs.
5. 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 Statement of Financial Accounting Standards No. 107, "Disclosure
about Fair Value of Financial Instruments." ("SFAS 107") 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>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................ $23,959,190 $33,729,232
Accounts payable and accrued expenses.... 6,124,076 5,831,983
Accrued interest......................... 10,521 --
Long-term debt........................... 5,811,869 5,811,869
</TABLE>
F-17
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
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.
6. 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 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 and
March 31, 2000 (unaudited) 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>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
Series A preferred stock................. 17,008,500 17,008,500
Series B preferred stock................. -- 2,110,347
Stock options............................ 3,200,000 3,520,000
Warrants................................. 6,126,954 6,126,954
----------- -----------
Total................................ 26,335,454 28,765,801
=========== ===========
</TABLE>
7. STOCKHOLDERS' EQUITY
COMMON STOCK
On November 1, 1999, the Company issued 6,834,000 shares of voting common
stock to a group collectively referred to as the Founders at a par value of
$0.0005 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 $0.50 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 non-
F-18
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
cash compensation for general and administrative matters 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. The vested, nonvoting common stock are 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.
On November 1, 1999, the Company issued 32,000,000 non-vested shares of
non-voting common stock to the Founders at a par value of $0.0005 per share.
These shares were issued to retain the Founders 13.4% ownership interest in the
event the Company issues additional stock and equity securities. Any non-voting
common stock that vests will automatically be converted to voting common stock.
At December 31, 1999 and March 31, 2000 (unaudited) none of the non-voting
common stock was vested. Upon completion of the initial public offering, any
remaining non-vested shares of non-voting common stock will be forfeited.
CONVERTIBLE SERIES A AND SERIES B 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 (the "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
F-19
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
commitments for at least $33 million in senior and subordinated debt financing,
(see Note 4) 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 $0.50 as adjusted
for the 2-for-1 stock split 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.
On February 25, 2000, DLJ Merchant Banking Partners II, L.P. ("DLJ"), an
affiliate of Donaldson, Lufkin & Jenrette, one of the Company's underwriters,
entered into a Securities Purchase Agreement whereby it purchased 2,110,347
shares of 7% Convertible Series B Preferred Stock at a purchase price of $11.84
per share, or $25 million in aggregate. Each share of Series B Preferred Stock
is convertible at any time after the date of issuance into common stock at the
then effective conversion price. DLJ also committed to purchase 11,837,024
shares of Convertible Series B Preferred Stock at a purchase price of $8.46 per
share, or $100 million in aggregate, in the event the Company does not
consummate the initial public offering. In accordance with the EITF 98-5 upon
issuance of the Series B Preferred Stock the Company had a beneficial conversion
resulting in a discount of $29,869,000 which is recognized as a return to the
preferred shareholder during the three month period ended March 31, 2000.
DIVIDENDS
Holders of Series A and B Convertible Preferred Stock are entitled to
receive cumulative dividends at a rate of 7% per annum out of any assets of the
Company. The cumulative accrued dividends at March 31, 2000 (unaudited) are
$473,671.
The discount of $29,869,000 resulting from the allocation of the proceeds
from the Series B Convertible Preferred Stock to the beneficial conversion
feature is included in preferred stock dividends for the three months ended
March 31, 2000 (unaudited).
8. REDEEMABLE WARRANTS
At December 31, 1999 and March 31, 2000 (unaudited), the Company had
outstanding warrants to purchase 4,978,150 shares of voting common stock and
1,148,804 shares of non-voting common stock. The warrants to purchase 4,978,150
shares of voting common stock were issued to BET Associates in connection with
the issuance of the $8.0 million 12% senior
F-20
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE WARRANTS (CONTINUED)
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 1,148,804 shares of non-voting common stock were
issued to Paribas in connection with the $25.0 million credit facility. All
warrants are exercisable at $0.005 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 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 2,550,000 shares of common stock at a purchase price of $0.50
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 650,000 non-qualified options
to three employees pursuant to its 2000 Stock Equity Incentive Plan. These
options have an exercise price of $0.50 per share and vest over four years.
F-21
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTION PLAN (CONTINUED)
In January 2000, the Company issued an aggregate of 320,000 non-qualified
options to employees pursuant to its 2000 Stock Equity Incentive Plan. 260,000
of these options had an exercise price that was approximately $12.50 less per
share than the fair market value of the common stock on the date of grant.
Accordingly, the Company will recognize compensation expense of approximately
$3,266,000 over the 48 month vesting period for these options. During the three
months ended March 31, 2000 (unaudited), the Company recognized $188,643 of this
expense. The remaining 60,000 options will have an exercise price equal to the
initial public offering price per share.
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 4,080,000
shares of common stock for issuance under the Plan and does not include awards
paid in cash.
At December 31, 1999 and March 31, 2000 (unaudited), the following is a
summary of the options granted and outstanding:
<TABLE>
<CAPTION>
MARCH 31, 2000
DECEMBER 31, 1999 (UNAUDITED)
---------------------------- ----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of
period -- $ -- 3,200,000 $ .50
Granted 3,200,000 0.50 320,000 3.25
Exercised -- -- -- --
Forfeited -- -- -- --
---------- ---------- ---------- ----------
Outstanding at end of period 3,200,000 $ 0.50 3,520,000 $ 0.75
<CAPTION>
---------- ----------
Options exercisable at end of
<S> <C> <C> <C> <C>
period -- -- -- --
<CAPTION>
---------- ----------
Weighted average fair value of
<S> <C> <C> <C> <C>
options granted during period $ 0.19 $ 1.16
</TABLE>
F-22
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTION PLAN (CONTINUED)
The following table summarizes information about stock options outstanding
at March 31, 2000 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OPTIONS
RANGE OF OUTSTANDING AT WEIGHTED-AVERAGE EXERCISABLE AT WEIGHTED-
EXERCISE MARCH 31, 2000 REMAINING WEIGHTED-AVERAGE MARCH 31, 2000 AVERAGE
PRICES (UNAUDITED) CONTRACTUAL LIFE EXERCISE PRICE (UNAUDITED) EXERCISE PRICE
- --------------------- -------------- ---------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$0.50 3,200,000 8.7 Years $0.50 -- $0.50
3.25 320,000 8.0 Years $3.25 -- $3.25
</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. Except for the 260,000 options grants discussed above,
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 and for the three months ended March 31, 2000 (unaudited). Had
compensation cost for these grants been determined consistent with Statement of
Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss and basic and diluted loss per share at
December 31, 1999 and March 31, 2000 (unaudited) would have increased as
indicated in the following pro forma amounts:
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 2000
1999 (UNAUDITED)
--------------- ---------------
<S> <C> <C>
Net loss:
As reported $(1,987,091) $(33,048,222)
Pro forma $(2,005,033) $(33,115,229)
Basic and diluted loss per share:
As reported $ (0.29) $ (4.84)
Pro forma $ (0.29) $ (4.85)
</TABLE>
The fair value of all of the 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 6.34%,
- expected dividend yields of 0%,
- expected lives ranging from 1.5 years to 2.0 years and
F-23
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTION PLAN (CONTINUED)
- 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, the Company has generated losses for both book and tax
purposes. The Company has not recorded potential income tax benefits that may be
received and apply current losses to future years in which the Company has
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.
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. These carryforwards may be limited due to changes in ownership in
accordance with IRS guidelines.
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.
F-24
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS (CONTINUED)
(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 and $19,950 for the
period from inception through December 31, 1999 and the three months ended
March 31, 2000 (unaudited), respectively.
(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 2,550,000 shares of common stock at a purchase price of $0.50 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
F-25
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS (CONTINUED)
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.
12. DEFERRED FINANCING COSTS
During 1999, the Company incurred fees of $320,000 and $1,809,023 to secure
commitments from lenders related to the 12% senior subordinated note and the
$25.0 million credit facility, respectively. The Company has classified these
charges as deferred financing costs and is amortizing these costs using the
effective interest rate method and the straight-line method, respectively.
On March 31, 2000, the Company replaced the old $25.0 million facility with
a new $250.0 million senior secured credit facility (Note 4). An amount of
$1,722,879 related to the extinguishment of the old facility was expensed as an
extraordinary item during the first quarter. Costs to secure the new facility of
$7,056,168 are included in deferred financing and will be amortized on a
straight-line basis over the term of the new facility.
Amortization of deferred financing charges amounted to $18,381 and $81,096
at December 31, 1999 and March 31, 2000 (unaudited), respectively, and is
included in interest expense.
13. RELATED PARTY TRANSACTIONS
In 1999 and during the three months ended March 31, 2000 (unaudited),
certain shareholders of the Company provided services in connection with
obtaining, negotiating and closing the preferred stock offering and
$250.0 million senior secured credit facility. Fees incurred for those services
amounted to $1,515,000 and $1,000,000, respectively.
In 1999 and the three months ended March 31, 2000 (unaudited), the Company
paid the Walter Group, a shareholder, approximately $148,000 and $12,896,
respectively, for consulting services.
On October 28, 1999, the Company entered into an agreement with a
shareholder, SpectraSite Communications Inc., that owns and operates
communications towers. During
F-26
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. RELATED PARTY TRANSACTIONS (CONTINUED)
1999, no services were provided to the Company. For the three months ended
March 31, 2000 (unaudited), the Company incurred costs of $773,330 for capital
expenditures made during the period.
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. WHOLLY-OWNED OPERATING SUBSIDIARY SUMMARIZED FINANCIAL INFORMATION
On April 11, 2000, UbiquiTel Operating Company, a wholly owned subsidiary of
UbiquiTel Inc., issued 14% Senior Subordinated Discount Notes ("the Notes") with
a maturity value of $300,000,000 and Warrants to purchase 3,579,000 shares of
common stock of UbiquiTel Inc. at an exercise price of $11.37 per share under
Rule 144A of the Securities Act of 1933. The notes were issued at a discount and
generated approximately $152,300,000 in gross proceeds. The proceeds will be
used to partially fund capital expenditures relating to the network build-out,
operating losses, working capital, the acquisition of the Sprint PCS Spokane,
Washington assets, repayment of the $8,000,000 12% Senior Subordinated Note and
the related prepayment fee and other general corporate purposes. The notes have
a ten-year maturity and will accrete in value until April 15, 2005 at an
interest rate of 14%. Interest will become payable semiannually beginning on
October 15, 2005. Up to 35% of the notes will be redeemable on or prior to
April 15, 2003 from net proceeds of one or more public equity offerings, other
than UbiquiTel Inc. expected initial public offering. Any remaining notes will
be redeemable on or after April 15, 2005.
Donaldson, Lufkin and Jenrette Securities Corporation served as one of the
Initial Purchasers of the Notes and received a fee of 3.5% of the gross proceeds
and warrants to purchase 286,183 shares of UbiquiTel Inc. common stock at an
exercise price of $13.00 per share.
UbiquiTel Inc. has unconditionally guaranteed the obligations under the
Notes. Separate audited financial statements for UbiquiTel Operating Company as
issuer of the debt are not provided because it is wholly owned by UbiquiTel Inc.
and the guarantees are full and unconditional. UbiquiTel Inc. has no operations
separate from its investment in UbiquiTel Operating Company. The summarized
financial information of UbiquiTel Operating Company
F-27
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. WHOLLY-OWNED OPERATING SUBSIDIARY SUMMARIZED FINANCIAL INFORMATION
(CONTINUED)
as of December 31, 1999 and for the period from November 9, 1999 (inception) to
December 31, 1999, is presented below:
<TABLE>
<CAPTION>
SUMMARIZED BALANCE SHEET DATA DECEMBER 31, 1999
- ----------------------------- ------------------
<S> <C>
Assets:
Cash and other current assets............................. $23,994,826
Construction in progress.................................. 4,085,942
Deferred financing costs.................................. 2,110,642
-----------
Total assets............................................ $30,191,410
===========
Liabilities and Equity:
Accounts payable and accrued expenses..................... $ 373,575
Due to Lucent Technologies................................ 3,883,419
Due to related parties.................................... 813,441
Accrued interest.......................................... 10,521
Advances from parent...................................... 19,584,045
Senior subordinated debt.................................. 5,811,869
-----------
Total liabilities....................................... 30,476,870
Deficit................................................... (285,460)
-----------
Total liabilities and equity............................ $30,191,410
===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM NOVEMBER 9, 1999
(INCEPTION)
SUMMARIZED STATEMENTS OF OPERATIONS DATA TO DECEMBER 31, 1999
- ---------------------------------------- ---------------------
<S> <C>
General and administrative expenses................... $257,558
Interest expense...................................... 28,902
--------
Net loss.............................................. $286,460
========
</TABLE>
The Company had previously secured commitments from affiliates of each of
the Initial Purchasers to provide up to $125.0 million of senior subordinated
increasing rate notes. The commitment expired on April 11, 2000 upon the closing
of the Senior Subordinated Discount Note offering. A commitment fee of $625,000
was paid to the Initial Purchasers, of which $531,250 was paid to an affiliate
of Donaldson, Lufkin and Jenrette.
16. 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 has filed 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
F-28
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS (CONTINUED)
the proceeds from the aforementioned offerings to fund the build-out of its
expanded network, operating losses, working capital and other general corporate
purposes.
In January 2000, 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 closed this transaction on April 15,
2000.
On April 11, 2000, upon the closing of the 14% Senior Subordinated Discount
Notes, the Company issued DLJ Merchant Banking 38,501 additional shares of
preferred stock to maintain a specified percentage stock ownership. Each share
of preferred stock will be converted automatically into two shares of voting
common stock upon the closing of the initial public offering after the effect of
the 2-for-1 stock split.
The Founders Agreement provides that the Founders non-voting common stock
will vest and convert to voting 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, in April 2000, an aggregate amount of 136,758 shares of
founders non-voting common stock vested and converted to voting common stock.
The Founders Agreement will terminate upon the earlier of the completion of an
initial public offering, the sale to DLJ Merchant Banking of additional
preferred stock for $100.0 million, or the closing of a private or public equity
financing of at least $100.0 million or November 23, 2000.
In April 2000, the board of directors approved a 2-for-1 stock split
effective immediately prior to the initial public offering. All common stock
shares data and equity securities data except for the convertible preferred
stock have been retroactively adjusted to reflect this change.
F-29
<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 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-30
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
STATEMENTS OF ASSETS TO BE SOLD
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
----------- -------------------------
2000 1999 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Assets:
Property, plant and equipment
Network equipment.......................... $29,246,217 $29,038,828 $25,246,441
Other...................................... 235,232 231,661 185,586
Construction work in progress.............. 166,960 211,167 349,480
----------- ----------- -----------
Total property, plant and equipment.......... 29,648,409 29,481,656 25,781,507
Less: accumulated depreciation............. 10,716,627 9,785,334 6,314,486
----------- ----------- -----------
Net property, plant and equipment............ 18,931,782 19,696,322 19,467,021
Prepaid lease expense.......................... 92,776 87,416 83,767
----------- ----------- -----------
Total assets to be sold........................ $19,024,558 $19,783,738 $19,550,788
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-31
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
STATEMENTS OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
----------------------- -------------------------------------
2000 1999 1999 1998 1997
---------- ---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues.............. $1,573,883 $1,135,957 $5,624,927 $3,280,648 $ 1,246,181
Expenses:
Cost of services and
equipment............. 779,138 747,497 5,046,416 3,970,423 2,902,605
Selling, general and
administrative........ 1,213,514 997,380 5,419,104 4,470,494 8,167,807
Depreciation............ 931,293 827,503 3,470,848 3,111,511 2,968,406
---------- ---------- ---------- ---------- -----------
2,923,945 2,572,380 13,936,368 11,552,428 14,038,818
---------- ---------- ---------- ---------- -----------
Expenses in excess of net
revenues................ $1,350,062 $1,436,423 $8,311,441 $8,271,780 $12,792,637
========== ========== ========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
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
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-33
<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 unbilled revenue and bad debt accruals that are
recorded by the Company at levels above the district level. These allocations
are 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
equipment sales to third-party retailers located 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
equipment sales to third-party retailers located 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-34
<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 ranging from seven to 20 years. Repair and
maintenance costs are expensed as incurred.
F-35
<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-36
<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 $166,753 and $785,463
(unaudited) for the three months ended March 31, 2000 and 1999, and $5,050,843,
$3,368,870 and $19,604,854 for the years ended December 31, 1999, 1998 and 1997,
respectively.
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.
7. SUBSEQUENT EVENT (UNAUDITED)
The transaction described in Note 1, whereby the Company was to sell to
UbiquiTel certain assets and UbiquiTel was to assume certain leases as
stipulated in the Agreement, closed on April 15, 2000.
F-37
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 2000
[LOGO]
14,500,000 SHARES OF COMMON STOCK
OF
UBIQUITEL INC.
-------------------
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......... $ 61,631
NASD filing fee............................................. 23,845
Nasdaq National Market listing fees......................... 95,000
Printing and engraving expenses............................. 300,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 300,000
Transfer agent and registrar fees........................... 100,000
Miscellaneous expenses...................................... 219,524
----------
Total....................................................... $1,600,000
==========
</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, 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
II-1
<PAGE>
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
two-for-one split of UbiquiTel's outstanding common stock to be effected as of
the date of the prospectus, which forms a part of this registration statement.
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>
II-2
<PAGE>
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................... 4,669,000
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........................ 1,667,500
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 A. 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.
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, and
2,489,075 shares of its Voting Common Stock upon exercise of such warrants.
7. 2,148,848 shares of its Series B Preferred Stock to DLJ Merchant Banking
Partners II, L.P. for an aggregate purchase price of $25,000,000.
II-3
<PAGE>
8. 68,379 shares of the 16,000,000 shares of Non-Voting Common Stock
originally issued in November 1999 vested in April 2000. 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................................ 25,642
Donald A. Harris..................................... 19,901
James Parsons........................................ 8,879
Paul F. Judge........................................ 8,037
US Bancorp........................................... 5,920
</TABLE>
9. employee stock options to purchase, in the aggregate, 455,000 shares of
Voting Common Stock at $1.00 per share.
10. an employee stock option to purchase 30,000 shares of Voting Common
Stock at the initial public offering price per share.
11. 14% Senior Subordinated Discount Notes due 2010 and warrants to purchase
1,789,500 shares of Voting Common Stock at $22.74 per share in connection with
its units offering.
12. Warrants to purchase 143,091 shares of Voting Common Stock at our
proposed initial public offering price per share in connection with units
offering.
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 Amended and Restated Certificate of Incorporation of
UbiquiTel Inc.
3.2 Amended and Restated Bylaws of UbiquiTel Inc.
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 28, 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 Amended and Restated Consent and Agreement dated as of
April 5, 2000 by and between Sprint Spectrum, LP, Sprint
Communications Company, LP, WirelessCo, LP, Cox
Communications PCS, LP, Cox PCS License, LLC and Paribas.
**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.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
**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.
**10.18 Credit Agreement dated as of March 31, 2000 by and between
UbiquiTel Inc., UbiquiTel Operating Company, the financial
institutions party thereto from time to time and Paribas, as
agent, for a $250,000,000 credit facility.
**10.19 Purchase Agreement dated April 4, 2000 between UbiquiTel
Inc., UbiquiTel Operating Company and Donaldson Lufkin &
Jenrette Securities Corporation, Paribas Corporation and PNC
Capital Markets, Inc.
**10.20 Indenture dated as of April 11, 2000 between UbiquiTel
Operating Company, UbiquiTel Inc. and American Stock
Transfer & Trust Company.
**10.21 Warrant Agreement dated as of April 11, 2000 between
UbiquiTel Inc. and American Stock Transfer & Trust Company.
**10.22 Registration Rights Agreement made as of April 11, 2000 by
and among UbiquiTel Operating Company, UbiquiTel Inc. and
Donaldson Lufkin & Jenrette Securities Corporation, Paribas
Corporation and PNC Capital Markets, Inc.
**10.23 Warrant Registration Rights Agreement made as of April 11,
2000 by and among UbiquiTel Inc. and Donaldson Lufkin &
Jenrette Securities Corporation, Paribas Corporation and PNC
Capital Markets, Inc.
10.24 Founders Stock Agreement dated as of November 1, 1999, by
and among UbiquiTel Holdings, Inc., and James Parsons,
Donald A. Harris, Paul F. Judge, The Walter Group, Inc. and
US Bancorp.
10.25 Agreement between LCC International, Inc. and UbiquiTel
Holdings, Inc., as amended, dated as of September 24, 1999.
10.26 Agreement between Lucent Technologies, Inc. and UbiquiTel
Holdings, Inc., dated as of December 21, 1999.
10.27 Master Site Agreement between Spectrasite Communications,
Inc. and UbiquiTel Leasing Company, dated as of May 11,
2000.
10.28 Note Guarantee of UbiquiTel Inc.
10.29 Guarantee of UbiquiTel Inc.
**21.1 Subsidiaries of UbiquiTel Inc.
23.1 Consent of Arthur Andersen LLP.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Greenberg Traurig, LLP (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.
** Previously filed.
+ Confidential treatment has been requested on portions of these documents.
(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.
The undersigned registrant hereby undertakes that:
(1) The undersigned registrant hereby undertakes to provide the underwriter
at the closing specified in the underwriting agreements, certificates 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 Amendment No. 3 to the 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 15th day of May, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
UBIQUITEL INC.
By: /s/ Donald A. Harris
-----------------------------------------
Donald A. Harris
Chairman of the Board, President and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Donald A. Harris Chairman of the Board, President May 15, 2000
- -------------------------------------- and Chief Executive Officer
Donald A. Harris (Principal Executive Officer)
/s/ Paul F. Judge* Senior Vice President--Business May 15, 2000
- -------------------------------------- Development and Finance
Paul F. Judge (Principal Financial Officer and
Accounting Officer)
/s/ Peter Lucas* Director May 15, 2000
- --------------------------------------
Peter Lucas
/s/ Robert A. Berlacher* Director May 15, 2000
- --------------------------------------
Robert A. Berlacher
/s/ Eve M. Trkla* Director May 15, 2000
- --------------------------------------
Eve M. Trkla
/s/ Joseph N. Walter* Director May 15, 2000
- --------------------------------------
Joseph N. Walter
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ Donald A. Harris
---------------------------------
Donald A. Harris
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of
UbiquiTel Inc.
3.2 Amended and Restated Bylaws of UbiquiTel Inc.
5.1 Form of opinion of Greenberg Traurig, LLP, regarding
legality of the Common Stock being issued.
10.2 Sprint PCS Services Agreement dated as of October 15, 1998
by and between Sprint Spectrum, LP and UbiquiTel, LLC.
10.24 Founders Stock Agreement dated as of November 1, 1999, by
and among UbiquiTel Holdings, Inc. and James Parsons,
Donald A. Harris, Paul F. Judge, The Walter Group, Inc. and
US Bancorp.
10.25 Agreement between LCC International, Inc. and UbiquiTel
Holdings, Inc., as amended, dated as of September 24, 1999.
10.26 Agreement between Lucent Technologies, Inc. and UbiquiTel
Holdings, Inc., dated as of December 21, 1999.
10.27 Master Site Agreement between Spectrasite Communications,
Inc. and UbiquiTel Leasing Company, dated as of May 11,
2000.
10.28 Note Guarantee of UbiquiTel Inc.
10.29 Guarantee of UbiquiTel Inc.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of Greenberg Traurig, LLP (contained in legal
opinion filed as Exhibit 5.1).
27.1 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 1.1
16,675,000 Shares
UBIQUITEL INC.
Common Stock
UNDERWRITING AGREEMENT
__________, 2000
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
DLJ DIRECT INC.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
UbiquiTel Inc., a Delaware corporation (the "COMPANY"), proposes to
issue and sell 14,500,000 shares of its Common Stock, par value $0.001 per
share (the "FIRM SHARES") to the several underwriters named in Schedule I
hereto (the "UNDERWRITERS"). The Company also proposes to issue and sell to
the several Underwriters not more than an additional 2,175,000 shares of its
Common Stock, par value $0.001 per share (the "ADDITIONAL SHARES") if
requested by the Underwriters as provided in Section 2 hereof. The Firm
Shares and the Additional Shares are hereinafter referred to collectively as
the "SHARES". The shares of common stock of the Company to be outstanding
after giving effect
<PAGE>
to the sales contemplated hereby are hereinafter referred to as the "COMMON
STOCK".
SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to
Rule 430A under the Act, is hereinafter referred to as the "REGISTRATION
STATEMENT"; and the prospectus in the form first used to confirm sales of
Shares is hereinafter referred to as the "PROSPECTUS". If the Company has
filed or is required pursuant to the terms hereof to file a registration
statement pursuant to Rule 462(b) under the Act registering additional shares
of Common Stock (a "RULE 462(b) REGISTRATION STATEMENT"), then, unless
otherwise specified, any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462(b) Registration Statement.
SECTION 2. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to
issue and sell, and each Underwriter agrees, severally and not jointly, to
purchase from the Company at a price per Share of $______ (the "PURCHASE
PRICE") the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto.
On the basis of the representations and warranties
contained in this Agreement, and subject to its terms and conditions, the
Company agrees to issue and sell the Additional Shares and the Underwriters
shall have the right to purchase, severally and not jointly, up to 2,175,000
Additional Shares from the Company at the Purchase Price. Additional Shares
may be purchased solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares. The Underwriters may
exercise their right to purchase Additional Shares in whole or in part from
time to time by giving written notice thereof to the Company within 30 days
after the date of this Agreement. You shall give any such notice on behalf of
the Underwriters and such notice shall specify the aggregate number of
Additional Shares to be purchased pursuant to such exercise and the date for
payment and delivery thereof, which date shall be a business day (i) no
earlier than two business days after such notice has been given (and, in any
event, no earlier than the Closing Date (as hereinafter defined)) and (ii) no
later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine)
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which bears the same proportion to the total number of Additional Shares to
be purchased from the Company as the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule I bears to the total number of Firm
Shares.
The Company hereby agrees not to (i) 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 (ii) 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 (regardless of whether any of the transactions described in clause
(i) or (ii) is to be settled by the delivery of Common Stock, or such other
securities, in cash or otherwise), except to the Underwriters pursuant to this
Agreement, for a period of 180 days after the date of the Prospectus without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Notwithstanding the foregoing, during such period (i) the Company may grant
stock options pursuant to the Company's existing stock option plan and (ii) the
Company may issue shares of Common Stock upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof. The
Company also agrees not to file any registration statement with respect to any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock for a period of 180 days after the date of the
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation. The Company shall, prior to or concurrently with the
execution of this Agreement, deliver an agreement executed by (i) each of the
directors and officers of the Company and (ii) each stockholder listed on Annex
I hereto to the effect that such person will not, during the period commencing
on the date such person signs such agreement and ending 180 days after the date
of the Prospectus, without the prior written consent of Donaldson, Lufkin &
Jenrette Corporation, (A) engage in any of the transactions described in the
first sentence of this paragraph or (B) 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.
SECTION 3. TERMS OF PUBLIC OFFERING. The Company is advised by you
that the Underwriters propose (i) to make a public offering of their
respective portions of the Shares as soon after the execution and delivery of
this Agreement as in your judgment is advisable and (ii) initially to offer
the Shares upon the terms set forth in the Prospectus.
SECTION 4. DELIVERY AND PAYMENT. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations
and registered in such names as Donaldson, Lufkin & Jenrette Securities
Corporation shall request no later than two business days prior to the
Closing Date or the
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applicable Option Closing Date (as defined below), as the case may be. The
Company shall deliver the Shares, with any transfer taxes thereon duly paid
by the respective Sellers, to Donaldson, Lufkin & Jenrette Securities
Corporation through the facilities of The Depository Trust Company ("DTC"),
for the respective accounts of the several Underwriters, against payment to
the Company of the Purchase Price therefore by wire transfer of Federal or
other funds immediately available in New York City. The certificates
representing the Shares shall be made available for inspection not later than
9:30 A.M., New York City time, on the business day prior to the Closing Date
or the applicable Option Closing Date, as the case may be, at the office of
DTC or its designated custodian (the "DESIGNATED OFFICE"). The time and date
of delivery and payment for the Firm Shares shall be 9:00 A.M., New York City
time, on ________, 2000 or such other time on the same or such other date as
Donaldson, Lufkin & Jenrette Securities Corporation and the Company shall
agree in writing. The time and date of delivery for the Firm Shares are
hereinafter referred to as the "CLOSING DATE". The time and date of delivery
and payment for any Additional Shares to be purchased by the Underwriters
shall be 9:00 A.M., New York City time, on the date specified in the
applicable exercise notice given by you pursuant to Section 2 or such other
time on the same or such other date as Donaldson, Lufkin & Jenrette
Securities Corporation and the Company shall agree in writing. The time and
date of delivery for any Additional Shares are hereinafter referred to as an
"OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any
Option Closing Date on behalf of the parties hereto pursuant to Section 8 of
this Agreement shall be delivered at the offices of Weil, Gotshal & Manges
LLP, 767 Fifth Avenue, New York, New York 10153, and the Shares shall be
delivered at the Designated Office, all on the Closing Date or such Option
Closing Date, as the case may be.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to
confirm such advice in writing, (i) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to the
Prospectus or for additional information, (ii) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
of the suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, (iii) when
any amendment to the Registration Statement becomes effective, (iv) if the
Company is required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, when the Rule 462(b) Registration Statement has
become effective and (v) of the happening of any event during the period
referred to in Section 5(d) below which makes any statement of a material fact
made in the Registration Statement or the
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Prospectus untrue or which requires any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
will use its best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time.
(b) To furnish to you five signed copies of the Registration
Statement as first filed with the Commission and of each amendment to it,
including all exhibits, and to furnish to you and each Underwriter designated
by you such number of conformed copies of the Registration Statement as so
filed and of each amendment to it, without exhibits, as you may reasonably
request.
(c) To prepare the Prospectus, the form and substance of
which shall be satisfactory to you, and to file the Prospectus in such form
with the Commission within the applicable period specified in Rule 424(b)
under the Act; during the period specified in Section 5(d) below, not to file
any further amendment to the Registration Statement and not to make any
amendment or supplement to the Prospectus of which you shall not previously
have been advised or to which you shall reasonably object after being so
advised; and, during such period, to prepare and file with the Commission,
promptly upon your reasonable request, any amendment to the Registration
Statement or amendment or supplement to the Prospectus which may be necessary
or advisable in connection with the distribution of the Shares by you, and to
use its best efforts to cause any such amendment to the Registration
Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first
business day after the date of this Agreement and from time to time
thereafter for such period as in the opinion of counsel for the Underwriters
a prospectus is required by law to be delivered in connection with sales by
an Underwriter or a dealer, to furnish in New York City to each Underwriter
and any dealer as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as such Underwriter or dealer may reasonably
request.
(e) If during the period specified in Section 5(d), any
event shall occur or condition shall exist as a result of which, in the
opinion of counsel for the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if, in the opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable
law, forthwith to prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus so that the statements in the
Prospectus, as so amended or supplemented, will not in the light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with applicable law, and to furnish to each
Underwriter
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and to any dealer as many copies thereof as such Underwriter or dealer may
reasonably request.
(f) Prior to any public offering of the Shares, to
cooperate with you and counsel for the Underwriters in connection with the
registration or qualification of the Shares for offer and sale by the several
Underwriters and by dealers under the state securities or Blue Sky laws of
such jurisdictions as you may request, to continue such registration or
qualification in effect so long as required for distribution of the Shares
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; PROVIDED,
HOWEVER, that the Company shall not be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now
so qualified or to take any action that would subject it to general consent
to service of process or taxation other than as to matters and transactions
relating to the Prospectus, the Registration Statement, any preliminary
prospectus or the offering or sale of the Shares, in any jurisdiction in
which it is not now so subject.
(g) To mail and make generally available to its
stockholders as soon as practicable an earnings statement covering a period
of at least twelve months beginning after the effective date of the
Registration Statement that shall satisfy the provisions of Section 11(a) of
the Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this
Agreement, to furnish to you as soon as available copies of all reports or
other communications furnished to the record holders of Common Stock or
furnished to or filed with the Commission or any national securities exchange
on which any class of securities of the Company is listed and such other
publicly available information concerning the Company and its subsidiaries as
you may reasonably request.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to
be paid all expenses incident to the performance of its obligations under
this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Act and all other fees and
expenses in connection with the preparation, printing, filing and
distribution of the Registration Statement (including financial statements
and exhibits), any preliminary prospectus, the Prospectus and all amendments
and supplements to any of the foregoing, including the mailing and delivering
of copies thereof to the Underwriters and dealers in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of
the Shares to the Underwriters, including any transfer or other taxes payable
thereon, (iii) all costs of printing or producing this Agreement
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and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Shares, (iv) all expenses in connection
with the registration or qualification of the Shares for offer and sale under
the securities or Blue Sky laws of the several states and all costs of
printing or producing any Preliminary and Supplemental Blue Sky Memoranda in
connection therewith (including the filing fees and fees and disbursements of
counsel for the Underwriters in connection with such registration or
qualification and memoranda relating thereto), (v) the filing fees and
disbursements of counsel for the Underwriters in connection with the review
and clearance of the offering of the Shares by the National Association of
Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8 -A relating to
the Common Stock and all costs and expenses incident to the listing of the
Shares on the Nasdaq National Market, (vii) the cost of printing certificates
representing the Shares, (viii) the costs and charges of any transfer agent,
registrar and/or depositary, and (ix) all other costs and expenses incident
to the performance of the obligations of the Company hereunder for which
provision is not otherwise made in this Section.
(j) To use its best efforts to list for quotation the
Shares on the Nasdaq National Market and to maintain the listing of the
Shares on the Nasdaq National Market for a period of three years after the
date of this Agreement.
(k) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date or any Option Closing Date, as the case may
be, and to satisfy all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the
effectiveness of this Agreement does not cover all of the Shares, to file a
Rule 462(b) Registration Statement with the Commission registering the Shares
not so covered in compliance with Rule 462(b) by 10:00 P.M., New York City
time, on the date of this Agreement and to pay to the Commission the filing
fee for such Rule 462(b) Registration Statement at the time of the filing
thereof or to give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The
Company represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other
than any Rule 462(b) Registration Statement to be filed by the Company after
the effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement; and
no stop order suspending the effectiveness of the Registration Statement is
in effect, and no
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proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) The Registration Statement (other than any Rule
462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement), when it became effective, did not contain
and, as amended, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) the
Registration Statement (other than any Rule 462(b) Registration Statement to
be filed by the Company after the effectiveness of this Agreement) and the
Prospectus comply and, as amended or supplemented, if applicable, will comply
in all material respects with the Act, (iii) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, such Rule 462(b) Registration Statement and any amendments
thereto, when they become effective (A) will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and (B)
will comply in all material respects with the Act and (iv) the Prospectus
does not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, complied when so filed
in all material respects with the Act, and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in any preliminary prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(d) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Prospectus and to own,
lease and operate its properties, and each is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing
of property requires such qualification,
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except where the failure to be so qualified would not have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights,
warrants, options, calls, convertible securities, commitments of sale or
liens granted or issued by the Company or any of its subsidiaries relating to
or entitling any person to purchase or otherwise to acquire any shares of the
capital stock of the Company or any of its subsidiaries, except as otherwise
disclosed in the Registration Statement.
(f) All the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights; and the
Shares have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor as provided by this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.
(g) All of the outstanding shares of capital stock of each
of the Company's subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable, and are owned by the Company, directly
or indirectly through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any
nature, except as provided under the Credit Agreement, dated as of March 31,
2000, among the Company, UbiquiTel Operating Company, the lenders parties
thereto, and Paribas, as agent (the "CREDIT AGREEMENT").
(h) The authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or bylaws or in default in the
performance of any obligation, agreement, covenant or condition contained in
any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is bound.
(j) The execution, delivery and performance of this
Agreement by the Company, the compliance by the Company with all the
provisions hereof and the consummation of the transactions contemplated
hereby will not (i) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or agency
(except such as may be obtained on or prior to the Closing Date and/or may be
required under the securities or Blue Sky laws of
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the various states), (ii) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or bylaws of the
Company or any of its subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the
Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, (iii) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property or (iv) result
in the suspension, termination or revocation of any Authorization (as defined
below) of the Company or any of its subsidiaries or any other impairment of
the rights of the holder of any such Authorization which would, singly or in
the aggregate, have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(k) There are no legal or governmental proceedings pending
or threatened to which the Company or any of its subsidiaries is or could be
a party or to which any of their respective property is or could be subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described; nor are there any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required.
(l) Neither the Company nor any of its subsidiaries has
violated any foreign, federal, state or local law or regulation relating to
the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"), any provisions of the Employee Retirement Income Security Act of
1974, as amended, or any provisions of the Foreign Corrupt Practices Act, or
the rules and regulations promulgated thereunder, except for such violations
which, singly or in the aggregate, would not have a material adverse effect
on the business, prospects, financial condition or results of operation of
the Company and its subsidiaries, taken as a whole.
(m) Each of the Company and its subsidiaries has such
permits, licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "AUTHORIZATION") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary to own,
lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make
any such filing or notice would not, singly or in the aggregate, have a
material adverse effect on the business, prospects,
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financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. Each such Authorization is valid and in full
force and effect and each of the Company and its subsidiaries is in
compliance with all the terms and conditions thereof and with the rules and
regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation,
the receipt of any notice from any authority or governing body) which allows
or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after
notice or lapse of time or both, would result in any other impairment of the
rights of the holder of any such Authorization; and such Authorizations
contain no restrictions that are burdensome to the Company or any of its
subsidiaries; except where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction would not, singly or in the aggregate, have
a material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
(n) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would,
singly or in the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole.
(o) This Agreement has been duly authorized, executed and
delivered by the Company.
(p) Arthur Andersen LLP and Ernst & Young LLP are
independent public accountants with respect to the Company and its
subsidiaries as required by the Act. The historical audited financial
statements, together with related schedules and notes, set forth in the
Prospectus comply as to form in all material respects with the requirements
applicable to registration statements on Form S-1 under the Act other than
financial statements, together with related schedules and notes with regard
to the Company's acquisition of the Spokane PCS assets as described in the
Prospectus, as to which the Company has received written communication from
the staff of the Commission that the Commission will not object to the
Company's presentation of such financial statements in the Registration
Statement.
(q) The historical audited financial statements included in
the Registration Statement and the Prospectus (and any amendment or
supplement thereto), together with related schedules and notes, present
fairly the consolidated financial position, results of operations and changes
in financial position of the Company and its subsidiaries on the basis stated
therein at the respective dates or
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for the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; the supporting schedules, if any, included in
the Registration Statement present fairly in accordance with generally
accepted accounting principles the information required to be stated therein;
and the other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on
a basis consistent with such financial statements and the books and records
of the Company, except as disclosed therein.
(r) The pro forma financial statements included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), together with related schedules and notes, present fairly the
consolidated financial position, results of operations and changes in
financial position of the Company and its subsidiaries on the basis stated
therein at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; the supporting
schedules, if any, included in the Registration Statement present fairly in
accordance with generally accepted accounting principles the information
required to be stated therein; and the other financial and statistical
information and data set forth in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company, except as
disclosed therein.
(s) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds thereof
as described in the Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(t) Except as disclosed in the Registration Statement,
there are no contracts, agreements or understandings between the Company and
any person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
(u) Since the respective dates as of which information is
given in the Prospectus other than as set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement), (i) there has not occurred any material adverse change or any
development involving
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a prospective material adverse change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there has not been any material
adverse change or any development involving a prospective material adverse
change in the capital stock or in the long-term debt of the Company or any of
its subsidiaries and (iii) neither the Company nor any of its subsidiaries
has incurred any material liability or obligation, direct or contingent.
(v) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(w) The Company has provided or made available to the
Underwriters and counsel for DLJ a true and correct copy of the Consent and
Agreement between Sprint Spectrum, L.P., Sprint Communications Company, L.P.,
Cox Communications PCS, L.P., Cox PCS License, L.L.C., Paribas and the
Company, including any amendments thereto and restatements thereof, as in
effect on the date hereof (the "CONSENT AND AGREEMENT"); all documents and
correspondence relating to such Consent and Agreement; and such other
documents as may be necessary to interpret such Consent and Agreement,
documents and correspondence and to assess the impact thereof on the business
and financial condition of the Company.
(x) The Company has provided or made available to the
Underwriters and counsel for DLJ true and correct copies of each and every
agreement (or, if an agreement has not been reduced to writing, a written
enumeration of the terms of such agreement) between and among the Company and
any Related Party (as such term is defined below), on the one hand, and
Sprint PCS and any Related Party on the other, including in each case any
amendments and addenda thereto and restatements thereof, as in effect on the
date hereof (collectively, including the Consent and Agreement, the "SPRINT
AGREEMENTS"); all documents and correspondence relating to such agreements;
and such other documents as may be necessary to interpret such agreements,
documents and correspondence and to assess the impact thereof on the business
and financial condition of the Company. For purposes of this subparagraph and
the immediately following subparagraph, "RELATED PARTY" shall have the
meaning given to such term in the Schedule of Definitions incorporated by
reference in that certain Sprint PCS Management Agreement executed by the
Company and Sprint PCS as of September 1998 (as amended and supplemented
through the date hereof, (THE "SPRINT PCS MANAGEMENT AGREEMENT").
(y) Each of the Sprint Agreements (A) has been duly
authorized, executed and delivered by, (B) constitutes the valid and binding
obligation of and (C) is enforceable in accordance with its terms against,
the Company and any Related Party, to the extent each is a party thereto
(subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or
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other laws affecting creditors' rights generally from time to time in effect
and to general principles of equity, and subject, as to enforcement or rights
of indemnity and contribution, to applicable principles of public policy). No
Event of Termination (as defined in the Sprint Agreements) has occurred or is
continuing that has not been waived or cured in accordance with the terms of
any Sprint Agreement.
(z) The Company has provided the Underwriters and counsel
for the Underwriters true and correct copies of the Credit Agreement,
including any amendments thereto, and restatements thereof, as in effect on
the date hereof; and such other documents as may be necessary to interpret
such agreements and to assess the impact thereof on the business and
financial condition of the Company.
(aa) The Credit Agreement (A) has been duly authorized,
executed and delivered by, (B) constitutes the valid and binding obligation
of and (C) is enforceable in accordance with its terms against, the Company
and its affiliates, to the extent each is a party thereto (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, and subject,
as to enforcement or rights of indemnity and contribution, to applicable
principles of public policy).
(bb) On April 11, 2000, $75 million of loans under the
Credit Agreement was placed in an escrow account for the benefit of and use
by the Company pending the satisfaction of certain conditions specified in
the Credit Agreement. The Credit Agreement, subject to the escrow arrangement
set forth therein, constitutes all of the documentation and agreements
necessary for the Company to receive further disbursements under the Credit
Agreement in accordance with the terms of the Credit Agreement.
(cc) The execution, delivery and performance of the Sprint
Agreements and the Credit Agreement by the Company and any of its affiliates
that are a party thereto, the compliance by the Company and such affiliates
with all the provisions thereof and the consummation of the transactions
contemplated thereby do not (A) require any consent, approval, authorization
or other order of, or qualification with, any court or governmental body or
agency (except such as have already been obtained or that may be required to
be obtained hereafter from time to time in accordance with such agreements or
that would not, individually or in the aggregate, have a material adverse
effect on the business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole), (B) conflict with or
constitute a breach of any of the terms or provisions of, or a default under
(or an event which with notice or lapse of time, or both, would constitute a
breach of or a default under), the certificate of incorporation or bylaws of
the Company or any of its subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument to which the
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Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or their respective property is bound, other than
conflicts, breaches or defaults that, individually or in the aggregate, would
not have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole,
(C) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency
having jurisdiction over the Company, any of its subsidiaries or their
respective property other than violations or conflicts that, individually or
in the aggregate, would not have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, or (D) result in the suspension, termination
or revocation of any Authorization of the Company or any of its subsidiaries
or any other impairment of the rights of the holder of any such Authorization
other than suspensions, terminations or revocations that, individually or in
the aggregate, would not have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(dd) Each of the Sprint Agreements (including, without
limitation, the Sprint PCS Management Agreement) and the Consent and
Agreement (collectively, the "PCS AGREEMENTS"), is, and the PCS Agreements
viewed as a whole are, consistent with the terms and conditions of the
License (as such term is defined in the Sprint PCS Management Agreement) as
the Federal Communications Commission (the "FCC") has construed the terms of
such License, or similar licenses, to date and, to the best of the Company's
knowledge, is not otherwise contrary to FCC policies, rules and regulations
or other applicable law, rules or regulations.
(ee) Each certificate signed by any officer of the Company
or any of its subsidiaries and delivered to the Underwriters or counsel for
the Underwriters shall be deemed to be a representation and warranty by the
Company or any of its subsidiaries to the Underwriters as to the matters
covered thereby.
The Company acknowledges that the Underwriters and, for
purposes of the opinions to be delivered to the Underwriters pursuant to
Section 8 hereof, counsel to the Company and counsel to the Underwriters will
rely upon the accuracy and truth of the foregoing representations and hereby
consents to such reliance.
SECTION 7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, its directors, its officers and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and
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against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company
by such Underwriter through you expressly for use therein; PROVIDED, HOWEVER,
that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter who failed to
deliver a Prospectus, as then amended or supplemented, (so long as the
Prospectus and any amendments or supplements thereto was provided by the
Company to the several Underwriters in the requisite quantity and on a timely
basis to permit proper delivery on or prior to the Closing Date) to the
person asserting any losses, claims, damages, liabilities or judgments caused
by any untrue statement or alleged untrue statement of a material fact
contained in such preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if such
material misstatement or omission or alleged material misstatement or
omission was cured in the Prospectus, as so amended or supplemented, and such
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to such
Underwriter but only with reference to information relating to such
Underwriter furnished in writing to the Company by such Underwriter through
you expressly for use in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus.
(c) In case any action shall be commenced involving any
person in respect of which indemnity may be sought pursuant to Section 7(a)
or 7(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly
notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party shall assume the
defense of such action, including the employment of counsel reasonably
satisfactory to the indemnified
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party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 7(a) and 7(b), the Underwriter shall not be
required to assume the defense of such action pursuant to this Section 7(c),
but may employ separate counsel and participate in the defense thereof, but
the fees and expenses of such counsel, except as provided below, shall be at
the expense of such Underwriter). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have
been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include
both the indemnified party and the indemnifying party, and the indemnified
party shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf
of the indemnified party). In any such case, the indemnifying party shall
not, in connection with any one action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson,
Lufkin & Jenrette Securities Corporation, in the case of parties indemnified
pursuant to Section 7(a), and by the Company, in the case of parties
indemnified pursuant to Section 7(b). The indemnifying party shall indemnify
and hold harmless the indemnified party from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business
days after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party
shall have failed to comply with such reimbursement request. No indemnifying
party shall, without the prior written consent of the indemnified party,
effect any settlement or compromise of, or consent to the entry of judgment
with respect to, any pending or threatened action in respect of which the
indemnified party is or could have been a party and indemnity or contribution
may be or could have been sought hereunder by the indemnified party, unless
such settlement, compromise or judgment (i) includes an unconditional release
of the indemnified party from all liability on claims that are or could have
been the subject matter of such action
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and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this
Section 7 is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages, liabilities or judgments referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause 7(d)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company on the one hand and
the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the
Underwriters on the other hand shall be deemed to be in the same proportion
as the total net proceeds from the offering (after deducting underwriting
discounts and commissions, but before deducting expenses) received by the
Company, and the total underwriting discounts and commissions received by the
Underwriters, bear to the total price to the public of the Shares, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault of the Company on the one hand and the Underwriters on the
other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with investigating
or defending any matter, including any action, that could have given rise to
such losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Shares
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underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 7(d) are several in proportion to the respective number of
Shares purchased by each of the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
SECTION 8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement that are qualified as to material adverse effect
shall be true and correct, and all representations and warranties of the
Company that are not so qualified shall be true and correct in all material
respects on the Closing Date with the same force and effect as if made on and
as of the Closing Date (except to the extent in either case that such
representations and warranties speak as of another date).
(b) If the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, such Rule
462(b) Registration Statement shall have become effective by 10:00 P.M., New
York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a
certificate dated the Closing Date, signed by Donald A. Harris and Peter
Lucas, in their capacities as the Chief Executive Officer and interim Chief
Financial Officer of the Company, confirming the matters set forth in Sections
6(t), 8(a) and 8(b) and that the Company has complied with all of the
agreements and satisfied all of the conditions herein contained and required
to be complied with or satisfied by the Company on or prior to the Closing
Date.
(d) Since the respective dates as of which information is
given in the Prospectus other than as set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement), (i)
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there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken
as a whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt
of the Company or any of its subsidiaries and (iii) neither the Company nor
any of its subsidiaries shall have incurred any liability or obligation,
direct or contingent, the effect of which, in any such case described in
clause 8(d)(i), 8(d)(ii) or 8(d)(iii), in your judgment, is material and
adverse and, in your judgment, makes it impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Greenberg Traurig, LLP, counsel for the Company, to the effect that:
(i) each of the Company and its subsidiaries has
been duly incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the corporate
power and authority to carry on its business as described in the Prospectus
and to own, lease and operate its properties;
(ii) each of the Company and its subsidiaries is
duly qualified and is in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole;
(iii) all the outstanding shares of capital stock
of the Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive rights pursuant to law
or the Company's certificate of incorporation or, to such counsel's knowledge,
in violation of any other preemptive rights;
(iv) the Shares have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor as provided
by this Agreement, will be validly issued, fully paid and non-assessable, and
the issuance of such Shares will not be subject to any preemptive rights
pursuant to law or the Company's certificate of incorporation or, to such
counsel's knowledge, in violation of any other preemptive rights;
(v) all of the outstanding shares of capital stock
of each of the Company's subsidiaries have been duly authorized and validly
issued and
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are fully paid and non-assessable, and are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature, except
as provided by the Credit Agreement;
(vi) this Agreement has been duly authorized,
executed and delivered by the Company;
(vii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in the
Prospectus;
(viii) the Registration Statement has become
effective under the Act, no stop order suspending its effectiveness has been
issued and no proceedings for that purpose are, to the best of such counsel's
knowledge after due inquiry, pending before or contemplated by the Commission;
(ix) the statements under the captions "Sprint PCS
Agreements", "Description of Certain Indebtedness", "Principal Stockholders",
"Certain Transactions", "U.S. Federal Tax Considerations", "Regulation of the
Wireless Telecommunications Industry", "Shares Eligible for Future Sale",
"Description of Capital Stock" and "Underwriting" in the Prospectus and Items
14 and 15 of Part II of the Registration Statement, insofar as such statements
constitute a summary of the legal matters, documents or proceedings referred
to therein, fairly present in all material respects the information called for
with respect to such legal matters, documents and proceedings;
(x) neither the Company nor any of its subsidiaries
is in violation of its respective charter or bylaws and, to the best of such
counsel's knowledge after due inquiry, neither the Company nor any of its
subsidiaries is in default in the performance of any obligation, agreement,
covenant or condition contained in any material agreements (the "MATERIAL
AGREEMENTS") listed or required to be listed as exhibits to the Registration
Statement, in each case which default has not or is not likely to have, singly
or in the aggregate, a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole;
(xi) the execution, delivery and performance of
this Agreement by the Company, the compliance by the Company with all the
provisions hereof and the consummation of the transactions contemplated hereby
will not (A) require any consent, approval, authorization or other order of,
or qualification with, any court or governmental body or agency (except as
such may be obtained on or prior to the Closing Date and/or may be required
under the securities or Blue Sky laws of the various states), (B) conflict
with or constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-
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laws of the Company or any of its subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material
to the Company and its subsidiaries, taken as a whole, to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, (C) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property or (D) result in
the suspension, termination or revocation of any Authorization of the Company
or any of its subsidiaries or any other impairment of the rights of the holder
of any such Authorization which would, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole;
(xii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is or could be a party or to which any of
their respective property is or could be subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described, or of any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement that are not so
described or filed as required;
(xiii) to such counsel's knowledge, neither the
Company nor any of its subsidiaries has violated any Environmental Law, any
provisions of the Employee Retirement Income Security Act of 1974, as amended,
or any provisions of the Foreign Corrupt Practices Act, or the rules and
regulations promulgated thereunder, except for such violations which, singly
or in the aggregate, would not have a material adverse effect on the business,
prospects, financial condition or results of operation of the Company and its
subsidiaries, taken as a whole;
(xiv) each of the Company and its subsidiaries has
such Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and
all courts and other tribunals, including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or
notice would not, singly or in the aggregate, have a material adverse effect
on the business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole; each such Authorization is
valid and in full force and effect and each of the Company and its
subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has
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occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction would
not, singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole;
(xv) the Company is not and, after giving effect to
the offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment company"
as such term is defined in the Investment Company Act of 1940, as amended;
(xvi) except as contemplated by this Agreement or
agreements referenced in the Prospectus, to the best of such counsel's
knowledge after due inquiry, there are no contracts, agreements or
understandings between the Company and any person granting such person the
right to require the Company to file a registration statement under the Act
with respect to any securities of the Company or to require the Company to
include such securities with the Shares registered pursuant to the
Registration Statement; and
(xvii) (A) the Registration Statement and the
Prospectus and any supplement or amendment thereto (except for the financial
statements and the related notes, the financial statement schedules and the
other financial, statistical and accounting data included therein as to which
no opinion need be expressed) comply as to form with the Act, (B) such counsel
has no reason to believe that at the time the Registration Statement became
effective or on the date of this Agreement, the Registration Statement and the
prospectus included therein (except for the financial statements and the
related notes, the financial statement schedules and the other financial,
statistical and accounting data as to which such counsel need not express any
belief) contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (C) such counsel has no reason to
believe that the Prospectus, as amended or supplemented, if applicable (except
for the financial statements and the related notes, the financial statement
schedules and the other financial, statistical and accounting data, as
aforesaid) contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
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The opinion of Greenberg Traurig, LLP described in Section
8(e) above shall be rendered to you at the request of the Company and shall so
state therein.
(f) You shall have received on the Closing Date an opinion,
dated the Closing Date, of Weil, Gotshal & Manges, LLP, counsel for the
Underwriters, as to the matters referred to in Sections 8(e)(iv), 8(e)(vi),
8(e)(ix) (but only with respect to the statements under the caption
"Description of Capital Stock" and "Underwriting") and 8(e)(xvii).
In giving such opinions with respect to the matters covered
by Section 8(e)(xvii) Greenberg Traurig, LLP and Weil, Gotshal & Manges LLP
may state that their opinion and belief are based upon their participation in
the preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto and review and discussion of the contents
thereof, but are without independent check or verification except as specified.
(g) You shall have received, on each of the date hereof and
the Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Arthur Andersen
LLP and Ernst & Young LLP, independent public accountants, containing the
information and statements of the type ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectus.
(h) The Company shall have delivered to you the agreements
specified in Section 2 hereof which agreements shall be in full force and
effect on the Closing Date.
(i) The Shares shall have been duly listed for quotation on
the Nasdaq National Market.
(j) The Company shall not have failed on or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company on or prior to
the Closing Date.
The several obligations of the Underwriters to purchase any
Additional Shares hereunder are subject to the delivery to you on the
applicable Option Closing Date of such documents as you may reasonably request
with respect to the good standing of the Company, the due authorization and
issuance of such Additional Shares and other matters related to the issuance
of such Additional Shares.
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SECTION 9. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by
the parties hereto.
This Agreement may be terminated at any time on or prior to
the Closing Date by you by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions
or in the financial markets of the United States or elsewhere that, in your
judgment, is material and adverse and, in your judgment, makes it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus, (ii) the suspension or material limitation of trading in
securities or other instruments on the New York Stock Exchange, the American
Stock Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Chicago Board of Trade or the Nasdaq National Market or
limitation on prices for securities or other instruments on any such exchange
or the Nasdaq National Market, (iii) the suspension of trading of any
securities of the Company on any exchange or in the over-the-counter market,
(iv) the enactment, publication, decree or other promulgation of any federal
or state statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects, or will
materially and adversely affect, the business, prospects, financial condition
or results of operations of the Company and its subsidiaries, taken as a
whole, (v) the declaration of a banking moratorium by either federal or New
York State authorities or (vi) the taking of any action by any federal, state
or local government or agency in respect of its monetary or fiscal affairs
which in your opinion has a material adverse effect on the financial markets
in the United States.
If on the Closing Date or on an Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase the Firm Shares or Additional Shares, as the case may be, which it
has or they have agreed to purchase hereunder on such date and the aggregate
number of Firm Shares or Additional Shares, as the case may be, which such
defaulting Underwriter or Underwriters agreed but failed or refused to
purchase is not more than one-tenth of the total number of Firm Shares or
Additional Shares, as the case may be, to be purchased on such date by all
Underwriters, each non-defaulting Underwriter shall be obligated severally, in
the proportion which the number of Firm Shares set forth opposite its name in
Schedule I bears to the total number of Firm Shares which all the
non-defaulting Underwriters have agreed to purchase, or in such other
proportion as you may specify, to purchase the Firm Shares or Additional
Shares, as the case may be, which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase on such date; PROVIDED that in no
event shall the number of Firm Shares or Additional Shares, as the case may
be, which any Underwriter has agreed to purchase pursuant to Section 2 hereof
be increased pursuant to this Section 9 by an amount
25
<PAGE>
in excess of one-ninth of such number of Firm Shares or Additional Shares, as
the case may be, without the written consent of such Underwriter. If on the
Closing Date any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares
to be purchased by all Underwriters and arrangements satisfactory to you and
the Company for purchase of such Firm Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected. If, on an Option Closing Date, any Underwriter
or Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Additional Shares to
be purchased on such date, the non-defaulting Underwriters shall have the
option to (i) terminate their obligation hereunder to purchase such Additional
Shares or (ii) purchase not less than the number of Additional Shares that
such non-defaulting Underwriters would have been obligated to purchase on such
date in the absence of such default. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
default of any such Underwriter under this Agreement.
SECTION 10. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to
UbiquiTel Inc., 1 Bala Plaza, Suite 402, Bala Cynwyd, Pennsylvania 19004,
Attention: Donald A. Harris, with a copy to Greenberg Traurig, 1221 Brickell
Avenue, Miami, Florida 33131, Attention: Rebecca Orand and (ii) if to any
Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, with a copy to Weil, Gotshal & Manges LLP, 100 Crescent Court,
Suite 1300, Dallas, Texas 75201, Attention: Michael Saslaw, or in any case to
such other address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and the
several Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of
and payment for the Shares, regardless of (i) any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter, the
officers or directors of any Underwriter, any person controlling any
Underwriter, the Company, the officers or directors of the Company or any
person controlling the Company, (ii)
26
<PAGE>
acceptance of the Shares and payment for them hereunder and (iii) termination
of this Agreement.
If for any reason the Shares are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 9), the Company agrees to
reimburse the several Underwriters for all out-of-pocket expenses (including
the fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Company also
agrees to reimburse the several Underwriters, their directors and officers and
any persons controlling any of the Underwriters for any and all fees and
expenses (including, without limitation, the fees disbursements of counsel)
incurred by them in connection with enforcing their rights hereunder
(including, without limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Underwriters, the Underwriters' directors and officers, any controlling
persons referred to herein, the Company's directors and the Company's officers
who sign the Registration Statement and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement.
The term "successors and assigns" shall not include a purchaser of any of the
Shares from any of the several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
[The remainder of this page is intentionally left blank.]
27
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the several Underwriters.
Very truly yours,
UBIQUITEL INC.
By:
-----------------------------------
Peter Lucas
Interim Chief Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
DLJ DIRECT INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------------
William G. Payne
Senior Vice President
28
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Underwriters Number of Firm Shares
to be Purchased
- -------------------------------------------------------------------------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities
Corporation
- -------------------------------------------------------------------------------
Banc of America Securities LLC
- -------------------------------------------------------------------------------
DLJDIRECT Inc.
- -------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
Annex I
[Names of stockholders of the Company who will be required to sign lock ups]
The Walter Group
Paul Judge
Donald Harris
US Bancorp
James Parsons
Trust dated 12/24/99 between Donald A. Harris, as Settlor and Thomas
Whiteman, as Trustee
Brookwood Ubiquitel Investors, LLC
Lancaster Investment Partners
Stephen C. Marcus
Robert Berlacher
Richard C. Walling, Jr.
Porter Partners
Ballyshannon Partners, LP
Barry Porter
CBT Wireless Investments, LLC
Spectrasite Communications
Mark and Jerri Buechley
New Ventures, LLC
Robert A. Berlacher and Julie T. Berlacher, Tenants by the Entirety
Robert A. Berlacher IRA, Bear Stearns Sec. Corp. Cust.
Paribas Corporation
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
UBIQUITEL INC.
(ORIGINALLY INCORPORATED ON SEPTEMBER 29, 1999)
The undersigned, for the purpose of amending and restating the
Certificate of Incorporation of UbiquiTel Inc., a corporation duly organized
and existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does certify that:
1. The present name of the Corporation is UbiquiTel Inc. The Company
was originally incorporated on September 29, 1999 under the name Ubiquitel
Holding Company and changed its name to UbiquiTel Holdings, Inc. on October
29, 1999, and subsequently changed its name to UbiquiTel Inc. on February 24,
2000.
2. The Certificate of Incorporation of the Corporation, as amended
and restated herein, shall at the effective time of this amended and restated
Certificate of Incorporation, read as follows:
ARTICLE I
The name of the corporation is UBIQUITEL INC. (hereinafter the
"Corporation").
ARTICLE II
The registered office of the Corporation in the State of Delaware is
located at 1013 Centre Road, City of Wilmington, County of New Castle. The
registered agent at that address is Corporation Service Company.
ARTICLE III
The nature of the business and purposes to be conducted and promoted
by the Corporation, shall be to conduct any lawful business, to promote any
lawful purpose, and to engage in any lawful activity for which corporations
may be organized under the General Corporation Law of the State of Delaware;
and to have and exercise all of the powers conferred by the laws of the State
of Delaware upon corporations incorporated or organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
1. The total number of shares of stock which the Corporation is
authorized to issue is 110,000,000 shares of stock consisting of (a)
100,000,000 shares of Common Stock, par value $.0005 each, and (b) 10,000,000
shares of Preferred Stock, par value $.001 each. The Board of Directors is
authorized, subject to any limitations prescribed by law, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a
<PAGE>
certificate pursuant to the applicable law of the State of Delaware (such
certificate being hereinafter referred to as a "Preferred Stock
Designation"), to establish from time to time the number of shares to be
included in each such series, and to fix the designation powers, preferences,
and rights of the shares of each such series and any qualifications,
limitations or restrictions thereof. The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the Common Stock, without a vote of the holders of the Preferred
Stock, or of any series thereof, unless a vote of any such holders is
required pursuant to the terms of any Preferred Stock Designation.
2. Upon the effectiveness of this Amended and Restated Certificate
of Incorporation, (A) each outstanding share (collectively the "Old Capital
Stock") of the Corporation's preferred stock, par value $.001 per share, and
voting common stock, par value $.001 per share, shall be reclassified and
changed into, one share of Common Stock; (B) each outstanding share of
non-voting common stock, par value $.001 per share, shall be cancelled,
retired and restored to the status of an authorized but unissued share of
Common Stock; and (C) each outstanding warrant or option to purchase shares
of voting common stock, par value $.001 per share, or non-voting common
stock, par value $.001 per share, shall now represent a warrant or option to
purchase the same number of shares of Common Stock. Each certificate that
heretofore represented shares of Old Capital Stock shall now represent the
number of shares of Common Stock into which such shares were reclassified and
changed hereby, provided, however, that each person holding of record a stock
certificate or certificates that represented shares of Old Capital Stock
shall receive, upon surrender of each such certificate or certificates, a new
certificate or certificates evidencing and representing the number of shares
of Common Stock to which such person is entitled. Upon consummation of the
reclassification of the Old Capital Stock of the Corporation set forth in
this paragraph, the holders of the shares of Common Stock of the Corporation
shall have all rights accorded them by law and this Amended and Restated
Certificate of Incorporation.
ARTICLE V
The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Directors and stockholders:
A. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to the powers
and authority expressly conferred upon them by statute or by this Amended and
Restated Certificate of Incorporation or the Bylaws of the Corporation, the
Directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation.
B. The Directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
2
<PAGE>
C. No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
D. Special meetings of stockholders of the Corporation may be called
only by the Chairman of the Board, if there is one, by the President, or by
the Board of Directors pursuant to a resolution adopted by a majority of the
Whole Board. The term "Whole Board" shall mean the total number of authorized
directorships (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption).
E. The holders of the Common Stock shall have no preemptive rights
to subscribe for any shares of any class of stock of the Corporation whether
now or hereafter authorized, except as such rights are expressly provided by
contract, or by resolution creating a series of Preferred Stock, to purchase
or subscribe for or receive any shares of any class, or series thereof, of
stock of the Corporation, whether now or hereafter authorized, or any
warrants, options, bonds, debentures or other securities convertible into,
exchangeable for or carrying any right to purchase any shares of any class of
stock, or series thereof; but such additional shares of stock and such
warrants, options, bonds, debentures or other securities convertible into,
exchangeable for or carrying any right to purchase any shares of any class of
stock, or series thereof, may be issued or disposed of by the Board of
Directors to such persons, and on such terms and for such lawful
consideration, as in its discretion it shall deem advisable or as to which
the Corporation shall have by binding contract agreed.
ARTICLE VI
The following provisions relate to the appointment of the Board of
Directors of the Corporation:
A. The number of Directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The Directors shall be divided into three
classes, as nearly equal in numbers as the then total number of directors
constituting the entire Board permits with the term of office of one class
expiring each year. At the first annual meeting of stockholders to be held
after the effective date of this Amended and Restated Certificate of
Incorporation, which is expected to be in 2001, directors of the first class
shall be elected to hold office for a term expiring at the next succeeding
annual meeting, directors of the second class shall be elected to hold office
for a term expiring at the second succeeding annual meeting, and directors of
the third class shall be elected to hold office for a term expiring at the
third succeeding annual meeting. Notwithstanding the foregoing, and except as
otherwise required by law, whenever the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a class, to elect
one or more directors of the Corporation, the terms of the director or
directors elected by such holders shall expire at
3
<PAGE>
the next succeeding annual meeting of stockholders. At each annual meeting of
stockholders following such initial classification and election, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of
stockholders after their election with each Director to hold office until his
or her successor shall have been duly elected and qualified.
B. Subject to the rights of holders of any series of Preferred Stock
outstanding, the newly created directorships resulting from any increase in
the authorized number of Directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the Directors
then in office, though less than a quorum, and Directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been chosen expires. No
decrease in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
C. Advance notice of stockholder nominations for the election of
Directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in
the Bylaws of the Corporation.
D. Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or the Bylaws of the Corporation, any Director,
or the entire Board of Directors, may be removed from office at any time, but
only for cause and only by the affirmative vote of the holders of at least 80
percent (80%) of the voting power of all of the then-outstanding shares of
capital stock of the Corporation entitled to vote generally in the election
of Directors, voting together as a single class. Except as may otherwise be
provided by law, cause for removal shall exist only if the director whose
removal is proposed:
(i) has been convicted of a felony by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal;
(ii) has been adjudged by a court of competent jurisdiction
to be liable for gross negligence or misconduct in the performance of such
director's duties to the Corporation in a matter of substantial importance to
the Corporation, and such adjudication has become final and non-appealable; or
(iii) has missed six consecutive meetings of the Board of
Directors.
E. Notwithstanding the foregoing, and except as otherwise required
by law, whenever the holders of any one or more series of Preferred Stock
shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the provisions of section D of this ARTICLE SIX
shall not apply with respect to the Director or Directors elected by such
holders of Preferred Stock.
4
<PAGE>
ARTICLE VII
The Board of Directors is expressly empowered to adopt, amend or
repeal Bylaws of the Corporation. Any adoption, amendment or repeal of the
Bylaws of the Corporation by the Board of Directors shall require the
approval of a majority of the Whole Board. The stockholders shall also have
power to adopt, amend or repeal the Bylaws of the Corporation; provided,
however, that, in addition to any vote of the holders of any class or series
of stock of this Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at least 80 percent
(80%) of the voting power of all of the then-outstanding shares of the
capital stock of the Corporate entitled to vote generally in the election of
Directors, voting together as a single class, shall be required to adopt,
amend or repeal any provisions of the Bylaws of the Corporation.
ARTICLE VIII
These provisions relate to indemnification:
F. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or
an Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a Director, Officer, employee or agent or in any other
capacity while serving as a Director, Officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide
prior to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as
provided in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
G. The right to indemnification conferred in Section A of this
ARTICLE EIGHT shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his
5
<PAGE>
or her capacity as a Director or Officer (and not in any other capacity in
which service was or is rendered by such indemnitee, including, without
limitation, services to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which there is
no further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section or otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this ARTICLE EIGHT shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
H. If a claim under Section A or B of this ARTICLE EIGHT is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement
of expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expenses of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the
Corporation shall be entitled to recover such expenses upon a final
adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither
the failure of the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has not
met such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the e case
of such a suit brought by the indemnitee, be a defense to such suit. In any
suit brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden
of proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this ARTICLE EIGHT or otherwise shall be on
the Corporation.
I. The rights to indemnification and to the advancement of expenses
conferred to this ARTICLE EIGHT shall not be exclusive of any other right
which any
6
<PAGE>
person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
Directors or otherwise.
J. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer, employee or agent of the
Corporation or subsidiary or Affiliate or another corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware General
Corporation Law.
K. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this ARTICLE EIGHT with respect to the
indemnification and advancement of expenses of Directors and Officers of the
Corporation.
ARTICLE IX
A Director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived
an improper personal benefit. If the Delaware General Corporation Law is
amended to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such
repeal or modification.
ARTICLE X
The provisions set forth in this Article TEN and in Articles FIVE,
SIX, SEVEN, EIGHT and NINE herein may not be repealed or amended in any
respect, and no article imposing cumulative voting in the election of
directors may be added, unless such action is approved by the affirmative
vote of the holders of not less than eight percent (80%) of the outstanding
shares of Common Stock of this Corporation, subject to the provisions of any
series of Preferred Stock which may at the time be outstanding.
7
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation, which restates and integrates and does further amend the
provisions of the Corporation's Certificate of Incorporation, having been
duly proposed by the Board of Directors of the Corporation and approved by
the stockholders of the Corporation in accordance with the provisions of
Sections 242 and 245 of the General Corporation Laws of the State of
Delaware, has been executed this _____ day of _______, 2000 by Donald A.
Harris, its authorized officer.
UBIQUITEL INC.
By:
---------------------------------
Donald A. Harris, President
8
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
UBIQUITEL INC.
ARTICLE I - STOCKHOLDERS
SECTION 1. ANNUAL MEETING.
An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such
place, on such date, and at such time as the Board of Directors shall each
year fix.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called only by the Chairman
of the Board, if there is one, by the President, or by the Board of Directors
pursuant to a resolution adopted by a majority of the Whole Board and shall
be held at such place, on such date, and at such time as they or he shall
fix. The term "Whole Board" shall mean the total number of authorized
directorships (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption).
SECTION 3. NOTICE OF MEETINGS.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten nor more than sixty days
before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time
by the Delaware General Corporation Law or the Certificate of Incorporation
of the corporation). Such notice shall state the place, date and hour of such
meeting and notice of special meetings shall also state the general purpose
of the business to be transacted.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty days after the date for which the meeting was originally noticed, or
if a new record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
<PAGE>
SECTION 4. QUORUM.
At any meeting of the stockholders, the holders of a majority of all
of the shares of the stock entitled to vote at the meeting, present in person
or by proxy, shall constitute a quorum for all purposes, unless or except to
the extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
Any previously scheduled meeting of the stockholders may be
postponed, and any special meeting of the stockholders may be cancelled, by
resolution of the Board of Directors upon "public announcement" (as
hereinafter defined) given prior to the date previously scheduled for such
meeting of stockholders. For purposes of these Bylaws, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act
of 1934, as amended.
SECTION 5. ORGANIZATION.
Such person as the Board of Directors may have designated or, in the
absence of such person, the chief executive officer of the corporation or, in
his absence, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the corporation, the secretary of the meeting
shall be such person as the chairman appoints.
SECTION 6. CONDUCT OF BUSINESS.
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including such regulation
of the manner of voting and the conduct of discussion.
(b) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
corporation who is entitled to vote with respect thereto and who complies
with the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have give timely notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be delivered or mailed
to and received at the principal executive offices of the corporation not
less than ninety days prior to the date of the annual meeting; provided,
however, that in the event that less than
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one hundred days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter such stockholder proposes to
bring before the annual meeting : (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation's capital
stock that are beneficially owned by such stockholder and, (iv) any material
interest of such stockholder in such business. Notwithstanding anything in
these Bylaws to the contrary, no business shall be brought before or
conducted at an annual meeting except in accordance with the provisions of
this Section 6(b). The officer of the corporation or other person presiding
over the annual meeting shall, if the facts so warrant, determine that
business was not properly brought before the meeting in accordance with the
provisions of this Section 6(b) and, if he should so determine, he shall so
declare to the meeting and any such business so determined to be not properly
brought before the meeting shall not be transacted.
At any special meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders at which directors are
to be elected only: (i) by or at the direction of the Board of Directors or,
(ii) by any stockholder of the corporation entitled to vote for the election
of Directors at the meeting who complies with the notice procedures set forth
in this Section 6(c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in
writing to the Secretary of the corporation. To be timely, a stockholder's
notice must be delivered or mailed to and received at the principal executive
offices of the corporation not less than forty five days nor more than
seventy five days prior to the first anniversary of the date on which the
proxy materials for the previous year's annual meeting of stockholders was
mailed. If the date of an annual meeting of stockholders is more than thirty
days before or more than thirty days after the date of the first anniversary
of the previous year's annual meeting of stockholders, then a stockholder's
notice is timely if delivered or mailed to and received not less than ninety
days prior to the date of the annual meeting; provided, however, that in the
event that less than one hundred days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of
business on the tenth day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth: (i) as to each person whom such
stockholders proposes to nominate for election or re-election as a Director,
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors , or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director
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if elected); and (ii) as to the stockholder giving the notice (x) the name
and address, as they appear on the corporation's books, of such stockholder
and (y) the class and number of shares of the corporation's capital stock
that are beneficially owned by such stockholder. At the request of the Board
of Directors, any person nominated by the Board of Directors for election as
a Director shall furnish to the Secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which
pertains to that nominee. No person shall be eligible for election as a
Director of the corporation unless nominated in accordance with the
provisions of this Section 6(c). The officer of the corporation or other
person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with the provisions of this
Section 6(c) and, if he shall so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 7. PROXIES AND VOTING.
At any meeting of the stockholders, every stockholder entitled to
vote may vote in person or by proxy authorized by an instrument in writing
filed in accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock
entitled to vote which is registered in his name on the record date for the
meeting, except as otherwise provided herein or required by law.
All voting, including the election of directors except where
otherwise required by law, may be by a voice vote. The corporation shall, in
advance of any meeting of the stockholders, appoint one or more inspectors to
act at the meeting and make a written report thereof. The corporation may
designate one or more persons to act as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act at a
meeting, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
his ability.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law or the Certificate of Incorporation,
all other matters shall be determined by a majority of the votes cast.
SECTION 8. RECORD DATE.
The Board of Directors may fix a record date, which shall not be
more than sixty nor less than ten days before the date of any meeting of
stockholders, nor more than sixty days prior to the time for the other action
hereinafter described, as of which there shall be determined the stockholders
who are entitled: (i) to notice of or to vote at any meeting of stockholders
or any adjournment thereof; (ii) to receive payment of any dividend or other
distribution or allotment of any rights; (iii) or to exercise any rights with
respect to any change, conversion or exchange of stock or with respect to any
other lawful action.
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SECTION 9. STOCK LIST.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at
a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number
of shares held by each of them.
SECTION 10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
ARTICLE II -- BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE
The number of directors who shall constitute the whole board shall
be fixed from time to time exclusively by the Board of Directors pursuant to
a resolution adopted by a majority of the Whole Board. The Directors shall be
divided into three classes, as nearly equal in numbers as the then total
number of directors constituting the entire Board permits with the term of
office of one class expiring each year. At the first annual meeting of
stockholders to be held after the effective date of these Amended and
Restated Bylaws, which is expected to be in 2001, directors of the first
class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected to
hold office for a term expiring at the second succeeding annual meeting, and
directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Notwithstanding the
foregoing, and except as otherwise required by law, whenever the holders of
any one or more series of Preferred Stock shall have the right, voting
separately as a class, to elect one or more directors of the corporation, the
terms of the director or directors elected by such holders shall expire at
the next succeeding annual meeting of stockholders. At each annual meeting of
stockholders following such initial classification and election, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of
stockholders after their election with each Director to hold office until his
or her successor shall have been duly elected and qualified.
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SECTION 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS.
Subject to the rights of holders of any series of Preferred Stock
outstanding, the newly created directorships resulting from any increase in
the authorized number of Directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the Directors
then in office, though less than a quorum, and Directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been chosen expires. No
decrease in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
SECTION 3. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such
place or places, on such date or dates, and at such time or times as shall
have been established by the Board of Directors and publicized among all
directors. A notice of each regular meeting shall not be required.
SECTION 4. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the
Chairman of the Board, the Chief Executive Officer or one-third of the
directors then in office and shall be held at such place, on such date, and
at such time as they or he shall fix. Notice of the place, date, and time of
each such special meeting shall be given each director by whom it is not
waived by mailing written notice not less than five days before the meeting
or by telegraphing the same not less than twenty-four hours before the
meeting. Unless otherwise indicated in the notice thereof, any and all
business may be transacted at a special meeting.
SECTION 5. QUORUM; REQUIRED VOTE.
At any meeting of the Board of Directors, a majority of the total
number of the Whole Board shall constitute a quorum for all purposes;
provided, however, that whenever, for any reason, a vacancy occurs in the
Board of Directors, a quorum shall consist of a majority of the remaining
directors until the vacancy has been filled except that in no event may a
quorum consist of fewer than one-third of the total number of the Whole
Board. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without
further notice or waiver thereof.
The Board of Directors of the corporation shall have the power and
authority to prescribe, permit or require special quorum and/or vote
requirements for directors (including the full Board of Directors or of any
designated sub-group or committee of the Board of Directors), in connection
with any action, determination, authorization and/or approval that the Board
of Directors shall deem appropriate and shall designate for such special
quorum and/or vote requirements, subject to the requirements of Section 141
of the Delaware General Corporation Law. This power and authority shall
include, without limitation, the power and authority to prescribe, permit or
require special quorum and/or vote requirements for directors (including,
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without limitation, special quorum and/or voting requirements for the full
Board of Directors or for any designated sub-group or committee of the Board
of Directors), in connection with any action, determination, authorization
and/or approval in connection with any share purchase rights, or any
agreement embodying or evidencing such share purchase rights, to be
authorized and issued by the corporation. Notwithstanding the foregoing,
unless otherwise provided in the Certificate of Incorporation (consistent
with applicable law), the Board of Directors shall not (i) with respect to
any action which by law requires action, authorization or approval of the
Board of Directors, fix a quorum of the Board of Directors at less than a
majority of the number of directors constituting the Board of Directors as
prescribed by the Certificate of Incorporation or these Bylaws, or (ii)
delegate to any committee or subgroup of the Board of Directors any
authorization or approval which, under and in accordance with Delaware law,
may only be taken by the fully constituted Board of Directors.
SECTION 6. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
SECTION 7. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be
transacted in such order and manner as the Board may from time to time
determine, and all matters shall be determined by the vote of a majority of
the Directors present, except as otherwise provided herein, in the
Certificate of Incorporation or required by law. Action may be taken by the
Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writings are filed with the minutes of proceedings of the
Board of Directors.
SECTION 8. POWERS.
The Board of Directors may, except as otherwise required by law or
by any agreement to which the corporation is a party, exercise all such
powers and do all such acts and things as may be exercised or done by the
corporation, including, without limiting the generality of the foregoing, the
unqualified power:
(1) To declare dividends from time to time in accordance
with law;
(2) To purchase or otherwise acquire any property, rights
or privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in
such form as it may determine, of written obligations
of every kind, negotiable or nonnegotiable, secured
or unsecured, and to do all things necessary in
connection herewith;
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(4) To remove any officer of the corporation with or
without cause, and from time to time to devolve the
powers and duties of any officer upon any other
person for the time being;
(5) To confer upon any officer of the corporation the
power to appoint, remove and suspend subordinate
officers, employees and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for
directors, officers, employees and agents of the
corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance,
retirement, and other benefit plans for directors,
officers, employees and agents of the corporation and
its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not
inconsistent with these bylaws, for the management of
the corporation's business and affairs.
SECTION 9. COMPENSATION OF DIRECTORS.
Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as
directors, including, without limitation, their services as members of
committees of the Board of Directors.
SECTION 10. ACTION WITHOUT MEETING.
Any action required or permitted to be taken at a meeting of the
Board of Directors or a committee thereof may be taken without a meeting if a
consent in writing, setting forth the action taken, is signed by all the
members of the Board of Directors or the committee, as the case may be, and
such consent shall have the same force and effect as a unanimous vote at a
meeting. Action taken under this section is effective when the last director
signs the consent, unless the consent specifies a different effective date. A
consent signed under this Section 10 shall have the effect of a meeting vote
and may be described as such in any document.
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ARTICLE III -- COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors may from time to time designate committees of
the Board, with such lawfully delegable powers and duties as it thereby
confers, to serve at the pleasure of the Board and shall, for those
committees and any others provided for herein, elect a director or directors
to serve as the member or members, designating, if it desires, other
directors as alternate members who may replace any absent or disqualified
member at any meeting of the committee. Any committee so designated may
exercise the power and authority of the Board of Directors to declare a
dividend or to authorize the issuance of stock if the resolution which
designates the committee or a supplemental resolution of the Board of
Directors shall so provide. In the absence or disqualification of any member
of any committee and any alternate member in his place, the member or members
of the committee present at the meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may by unanimous vote appoint
another member of the Board of Directors to act at the meeting in the place
of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be
made for notice to members of all meetings; one-third of the members shall
constitute a quorum unless the committee shall consist of one or two members,
in which event one member shall constitute a quorum; and all matters shall be
determined by a majority vote of the members present. Action may be taken by
any committee without a meeting if all members thereof consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of such committee.
ARTICLE IV -- OFFICERS
SECTION 1. NUMBER.
The officers of the corporation may include a Chairman of the Board,
Chief Executive Officer, a President, one or more Vice Presidents, a
Secretary, one or more Assistant Secretaries and a Chief Financial Officer
and/or Treasurer and one or more Assistant Treasurers, and such other
officers as the Board Of Directors from time to time may deem proper. Any
number of offices may be held by the same person.
SECTION 2. ELECTION.
The Board of Directors at its first meeting after each annual
meeting of shareholders may choose a Chairman of the Board, a President, a
Secretary and a Chief Financial Officer and/or
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Treasurer, and may also choose Vice Presidents, Assistant Secretaries and
Assistant Treasurers, none of whom need be a member of the Board of Directors.
The Board of Directors may elect or appoint such other officers,
assistant officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall have such authority and perform such duties
as shall be determined from time to time by the Board.
SECTION 3. SALARIES.
The salaries of all officers and agents of the corporation shall be
fixed by the Board of Directors.
SECTION 4. TERM OF OFFICE AND REMOVAL.
The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board of Directors whenever,
in their judgment, the best interests of the corporation will be served
thereby, but such removal shall be without prejudice to the contract rights,
if any, of the person so removed. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by
the Board of Directors.
SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board shall, subject to the provisions of these
Bylaws and to the direction of the Board of Directors, unless the Board has
designated another person, when present, preside at all meetings of the
stockholders of the corporation. The Chairman of the Board shall perform all
duties and have all powers which are commonly incident to the office of
Chairman of the Board or which are delegated to him or her by the Board of
Directors. He or she shall have power to sign all stock certificates,
contracts and other instruments of the corporation which are authorized.
SECTION 6. THE CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall have general responsibility for
the management and control of the business and affairs of the operation and
shall perform all duties and have all powers which are commonly incident to
the office of Chief Executive Officer or which are delegated to him or her by
the Board of Directors. He or she shall have power to sign all stock
certificates, contracts and other instruments of the corporation which are
authorized.
SECTION 7. THE PRESIDENT.
The President shall have general responsibility for the management
and control of the business and affairs of the operation and shall perform all
duties and have all powers which are commonly incident to the office of
President or which are delegated to him or her by the Board of Directors.
Subject to the direction of the Board of Directors, the President shall have the
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power to sign all stock certificates, contracts and other instruments of the
corporation which are authorized and shall have general supervision of all of
the other Officers (other than the Chairman of the Board and the Chief
Executive Officer), employees and agents of the corporation.
SECTION 8. THE VICE PRESIDENTS.
The vice president, or if there shall be more than one, the vice
presidents in the order determined by the Board of Directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
SECTION 9. THE SECRETARY.
The Secretary shall attend all meetings of the Board of Directors and
all meetings of the stockholders and record all the proceedings of the
meetings of the corporation and of the Board of Directors in a book to be kept
for that purpose and shall perform like duties for the standing committees
when required. He or she shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors, the Chairman of the Board or President. He or she shall have
custody of the corporate seal of the corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring
it and when so affixed, it may be attested by his signature or by the
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
SECTION 10. THE ASSISTANT SECRETARIES.
The Assistant Secretaries in the order determined by the Board of
Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
SECTION 11. THE CHIEF FINANCIAL OFFICER/TREASURER.
The Chief Financial Officer/Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.
He or she shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an
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account of all his or her transactions as Chief Financial Officer/Treasurer
and of the financial condition of the corporation.
If required by the Board of Directors, he or she shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors.
SECTION 12. THE ASSISTANT TREASURERS.
The Assistant Treasurer, or if there be more than one, the Assistant
Treasurers in the order determined by the Board of Directors, shall, in the
absence or disability of the Chief Financial Officer/Treasurer, perform the
duties and exercise the powers of the Chief Financial Officer/Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE V -- STOCK
SECTION 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the corporation by, the Chairman of the Board, the President,
Chief Executive Officer or a Vice President, and by the Secretary or an
Assistant Secretary, or the Chief Financial Officer/Treasurer or an Assistant
Treasurer, certifying the number of shares owned by him. Any of or all the
signatures on the certificate may be facsimile.
SECTION 2. TRANSFERS OF STOCK.
Transfers of stock shall be made only upon the transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 4 of Article VI of these
bylaws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
SECTION 5. REGULATIONS.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors
may establish.
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ARTICLE VI -- INDEMNIFICATION
The Directors and Officers of the Corporation shall be indemnified to
the fullest extent allowed by law.
ARTICLE VII -- NOTICES
SECTION 1. NOTICES.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer,
employee or agent shall be in writing and may in every instance be effectively
given by hand delivery to the recipient thereof, by depositing such notice in
the mails, postage paid, or by sending such notice by prepaid telegram or
mailgram. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same
appears on the books of the corporation. The time when such notice is
received, if hand delivered, or dispatched, if delivered through the mails or
by telegram or mailgram, shall be the time of the giving of the notice.
SECTION 2. WAIVERS.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VIII -- MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these bylaws, facsimile signatures of any
officer or officers of the corporation may be used whenever and as authorized
by the Board of Directors or a committee thereof.
SECTION 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal, containing the
name of the corporation, which seal shall be in the charge of the Secretary.
If and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by an
Assistant Secretary or Assistant Treasurer.
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SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the Board
of Directors, and each officer of the corporation shall, in the performance of
his duties, be fully protected in relying in good faith upon the books of
account or other records of the corporation, including reports made to the
corporation by any of its officers, by an independent certified public
accountant, or by an appraiser selected with reasonable care.
SECTION 4. FISCAL YEAR.
The fiscal year of the corporation shall be as fixed by the Board of
Directors.
SECTION 5. TIME PERIODS.
In applying any provision of these bylaws which require that an act
be done or not done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be
excluded, and the day of the event shall be included.
ARTICLE IX -- AMENDMENTS
Any adoption, amendment or repeal of these bylaws by the Board of
Directors shall require the approval of a majority of the Whole Board. The
stockholders shall also have power to adopt, amend or repeal these; provided,
however, that, in addition to any vote of the holders of any class or series
of stock of this corporation required by law or by the corporation's
Certificate of Incorporation, the affirmative vote of the holders of at least
80 percent (80%) of the voting power of all of the then-outstanding shares of
the capital stock of the corporate entitled to vote generally in the election
of Directors, voting together as a single class, shall be required to adopt,
amend or repeal any provisions of these bylaws.
ARTICLE X -- CONFLICTS
To the extent that any provision in these bylaws is in conflict with
the provisions of the corporation's Certificate of Incorporation, any
Certificate of Designation establishing the rights and preferences of any
series of Preferred Stock, or any agreement between the corporation and any of
its stockholders (collectively the "Other Agreements"), the provisions of such
Other Agreements shall control.
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EXHIBIT 5.1
GREENBERG TRAURIG, L.L.P.
1750 TYSONS BOULEVARD, SUITE 1200
TYSONS CORNER, VIRGINIA 22102
May 12, 2000
UbiquiTel Inc.
1 Bala Plaza, Suite 402
Bala Cynwyd, Pennsylvania 19004
Re: UBIQUITEL INC.
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to UbiquiTel Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of a
Registration Statement on Form S-1 (File No. 333-32236) (the "Registration
Statement") by the Company with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), to
register the offering and sale by the Company of up 16,675,000 shares
(including 2,175,000 shares subject to the underwriters' over-allotment
option) of common stock, par value $.001 per share, of the Company (the
"Shares").
In this regard, we have reviewed (a) the Registration Statement and
the exhibits thereto; (b) the Certificate of Incorporation, as amended to
date, and the Bylaws of the Company, as amended to date; (c) resolutions of
the Company's Board of Directors authorizing the preparation and filing of
the Registration Statement and the offering and issuance of the Shares; and
(d) such other records and documents as we have deemed relevant in rendering
this opinion. In our review, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity with originals of all documents submitted to us as
certified or photostatic copies. As to various questions of fact material to
this opinion, we have relied, to the extent we deemed reasonably appropriate,
upon representations or certificates of officers or directors of the Company
and upon documents, records and instruments furnished to us by the Company,
without independently verifying the accuracy of such representations,
certificates, documents, records and instruments.
Based on the foregoing review, we are of the opinion that the Shares
have been duly and validly authorized and, when issued and delivered by the
Company and paid for in accordance with the terms of the Underwriting
Agreement filed as Exhibit 1.1 to the Registration Statement, will be validly
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption
"Legal Matters" in the prospectus comprising a part of the Registration
Statement. In giving this consent, we do not hereby admit that we are
included within the category of persons whose consent is required under
Section 7 of the Securities Act, or the rules and regulations promulgated
thereunder.
Very truly yours,
GREENBERG TRAURIG, L.L.P.
/S/ GREENBERG TRAURIG, L.L.P.
------------------------------------
<PAGE>
EXHIBIT 10.2
SPRINT PCS
SERVICES AGREEMENT
BETWEEN
SPRINT SPECTRUM L.P.
AND
UBIQUITEL L.L.C.
SEPTEMBER ___, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. ENGAGEMENT OF SPRINT SPECTRUM . . . . . . . . . . . . . . . . . . . . . . . .3
1.1 Engagement of Sprint Spectrum. . . . . . . . . . . . . . . . . . . . .3
1.2 Reliance on Manager. . . . . . . . . . . . . . . . . . . . . . . . . .3
1.3 Non-exclusive Service. . . . . . . . . . . . . . . . . . . . . . . . .4
1.4 Manager's Use of Services. . . . . . . . . . . . . . . . . . . . . . .4
2. SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.1 Available Services; Selected Services. . . . . . . . . . . . . . . . .4
2.2 Third Party Vendors. . . . . . . . . . . . . . . . . . . . . . . . . .5
2.3 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
3. FEES FOR SELECTED SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . .5
3.1 Payment of Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.2 Adjustment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 Late Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4. TERM; TERMINATION; EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . .6
4.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . .6
5. BOOKS AND RECORDS; CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . .7
5.1 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . .7
5.2 Confidential Information . . . . . . . . . . . . . . . . . . . . . . .8
6. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
6.1 Indemnification by Sprint Spectrum . . . . . . . . . . . . . . . . . .9
6.2 Indemnification by Manager . . . . . . . . . . . . . . . . . . . . . 10
6.3 Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7. DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Negotiation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Unable to Resolve. . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Attorneys and Intent . . . . . . . . . . . . . . . . . . . . . . . . 12
8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 12
8.1 Due Incorporation or Formation; Authorization of Agreements. . . . . 12
8.2 Valid and Binding Obligation . . . . . . . . . . . . . . . . . . . . 12
8.3 No Conflict; No Default. . . . . . . . . . . . . . . . . . . . . . . 12
8.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.2 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.3 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.4 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
9.5 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . 13
9.6 Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . 13
9.7 Limitation on Rights of Others . . . . . . . . . . . . . . . . . . . 14
9.8 Waivers; Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.9 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . 14
9.10 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.13 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . 15
9.14 No Assignment; Exceptions. . . . . . . . . . . . . . . . . . . . . . 15
9.15 Disclaimer of Agency . . . . . . . . . . . . . . . . . . . . . . . . 15
9.16 Independent Contractors. . . . . . . . . . . . . . . . . . . . . . . 15
9.17 Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.18 General Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.19 Conflicts with Management Agreement. . . . . . . . . . . . . . . . . 16
9.20 Master Signature Page. . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
ii
<PAGE>
SPRINT PCS SERVICES AGREEMENT
This SERVICES AGREEMENT is made September ___ 1998, by and between
Sprint Spectrum L.P., a Delaware limited partnership ("SPRINT SPECTRUM"), and
UBIQUITEL L.L.C., a Washington limited liability company (but not any Related
Party) ("MANAGER"). THE DEFINITIONS FOR THIS AGREEMENT ARE SET FORTH ON THE
"SCHEDULE OF DEFINITIONS."
RECITALS
A. Manager and the holder of the License ("Sprint PCS") are
entering into a Management Agreement contemporaneously with the execution of
this agreement, under which Manager will design, construct, operate, manage
and maintain a wireless services network in the Service Area in accordance
with Sprint PCS standards and will offer and promote Sprint PCS Products and
Services that operate on the Sprint PCS Network.
B. Manager desires to enter into this agreement with Sprint
Spectrum, under which Sprint Spectrum may furnish certain services to Manager
to assist Manager to build out, operate, manage and maintain the Service Area
Network under the License.
AGREEMENT
In consideration of the recitals and mutual covenants and agreements
contained in this agreement, the sufficiency of which are hereby
acknowledged, the parties. intending to be bound, agree as follows:
1. ENGAGEMENT OF SPRINT SPECTRUM
1.1 ENGAGEMENT OF SPRINT SPECTRUM. Manager engages Sprint Spectrum
to assist Manager with certain specified services in connection with the
operations of Manager and in building out, operating, managing and
maintaining the Service Area Network, subject to the terms and conditions of
this agreement. Sprint Spectrum accepts the engagement and will use the same
effort and demonstrate the same care in performing its obligations under this
agreement as it uses in conducting its own business. Manager will use the
efforts and demonstrate the care necessary for Sprint Spectrum to meet its
obligations under this agreement. When providing the Selected Services,
Sprint Spectrum will provide those services to Manager in the same manner it
provides those services to its own business, including the use of third party
vendors to provide certain Selected Services.
1.2 RELIANCE ON MANAGER. Manager understands that Sprint
Spectrum's ability to provide the Selected Services will depend largely on
Manager's compliance with the Sprint PCS Program Requirements under the
Management Agreement and cooperation with Sprint Spectrum. Manager agrees to
comply with such requirements and to cooperate with Sprint Spectrum to enable
Sprint Spectrum to perform its obligations under this agreement.
1.3 NON-EXCLUSIVE SERVICE. Nothing contained in this agreement
confers upon Manager an exclusive right to any of the Available Services.
Sprint Spectrum may contract with
<PAGE>
others to provide expertise and services identical or similar to those to be
made available or provided to Manager under this agreement.
1.4 MANAGER'S USE OF SERVICES. Manager agrees it will only use the
Selected Services in connection with its Service Area Network. Manager will
not use the Selected Services outside the Service Area or in connection with
any other business.
2. SERVICES
2.1 AVAILABLE SERVICES; SELECTED SERVICES.
2.1.1 AVAILABLE SERVICES. Subject to the terms of this
agreement, Manager may obtain any of the Available Services from Sprint
Spectrum in accordance with the provisions of this Section 2.1. The
Available Services offered from time to time and the fees charged for such
Available Services will be set forth on the then-current EXHIBIT 2.1.1 (the
"Available Services and Fees Schedule"). If Sprint Spectrum offers any new
Available Service, it will deliver a new EXHIBIT 2.1.1 indicating the new
service and the fee for the new service.
Manager may select one or more of the categories of Available
Services. If Manager selects a particular category of services it must take
and pay for all of the services under the category selected; Manager may not
select only particular services within that category.
If Sprint Spectrum determines to no longer offer an Available Service
and the service is not a Selected Service, then Sprint Spectrum may give
Manager written notice at any time during the term of this agreement that
Sprint Spectrum no longer offers the Available Service.
Sprint Spectrum may modify EXHIBIT 2.1.1 from time to time. EXHIBIT
2.1.1 will be deemed amended upon delivery of the new EXHIBIT 2.1.1 to
Manager.
2.1.2 SELECTED SERVICES. During the term of this agreement.
and subject to the terms of this agreement, Manager has selected, and Sprint
Spectrum has agreed to furnish or cause to be furnished to Manager, the
Available Services listed on EXHIBIT 2.1.2 (which listed services will be the
Selected Services). Sprint Spectrum may require from time to time that
certain Available Services be Selected Services where necessary to comply
with legal or regulatory requirements (e.g., mandatory provision of emergency
911 service) or applicable operating constraints (e.g., delivery of
merchandise to the regional distribution centers of national retail
distributors).
2.1.3 CHANGES TO SELECTED SERVICES. If Manager determines it
no longer requires a Selected Service, then Manager must give Sprint Spectrum
written notice at least 3 months prior to the date on which Manager wishes to
discontinue its use of such Selected Service.
If Sprint Spectrum determines to no longer offer an Available Service
and such service is one of Manager's Selected Services, then Sprint Spectrum
must give Manager written notice at least 9 months prior to its
discontinuance of such Available Service that Sprint Spectrum will no longer
offer such Available Service. If the Available Service to be discontinued is
required by
<PAGE>
Sprint Spectrum to be a Selected Service, then Sprint Spectrum will use
commercially reasonable efforts to (a) help Manager provide the service
itself or find another vendor to provide the service, and (b) facilitate
Manager's transition to the new service provider.
2.1.4 PERFORMANCE OF SELECTED SERVICES. Sprint Spectrum may
select the method, location and means of providing the Selected Services. If
Sprint Spectrum wishes to use Manager's facilities to provide the Selected
Services, Sprint Spectrum must obtain Manager's prior written consent.
2.2 THIRD PARTY VENDORS. Some of the Available Services might be
provided by third party vendors under arrangements between Sprint Spectrum
and the third party vendors. In some instances, Manager may receive Available
Services from a third party vendor under the same terms and conditions that
Sprint Spectrum receives such services, in other instances, Manager may
receive Available Services under the terms and conditions set forth in an
agreement between Manager and the third party vendor. If Manager wishes to
engage a third party vendor to provide Available Services, Selected Services,
or Available Services that Sprint Spectrum will no longer offer, Manager must
first obtain Sprint Spectrum's prior written consent, which consent will not
be unreasonably withheld. Before Manager may obtain from the third party
vendor any Available Services, Selected Services, or Available Services that
Sprint Spectrum will no longer offer, such vendor must execute an agreement
prepared by Sprint Spectrum that obligates the vendor to maintain the
confidentiality of any proprietary information and that prohibits the vendor
from using any proprietary technology, information or methods for its benefit
or the benefit of any other person or entity. Manager's use of a third party
vendor that is not providing Available Services to Manager on behalf of
Sprint PCS under the Management Agreement will not qualify for assumed
compliance with the Program Requirements under Sections 7.1(a)(ii) or 8.1(b)
of the Management Agreement.
2.3 CONTRACTS. Manager will notify Sprint Spectrum of any contract
or other arrangement Manager has with any other party that will affect how
Sprint Spectrum is to provide the Selected Services.
3. FEES FOR SELECTED SERVICES
3.1 PAYMENT OF FEES. Sprint Spectrum and Manager agree that the
fees for the Available Services will initially be those set forth on EXHIBIT
2.1.1, which fees represent an adjustment to any fees paid by Sprint PCS to
Manager under Section 10 of the Management Agreement. The monthly charge for
any fees based on the number of subscribers of the Service Area Network will
be determined based on the number of subscribers as of the 15th day of the
month for which the charge is being calculated. Manager agrees to pay the
fees to Sprint Spectrum within 20 days after the date of the invoice. If
Manager enters into an agreement with a third party vendor under Section 2.2,
Manager agrees to pay the fees for the services rendered by the third party
vendor in accordance with the terms and conditions of such agreement.
3.2 ADJUSTMENT OF FEES. Sprint Spectrum may change the fee for any
service it provides once during any 12-month period by delivering a new
EXHIBIT 2.1.1 to Manager. EXHIBIT 2.1.1 will be deemed amended on the
effective date noted on the new EXHIBIT 2.1.1,
<PAGE>
which will be at least 30 days after delivering the new EXHIBIT 2.1.1.
Manager must notify Sprint Spectrum in writing before the effective date of
the new EXHIBIT 2.1.1 if Manager wishes to discontinue a Selected Service for
which the price is being increased (a "Cancelled Service"). If Manager
discontinues a Selected Service under this Section 3.2, Sprint Spectrum will,
at Manager's option, continue to provide the Cancelled Service and to charge
Manager the current fee (I.E., the fee under the EXHIBIT 2.1.1 in effect on
the date Manager gives its cancellation notice to Sprint Spectrum) for the
Cancelled Service for up to 9 months from the date Sprint Spectrum gives
Manager notice of the price change or until Manager no longer needs the
Cancelled Service, whichever occurs first. If Sprint Spectrum continues to
provide the Cancelled Service after the 9-month period, Sprint Spectrum will
apply the new fee. under the new EXHIBIT 2.1.1, and such fee will be applied
retroactively as of the effective date of the new schedule. Manager agrees to
pay such retroactive charge within 10 days after the date of the invoice for
such charge.
3.3 LATE PAYMENTS. Any payment due under this Section 3 that is
not paid by Manager to Sprint Spectrum in accordance with the terms of this
agreement will bear interest at the Default Rate beginning (and including)
the 6th day after the due date until (and including) the date on which such
payment is made.
3.4 TAXES. Manager will pay or reimburse Sprint Spectrum for any
sales, use, gross receipts or similar tax, administrative fee,
telecommunications fee or surcharge for taxes or fees levied by a
governmental authority on the fees and charges payable to Sprint Spectrum by
Manager.
4. TERM; TERMINATION; EFFECT OF TERMINATION
4.1 TERM. This agreement commences on the date of execution and
continues until the Management Agreement terminates. This agreement
automatically terminates upon termination of the Management Agreement.
Neither party may terminate this agreement for any reason other than the
termination of the Management Agreement.
4.2 EFFECT OF TERMINATION. Upon the termination of this agreement,
all rights and obligations of each party under this agreement will
immediately cease, except that:
(a) Any rights arising out of a breach of any terms of this
agreement will survive any termination of this agreement;
(b) The provisions of this Section 4.2 and Sections 5.2, 6,
7, and 9 will survive any termination of this agreement; and
(c) The payment obligations under Section 3 will survive any
termination of this agreement if, and to the extent, any fees have accrued or
are otherwise due and owing from Manager to Sprint Spectrum or any Sprint
Spectrum Related Party as of the date of termination of this agreement.
<PAGE>
5. BOOKS AND RECORDS; CONFIDENTIAL INFORMATION
5.1 BOOKS AND RECORDS.
5.1.1 GENERAL. Each party must keep and maintain books and
records to support and document any fees, costs, expenses or other charges
due in connection with the provisions set forth in this agreement. The
records must be retained for a period of at least 3 years after the fees,
costs, expenses or other charges to which the records relate have accrued and
have been paid, or such other period as may be required by law.
5.1.2 AUDIT. On reasonable advance written notice by the
Manager, but no more frequently than annually, Sprint PCS will provide a
report issued in conformity with Statement of Auditing Standard No. 70
"Reports on the Processing of Transactions by Service Organizations" ("TYPE
II REPORT" or "MANAGER MANAGEMENT REPORT"). Such report will be prepared by
independent auditors and will provide an opinion on the controls placed in
operation and tests of operating effectiveness of those controls in effect at
Sprint PCS over the Manager Management Processes. "Manager Management
Processes" include those services generally provided within the Management
Agreement, primarily billing and collection of Collected Revenues. The
Manager is responsible for costs incurred attributable to such requested
procedures with respect to the services provided under this agreement,
including without limitation discussion of the billing and collection of
Collected Revenues. This report will be made available to the other party
upon such other party's request.
5.1.3 CONTESTING AN AUDIT. If the party that did not select
the independent auditor does not agree with the findings of the audit, then
such party can contest the findings by providing notice of such disagreement
to the other party (the "DISPUTE NOTICE"). The date of delivery of such
notice is the "DISPUTE NOTICE DATE." If the parties are unable to resolve the
disagreement within 10 Business Days after the Dispute Notice Date, they will
resolve the disagreement in accordance with the following procedures.
The two parties and the auditor that conducted the audit will all
agree on an independent certified public accountant with a regional or
national accounting practice in the wireless telecommunications industry (the
"Arbiter") within 15 Business Days after the Dispute Notice Date. If, within
15 Business Days after the Dispute Notice Date, the three parties fail to
agree on the Arbiter, then at the request of either party to this agreement,
the Arbiter will be selected pursuant to the rules then in effect of the
American Arbitration Association. Each party will submit to the Arbiter
within 5 Business Days after its selection and engagement all information
reasonably requested by the Arbiter to enable the Arbiter to independently
resolve the issue that is the subject of the Dispute Notice. The Arbiter will
make its own determination of the amount of fees, costs, expenses or other
charges payable under this agreement with respect to the period audited. The
Arbiter will issue a written report of its determination in reasonable detail
and will deliver a copy of the report to the parties within 10 Business Days
after the Arbiter receives all of the information reasonably requested. The
determination made by the Arbiter will be final and binding and may be
enforced by any court having jurisdiction. The parties will cooperate fully
in
<PAGE>
assisting the Arbiter and will take such actions as are necessary to expedite
the completion of and to cause the Arbiter to expedite its assignment.
If the amount owed by a contesting party is reduced by more than 10%
or the amount owed to a contesting party is increased by more than 10% then
the non-contesting party will pay the costs and expenses of the Arbiter,
otherwise the contesting party will pay the costs and expenses of the Arbiter.
5.2 CONFIDENTIAL INFORMATION.
(a) Except as specifically authorized by this agreement,
each of the parties must, for the term of this agreement and 3 years after
the date of termination of this agreement, keep confidential, not disclose to
others and use only for the purposes authorized in this agreement, all
Confidential Information disclosed by the other party to the party in
connection with this agreement, except that the foregoing obligation will not
apply to the extent that any Confidential Information:
(i) is or becomes, after disclosure to a party, publicly
known by any means other than through unauthorized acts or omissions of
the party or its agents; or
(ii) is disclosed in good faith to a party by a third
party entitled to make the disclosure.
(b) Notwithstanding the foregoing, a party may use, disclose or
authorize the disclosure of Confidential Information that it receives that:
(i) has been published or is in the public domain, or
that subsequently comes into the public domain, through no fault of the
receiving party;
(ii) prior to the effective date of this agreement was
properly within the legitimate possession of the receiving party, or
subsequent to the effective date of this agreement, is lawfully received
from a third party having rights to publicly disseminate the Confidential
Information without any restriction and without notice to the recipient
of any restriction against its further disclosure;
(iii) is independently developed by the receiving party
through persons or entities who have not had, either directly or
indirectly, access to or knowledge of the Confidential Information;
(iv) is disclosed to a third parry consistent with the
terms of the written approval of the party originally disclosing the
information;
(v) is required by the receiving party to be produced
under order of a court of competent jurisdiction or other similar
requirements of a governmental agency, and the Confidential Information
will otherwise continue to be Confidential Information required to be
held confidential for purposes of this agreement;
<PAGE>
(vi) is required by the receiving party to be disclosed
by applicable law or a stock exchange or association on which the
receiving party's securities (or those of its Related Parties) are or may
become listed; or
(vii) is disclosed by the receiving party to a financial
institution or accredited investor (as that term is defined in Rule
501(a) under the Securities Act of 1933) that is considering providing
financing to the receiving party and which financial institution or
accredited investor has agreed to keep the Confidential Information
confidential in accordance with an agreement at least as restrictive as
this Section 5.
(c) The party making a disclosure under Sections 5.2(b)(v),
5.2(b)(vii) or 5.2(b)(vii) must inform the non-disclosing party as promptly
as is reasonably necessary to enable the non-disclosing party to take action
to, and use the disclosing party's reasonable best efforts to, limit the
disclosure and maintain confidentiality to the extent practicable.
(d) Manager will not, except when serving in the capacity of
Manager under this agreement, use any Confidential Information of any kind
that it receives under or in connection with this agreement. For example, if
Manager operates a wireless company in a different licensed area, Manager may
not use any of the Confidential Information received under or in connection
with this agreement in operating its other wireless business.
6. INDEMNIFICATION
6.1 INDEMNIFICATION BY SPRINT SPECTRUM. Sprint Spectrum agrees to
indemnify, defend and hold harmless Manager, its directors, managers,
officers and employees from and against any and all claims, demands, causes
of action, losses, actions, damages, liability and expense, including costs
and reasonable attorneys' fees, against Manager, its directors, managers,
officers and employees arising from or relating to the violation by Sprint
Spectrum, its directors, officers, employees, contractors, subcontractors,
agents or representatives of any law, regulation or ordinance applicable to
Sprint Spectrum in its performance of the Selected Services, or by Sprint
Spectrum's, or its directors', officers', employees', contractors',
subcontractors', agents' or representatives' breach of any representation,
warranty or covenant contained in this agreement, except where and to the
extent the claim, demand, cause of action, loss, action, damage, liability
and expense results from the negligence or willful misconduct of Manager, its
directors, managers, officers, employees, agents or representatives. Sprint
Spectrum's indemnification obligations under this Section 6.1 do not apply to
any third party vendors that provide services (including Selected Services)
directly to Manager or Manager's Related Parties under a separate agreement.
6.2 INDEMNIFICATION BY MANAGER. Manager agrees to indemnify,
defend and hold harmless Sprint Spectrum, its directors, officers and
employees from and against any and all claims, demands, causes of action,
losses, actions, damages, liability and expense, including costs and
reasonable attorneys' fees, against Sprint Spectrum, its directors, officers
and employees arising from or relating to Manager's, or its directors',
managers', officers', employees', contractors', subcontractors', agents' or
representatives' violation of any law, regulation or ordinance applicable to
Manager, or by Manager's, or its directors', managers',
<PAGE>
officers', employees', contractors', subcontractors', agents' or
representatives' breach of any representation, warranty or covenant contained
in this agreement. Manager's ownership of the Operating Assets or the
operation of the Service Area Network, except where and to the extent the
claim, demand, cause of action, loss, action, damage, liability and expense
results from the negligence or willful misconduct of Sprint Spectrum, its
directors, officers, employees, contractors, subcontractors, agents or
representatives.
6.3 PROCEDURE.
6.3.1 NOTICE. Any party being indemnified ("INDEMNITEE") will
give the party making the indemnification ("INDEMNITOR") written notice as
soon as practicable but no later than 5 Business Days after the party becomes
aware of the facts, conditions or events that give rise to the claim for
indemnification if:
(a) any claim or demand is made or liability is asserted
against Indemnitee; or
(b) any suit, action, or administrative or legal proceeding
is instituted or commenced in which Indemnitee is involved or is named as a
defendant either individually or with others.
Failure to give notice as described in this Section 6.3.1 does not
modify the indemnification obligations of this provision, except if
Indemnitor is harmed by failure to provide timely notice to Indemnitor, then
Indemnitor does not have to indemnify Indemnitee for the harm caused by
failure to give the timely notice.
6.3.2 DEFENSE BY INDEMNITOR. If within 30 days after giving
notice Indemnitee receives written notice from Indemnitor stating that
Indemnitor disputes or intends to defend against the claim, demand,
liability, suit, action or proceeding, then Indemnitor will have the right to
select counsel of its choice and to dispute or defend against the claim,
demand, liability, suit, action or procedding.
Indemnitee will fully cooperate with Indemnitor in the dispute or
defense so long as Indemnitor is conducting the dispute or defense diligently
and in good faith. Indemnitor is not permitted to settle the dispute or
claim without prior written approval of Indemnitee, which approval shall not
be unreasonably withheld. Even though Indemnitor selects counsel of its
choice, Indemnitee has the right to retain additional representation by
counsel of its choice to participate in the defense at Indemnitee's sole cost
and expense.
6.3.3 DEFENSE BY INDEMNITEE. If no notice of intent to
dispute or defend is received by Indemnitee within the 30-day period, or if a
diligent and good faith defense is not or ceases to be conducted, Indemnitee
has the right to dispute and defense against the claim, demand or other
liability at the sole cost and expense of Indemnitor and to settle the claim,
demand or other liability, and in either event to be indemnified as provided
in this section 6. Indemnitee is not permitted to settle the dispute or claim
without the prior written approval of Indemnitor, which approval will not be
unreasonably withheld.
<PAGE>
6.3.4 COSTS. Indemnitor's indemnity obligation includes
reasonable attorneys' fees, investigation costs, and all other reasonable
costs and expenses incurred by Indemnitee from the first notice that any
claim or demand has been made or may be made, and is not limited in any way
by any limitation on the amount or type of damages, compensation, or benefits
payable under applicable workers' compensation acts, disability benefit acts,
or other employee benefit acts.
7. DISPUTE RESOULUTION
7.1 NEGOTIATION. The parties will attempt in good faith to
resolve any dispute arising out of or relating to this agreement promptly by
negotiation between or among representatives who have authority to settle the
controversy. Either party may escalate a dispute not resolved in the normal
course of business to the appropriate (as determined by the party) officers
of the parties by providing written notice to the other party.
Within 10 Business Days after delivery of the notice, the appropriate
officers of each party will meet at a mutually acceptable time and place, and
thereafter as often as they deem reasonably necessary, to exchange relevant
information and to attempt to resolve the dispute.
Either party may elect, by giving written notice to the other party,
to escalate any dispute arising out of or relating to the determination of
fees that is not resolved in the normal course of business or by the audit
process set forth in Sections 5.1.2 and 5.1.3, first to the appropriate
financial or accounting officers to be designated by each party. The
designated officers will meet in the manner described in the preceding
paragraph. If the matter has not been resolved by the designated officers
within 30 days after the notifying party's notice, either party may elect to
escalate the dispute to the appropriate (as determined by the party) officers
in accordance with the prior paragraphs of this Section 7.1.
7.2 UNABLE TO RESOLVE. If a dispute has not been resolved within
60 days after the notifying party's notice, the parties will continue to
operate under this agreement and sue the other party for damages or seek
other appropriate remedies as provided in this agreement, except neither
party may bring a suit for damages based on an event that occurs during the
first two years of this agreement.
7.3 ATTORNEYS AND INTENT. If an officer intends to be accompanied
at a meeting by an attorney, the other party's officer will be given at least
3 Business Days prior notice of the intention and may also be accompanied by
an attorney. All negotiations under this Section 7 are confidential and will
be treated as compromise and settlement negotiations for purposes of the
Federal Rules of Civil Procedure and state rules of evidence and civil
procedure.
8. REPRESENTATIONS AND WARRANTIES
Each party for itself makes the following representations and
warranties to the other party:
<PAGE>
8.1 DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENTS.
The party is either a corporation, limited liability company, or limited
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Manager is qualified to do
business and in good standing in every jurisdiction in which the Service Area
is located. The party has the full power and authority to execute and deliver
this agreement and to perform its obligations under this agreement.
8.2 VALID AND BINDING OBLIGATION. This agreement constitutes the
valid and binding obligation of the party, enforceable in accordance with its
terms, except as may be limited by principles of equity or by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
8.3 NO CONFLICT; NO DEFAULT. Neither the execution, delivery and
performance of this agreement nor the consummation by the party of the
transactions contemplated in this agreement will conflict with, violate or
result in a breach of (a) any law, regulation, order, writ, injunction,
decree, determination or award of any governmental authority or any
arbitrator, applicable to such party, or (b) any term, condition or provision
of the articles of incorporation, certificate of limited partnership,
certificate of organization, bylaws, partnership agreement or limited
liability company agreement (or other governing documents) of such party or
of any material agreement or instrument to which such party is or may be
bound or to which any of its material properties or assets is subject.
8.4 LITIGATION. No action, suit, proceeding or investigation is
pending or, to the knowledge of the party, threatened against or affecting
the party or any of its properties, assets or businesses in any court or
before or by any governmental agency that could, if adversely determined,
reasonably be expected to have a material adverse effect on the party's
ability to perform its obligations under this agreement. The party has not
received any currently effective notice of any default that could reasonably
be expected to result in a breach of the preceding sentence.
9. GENERAL PROVISIONS
9.1 NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this agreement must be
in writing and mailed (certified or registered mail, postage prepaid, return
receipt requested), sent by hand or overnight courier, or sent by facsimile
(with acknowledgment received and a copy sent by overnight courier), charges
prepaid and addressed described on the Notice Address Schedule attached to
the Master Signature Page, or to any other address or number as the person or
entity may from rime to time specify by written notice to the other parties.
All notices and other communications given to a party in accordance
with the provisions of this agreement will be deemed to have been given when
received.
9.2 CONSTRUCTION. This agreement will be construed simply
according to its fair meaning and not strictly for or against either party.
<PAGE>
9.3 HEADINGS. The table of contents, section and other headings
contained in this agreement are for reference purposes only and are not
intended to describe, interpret, define, limit or expand the scope, extent or
intent of this agreement.
9.4 FURTHER ACTION. Each party agrees to perform all further acts
and execute, acknowledge, and deliver any documents that may be reasonably
necessary, appropriate, or desirable to carry out the intent and purposes of
this agreement.
9.5 SPECIFIC PERFORMANCE. Each party agrees with the other party
that the party would be irreparably damaged if any of the provisions of this
agreement were not performed in accordance with their specific terms and that
monetary damages alone would not provide an adequate remedy. Accordingly, in
addition to any other remedy to which the non-breaching party may be
entitled, at law or in equity, the non-breaching party will be entitled to
injunctive relief to prevent breaches of this agreement and specifically to
enforce the terms and provisions of this agreement.
9.6 ENTIRE AGREEMENT; AMENDMENTS. The provisions of this agreement
and the Management Agreement (if Sprint Spectrum is a party to that
agreement) (including the exhibits to those agreements) set forth the entire
agreement and understanding between the parties as to the subject matter of
this agreement and supersede all prior agreements, oral or written, and other
communications between the parties relating to the subject matter of this
agreement. Except for Sprint Spectrum's right to amend the Available Services
and the fees charged for such services as shown on EXHIBIT 2.1.1, and
Manager's right to amend the Selected Services listed on EXHIBIT 2.1.2, this
agreement may be modified or amended only by a written amendment signed by
persons or entities authorized to bind each party.
9.7 LIMITATION ON RIGHTS OF OTHERS. Nothing in this agreement,
whether express or implied, will be construed to give any person or entity
other than the parties any legal or equitable right, remedy or claim under or
in respect of this agreement.
9.8 WAIVERS; REMEDIES. The observance of any term of this
agreement may be waived (whether generally or in a particular instance arid
either retroactively or prospectively) by the party entitled to enforce the
term, but any waiver is effective only if in a writing signed by the party
against which the waiver is to be asserted. Except as otherwise provided in
this agreement, no failure or delay of either party in exercising any power
or right under this agreement will operate as a waiver of the power or right,
nor will any single or partial exercise of any right or power preclude any
other or further exercise of the right or power or the exercise of any other
right or power.
Sprint Spectrum is not in breach of any covenant in this agreement, if
failure of such party to comply with such covenant or Sprint Spectrum's
non-compliance with the covenant results primarily from:
(i) any FCC order or any other injunction issued by any
governmental authority impeding the ability to comply with the covenant;
<PAGE>
(ii) the failure of any governmental authority to grant
any consent, approval, waiver, or authorization or any delay on the part
of any governmental authority in granting any consent, approval, waiver
or authorization;
(iii) the failure of any vendor to deliver in a timely
manner any equipment or service; or
(iv) any act of God, act of war or insurrection, riot,
fire, accident, explosion, labor unrest, strike, civil unrest, work
stoppage, condemnation or any similar cause or event not reasonably
within the control of Sprint Spectrum.
9.9 WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
9.10 BINDING EFFECT. Except as otherwise provided in this
agreement, this agreement is binding upon and inures to the benefit of the
parties and their respective and permitted successors, transferees, and
assigns, including any permitted successor, transferee or assignee of the
Management Agreement. The parties intend that this agreement bind only the
party signing this agreement and that the agreement is not binding on the
Related Parties of a party unless the agreement provides that Related Parties
are bound.
9.11 GOVERNING LAW. The internal laws of the State of Missouri
(without regard to principles of conflicts of law) govern the validity of
this agreement, the construction of its terms, and the interpretation of the
rights and duties of the parties.
9.12 SEVERABILITY. The parties intend every provision of this
agreement to be severable. If any provision of this agreement is held to be
illegal, invalid, or unenforceable for any reason, the parties intend that a
court enforce the provision to the maximum extent permissible so as to effect
the intent of the parties (including the enforcement of the remaining
provisions). If necessary to effect the intent of the parties, the parties
will negotiate in good faith to amend this agreement to replace the parties.
9.13 LIMITATION OF LIABILITY. NO PARTY WILL BE LIABLE TO THE OTHER
PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE
DAMAGES, OR LOSS OF PROFITS, ARISING FROM THE RELATIONSHIP OF THE PARTIES OR
THE CONDUCT OF BUSINESS UNDER, OR BREACH OF, THIS AGREEMENT, EXCEPT WHERE
SUCH DAMAGES OR LOSS OF PROFITS ARE CLAIMED BY OR AWARDED TO A THIRD PARTY IN
A CLAIM OR ACTION AGAINST WHICH A PARTY TO THIS AGREEMENT HAS A SPECIFIC
OBLIGATION TO INDEMNIFY ANOTHER PARTY TO THIS AGREEMENT.
9.14 NO ASSIGNMENT; EXCEPTIONS. This agreement may only be assigned
in conjunction with and to the same party or parties to whom the Management
Agreement has been validly assigned under the Management Agreement's terms
and conditions.
<PAGE>
9.15 DISCLAIMER OF AGENCY. Neither party by this agreement makes
the other party a legal representative or agent of the party, nor does either
party have the right to obligate the other party in any manner, except if the
other party expressly permits the obligation by the party or except for
provisions in this agreement expressly authorizing one party to obligate the
other.
9.16 INDEPENDENT CONTRACTORS. The parties do not intend to create
any partnership, joint venture or other profit-sharing arrangement,
landlord-tenant or lessor-lessee relationship, employer-employee
relationship, or any other relationship other than that expressly provided in
this agreement. Neither party to this agreement has any fiduciary duty to the
other party.
9.17 EXPENSE. Each party bears the expense of complying with this
agreement except as otherwise expressly provided in this agreement.
9.18 GENERAL TERMS.
(a) This agreement, including the attached Schedule of
Definitions, is to be interpreted in accordance with the following rules of
construction:
(i) The definitions in this agreement apply equally to
both the singular and plural forms of the terms defined unless the
context otherwise requires;
(ii) The words "include," "includes" and "including" are
deemed to be followed by the phrase "without limitation";
(iii) All references in this agreement to Sections and
Exhibits are references to Sections of, and Exhibits to, this agreement,
unless otherwise specified; and
(iv) All references to any agreement or other instrument
or statute or regulation are to it as amended and supplemented from time
to time (and, in the case of a statute or regulation, to any
corresponding provisions of successor statutes or regulations), unless
the context otherwise requires.
(b) Any reference in this agreement to a "day" or number of
"days" (without the explicit qualification of "BUSINESS") is a reference to a
calendar day or number of calendar days. If any action or notice is to be
taken or given on or by a particular calendar day, and the calendar day is
not a Business Day, then the action or notice may be taken or given on the
next Business Day.
9.19 CONFLICTS WITH MANAGEMENT AGREEMENT. The provisions of the
Management Agreement govern over those of this Services Agreement if the
provisions contained in this agreement conflict with analogous provisions in
the Management Agreement.
9.20 MASTER SIGNATURE PAGE. Each party agrees that it will execute
the Master Signature Page that evidences such party's agreement to execute,
become a party to and be bound by this agreement, which document is
incorporated herein by this reference.
<PAGE>
EXHIBIT 10.24
FOUNDERS STOCK AGREEMENT
This Agreement, made as of November 1, 1999, by and among UbiquiTel
Holdings, Inc., a Delaware corporation (the "Company") and James Parsons,
Donald A. Harris, Paul F. Judge, The Walter Group, Inc., a Washington
corporation, and U.S. Bankcorp (each a "Founder" and collectively "Founders").
RECITALS
A. The Company has issued a total of 3,417,000 shares of Voting
Common Stock to the Founders, in the amounts to each Founder as set forth on
Exhibit A.
B. The Company intends to develop and maintain a Sprint PCS system in
the Reno/Tahoe market. To finance the build-out, the Company intends to raise
$17,008,500 through the sale of 17,008,500 shares of preferred stock
designated as Series A Preferred Stock, convertible into Voting Common Stock
on a share-for-share basis. Although the Company has identified prospective
purchasers of the Series A Preferred Stock, none of such purchasers has yet
agreed to purchase such Stock, and an Agreement for the purchase of such Stock
is currently being negotiated with such purchasers.
C. In addition, if the Series A Preferred Stock is issued, the
Company will reserve 2,040,000 shares of Voting Common Stock for issuance to
management pursuant to the Company's 1999 Equity Plan, and 3,060,000 shares of
Voting Common Stock for issuance pursuant to warrants issued in connection
with senior and mezzanine bank financing.
D. Assuming that the Series A Preferred Stock is sold, and that the
warrants in connection with the senior and mezzanine bank financing are
issued, as set forth above, the 3,417,000 shares of Voting Common Stock held
by the Founders will represent 13.4% of the Company's outstanding Voting
Common Stock on a fully-diluted basis.
E. The Company also expects to develop Sprint PCS systems in other
markets. The Founders will maintain their percentage of the Company's
outstanding Voting Common Stock on a fully diluted basis at 13.4% for twelve
months, unless the Company consummates a Major Financing Transaction (as
defined below), in which case the Founders will maintain their percentage of
the Company's outstanding Voting Common Stock on a fully diluted basis at 10%.
Now, therefore, the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings set forth below.
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"Founder's Common Stock" means the 3,417,000 shares of Voting Common
Stock presently issued to the Founders, and any additional shares of Voting
Common Stock issued to the Founders as a result of stock splits, stock
dividends, or other recapitalizations.
"Major Financing Transaction" means a new financing comprised of
senior and mezzanine financing and private equity of not less than
$400,000,000 in a single transaction, in which Wasserstein Perella & Co. Inc.,
or one of its affiliates, is the investment banking advisor, for a major build
out of Sprint PCS systems in numerous markets.
"Repurchase Date" means the first anniversary of the effective date
of the Series A Stock Purchase Agreement, which shall be the date of execution
of that agreement unless that Agreement provides otherwise.
"Series A Stock Purchase Agreement" means the Series A Stock Purchase
Agreement that the Company intends to negotiate with prospective purchasers of
its Series A Preferred Stock.
"Shares" means the Nonvoting Common Stock of the Company, par value
$0.001, issued to each Founder pursuant to this Agreement, and any other
shares of Nonvoting Common Stock issued to such Founder as a result of stock
splits, stock dividends, or other recapitalizations of the Company.
"Transfer" means any sale, exchange, assignment, disposition, gift,
bequest, donation, pledge, mortgage, hypothecation, grant of a security
interest in, encumbrance or other transfer.
2. AUTHORIZATION AND SALE OF SHARES.
2.1 AUTHORIZATION. The Company has authorized the sale and issuance,
pursuant to the terms of this Agreement, of 16,000,000 Shares, $0.001 par
value per share, having rights, restrictions, privileges and preferences equal
to the Voting Common Stock except with respect to the right to vote.
2.2 PURCHASE AND SALE OF NONVOTING COMMON. Each Founder hereby
purchases, and the Company hereby sells to each Founder, the number of Shares
set forth opposite such Founder's name on EXHIBIT A, for a price equal to the
par value thereof ($0.001 per share), for a total of 16,000,000 Shares. All of
such shares shall initially be unvested. During the term of this Agreement,
the Company shall not issue any other Shares to any person or entity except
the Shares issued to the Founders hereunder. Upon receiving payment for such
Shares, the Company will deliver to each Founder certificates representing
such Shares, which certificates shall bear a legend as set forth in Section
5.3.
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Within thirty (30) days of the date hereof, each Founder shall file an
election under Section 83(b) of the Internal Revenue Code of 1986, as amended,
in a form satisfactory to the Company.
3. RESTRICTIONS ON AND REPURCHASE OF UNVESTED SHARES.
No Founder may Transfer any Shares while such Shares are unvested,
and all Shares shall be subject to repurchase by the Company, on the following
terms: On the Repurchase Date, all Shares that have not vested as of such date
pursuant to Section 4 shall be repurchased by the Company, for a price equal
to the par value of such Shares. On such date, the Company shall notify each
Founder of the number of unvested Shares then held by such Founder and shall
enclose with such notice a check for the purchase price of such Shares. Upon
receiving such notice, each Founder shall return to the Company the
certificates representing such Shares. If such certificates represent only
unvested Shares, the Company shall cancel such certificates. If such
certificates represent both vested and unvested Shares, the Company shall
return to such Founder new certificates representing a number of shares of
Voting Common Stock equal to the number of Shares that were vested. As of the
Repurchase Date, all rights of the Founders with respect to unvested Shares,
other than the right to receive the purchase price for such Shares in
accordance with this Section 4, shall cease and such unvested Shares shall for
all purposes be treated as if they did not exist.
4. VESTING OF UNVESTED SHARES
4.1 VESTING.
(a) Each time the Company issues shares of Voting Common Stock, or
shares of preferred stock of any series that are convertible into Voting
Common Stock, or options or warrants for Voting Common Stock, or debt
convertible into Voting Common Stock, other than issuances pursuant to
subsection 4.1(c) and other than issuances in connection with a Major
Financing Transaction, such number of Shares shall vest as shall, when added
to the Founders' Common Stock and those Shares previously vested under this
Section 4, equal 13.4% of the total issued and outstanding Voting Common Stock
on a fully diluted basis.
(b) If the Company issues shares of Voting Common Stock, or shares of
preferred stock of any series that are convertible into Voting Common Stock,
or options or warrants for Voting Common Stock, or debt convertible into
Voting Common Stock in connection with a Major Financing Transaction, such
number of Shares shall vest as shall, when added to the Founders Common Stock
and those Shares previously vested under this Section 4, equal 10% of the
total issued and outstanding Voting Common Stock on a fully diluted basis.
(c) No additional Shares shall vest upon (i) the issuance of
17,000,000 shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Agreement; (ii) the
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issuance of stock options pursuant to the Company's 1999 Equity Plan to
purchase up to 2,040,000 of Voting Common Stock, (iii) the issuance of
warrants to financial institutions to purchase 3,060,000 shares of Voting
Common Stock, or (iv) the issuance of any shares of Voting Common Stock, or
shares of preferred stock of any series that are convertible into Voting
Common Stock, or options or warrants for Voting Common Stock, or debt
convertible into Voting Common Stock, other than issuances referred to in (i)
through (iii) above, in excess of 96,153,846 shares, (v) after the Repurchase
Date, or (vi) after a Major Financing Transaction.
4.2 SURRENDER OF CERTIFICATES. Shares that vest shall automatically
and without further action on the part of any Founder or the Company become
Voting Common Stock. Each time Shares vest, the Company shall notify all
holders of the Company's Voting Common Stock and Series A Preferred Stock that
Shares have vested and of the amount of such Shares and of the circumstances
giving rise to such vesting. Any Founder whose Shares have vested in whole or
in part may but shall not be obligated to tender to the Company the
certificate(s) representing such Shares and receive in return a certificate
for a like number of shares of Voting Common Stock, or, if a certificate
represents both vested and unvested Shares, a certificate for the number of
unvested Shares and a certificate for the correct number of shares of Common
Stock.
5. TRANSFER OF SHARES.
5.1 RESTRICTED SHARES. "Restricted Shares" means (i) the Shares, (ii)
the shares of Voting Common Stock issued or issuable upon vesting 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 Voting 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.
5.2 REQUIREMENTS FOR TRANSFER.
(a) Subject to the repurchase provisions of Section 3
hereof, 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 Founder which is
a corporation to a wholly owned subsidiary of such corporation or to an
officer, director, or employee of such corporation, a transfer by a Founder
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
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the estate of any such partner or retired partner, or a transfer by a Founder
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 Founder 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 5.2 to the same extent as if it were the original
Founder hereunder, or (ii) a transfer made in accordance with Rule 144 under
the Securities Act.
5.3 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. The
shares represented by this certificate are subject to transfer and mandatory
repurchase by the company PURSUANT TO the founders stock agreement dated as of
NOVEMBER 1, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE cOMPANY."
6. REPRESENTATIONS OF THE FOUNDERS. Each Founder severally represents
and warrants to the Company as follows:
6.1 INVESTMENT. Such Founder is acquiring the Shares for his 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 Founder has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the disposition thereof. Such Founder is an "accredited investor" as defined
in Rule 501(a) under the Securities Act.
6.2 AUTHORITY. Such Founder has full power and authority to enter
into and to perform this Agreement in accordance with its terms. Any Founder
that is a corporation, partnership, or trust represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
6.3 EXPERIENCE. Such Founder is familiar with the proposed business
plan of the Company, and has made detailed inquiry concerning the Company, its
business and its personnel; the officers of the Company have made available to
such Founder any and all written information which he or it has requested and
have answered to such Founder's
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satisfaction all inquiries made by such Founder; and such Founder has
sufficient knowledge and experience in finance and business that he or it is
capable of evaluating the risks and merits of his or its investment in the
Company and such Founder is able financially to bear the risks thereof. Each
Founder understands that its investment in the Company will for some period of
time be illiquid
7. MISCELLANEOUS.
7.1 STOCK TRANSFER RECORD. The Company shall maintain a Stock
Transfer Book in which shall be recorded the name and address of each
shareholder. No Transfer of stock shall be effective or valid unless and until
recorded in such Stock Transfer Book. The Company agrees not to record any
Transfer of Shares in its Stock Transfer Book unless (i) the Transfer strictly
complies with all of the provisions of this Agreement, and (ii) the transferee
shall have agreed in writing to be bound by all of the provisions of this
Agreement applicable to Founders and shall become a party hereto.
7.2 CONFIDENTIAL. Each Founder agrees that he, she or it will keep
confidential and will not disclose, divulge or use for any purpose not related
to the business of the Company any confidential, proprietary or secret
information which such Founder may obtain from the Company by virtue of being
a Founder pursuant to this Agreement, ("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 7.2 by such Founder); PROVIDED, HOWEVER, that a Founder 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 Founder as long as such
prospective purchaser agrees in writing to be bound by the provisions of this
Section 7.2, (iii) to any affiliate of such Founder or to a partner,
stockholder or subsidiary of such Founder, provided that such affiliate agrees
in writing to be bound by the provisions of this Section 7.2, or (iv) as may
otherwise be required by law, provided that the Founder takes reasonable steps
to minimize the extent of any such required disclosure.
7.3 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).
7.4 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, at the principal address of the Company.
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If to a Founder, at the address set forth below such Founder's
signature to this Agreement.
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.
7.5 COMPLETE AGREEMENT. This Agreement (including Exhibit A) 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.
7.6 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.
7.7 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.
Executed as of the date first written above.
UBIQUITEL HOLDINGS, INC.
By:
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Name: Donald A. Harris
Title: President and Chief Executive Officer
FOUNDERS:
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Donald A. Harris
Address:
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THE WALTER GROUP
By:
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Title:
Address:
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U.S. BANCORP
By:
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Title:
Address:
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James Parsons
Address:
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Paul F. Judge
Address:
-------------------------------------
---------------------------------------------
---------------------------------------------
8
<PAGE>
EXHIBIT A
FOUNDERS COMMON STOCK
<TABLE>
<CAPTION>
Voting Common Stock Nonvoting Common Stock
<S> <C> <C>
James Parsons 443,700 2,077,600
Donald A. Harris 994,500 4,656,640
The Walter Group, Inc. 1,281,375 6,000,160
Paul F. Judge 401,625 1,880,480
US Bancorp 295,800 1,385,120
</TABLE>
9
<PAGE>
EXHIBIT 10.25
LLC INTERNATIONAL, INC.
7925 Jones Branch Drive
McLean, Virginia 22102
(703) 873-2000
Fax (703) 873-2100
September 24, 1999
Don Harris
Chief Executive Officer
Ubiquitel Holdings, Inc.
3 Bala Plaza, East
Suite 502
Bala Cynwyd, PA 19004
Dear Mr. Harris:
This letter will confirm the agreement between Ubiquitel Holdings, Inc.
("Ubiquitel") and LCC International, Inc. ("LCC") with respect to Ubiquitel
engagement of LLC to perform all radio frequency engineering, optimization,
site acquisition, zoning, fixed network design, program management and ongoing
support and maintenance services (for an initial period of 5 years) that may
be necessary or required in connection with the design, deployment, and
maintenance of Ubiquitel's wireless communications system in the Tahoe Region
(approximately 80 sites), initially, and then in all subsequent Ubiquitel
markets (the "Services").
Ubiquitel hereby engages LCC to provide the following Services for the
Tahoe Region:
(a) RF DESIGN AND INITIAL OPTIMIZATION. These Services will consist
of completing predesign meetings and market setup activities, a preliminary
design, a final design, drive testing and initial optimization activities for
approximately 80 sites (52 cells and 28 repeaters) in the Tahoe Region.
(b) SITE ACQUISITION AND ZONING. These services will consist of
preliminary research, site identification, lease acquisition and zoning
services for approximately 80 sites in the Tahoe Region.
(c) FIXED NETWORK DESIGN. These services all consist of a design
with a single local exchange carrier ("LEC") per LATA, and a single inter
exchange carrier ("IXC") providing leased line costs, one switch, and a single
time period to be addressed
(d) PROGRAM MANAGEMENT. These services will consist of providing
overall scheduling, budgeting and management services with respect to the
services described in (a), (b) and (c) above.
<PAGE>
(e) SUPPORT AND MAINTENANCE. These services will consist of
providing the services of approximately six cell site technicians and one MSC
technician for an initial period of five years, to provide ongoing operational
support and maintenance services for the Tahoe Region.
The Services for the Tahoe Region (as described in (a)-(c) above will
be provided commencing on or about October 1, 1999 and continuing (i) for a
period of approximately 14 months, with respect to the services described in
(a), (b), (a), and (d) above, and (ii) for an initial period of five years
commencing on or about January 1, 2000, with respect to the Services described
in (e) above, for the prices set forth in Exhibit A attached hereto. All
payments of service fees, expense reimbursements, and other changes will be
made in accordance with the payment terms described in Exhibit A, and within
thirty (30) days after the date of LCC's invoice. All past due payments will,
hear interest at a rate of 1.3% per month. All service fees and other
payments are exclusive of any and all taxes, deductions, duties and similar
charges, which will be invoiced to and paid by Ubiquitel. The prices set
forth in Exhibit A shall be subject to annual adjustment by LCC, on or about
each anniversary of the date of this agreement by an amount not exceeding the
corresponding increase, for the same annual period, in the Consumer Price
Index ("CPI"') for All Urban Consumers, as published by the Department of
Labor, Bureau of Labor Statistics.
LCC warrants that it will render the Services in accordance with
generally accepted engineering standards and practices for the wireless
communications industry. LCC's sole obligation under the foregoing warranty
shall be to reperform any Services that do not meet this standard. This
warranty is provided in lieu of, and LCC hereby expressly disclaims, all other
warranties expressed or implied, including but not limited to any implied
warranty of merchantability, implied warranty of fitness for a particular
purpose, implied warranty of non-infringement and implied warranty arising out
of the course of dealing custom, usage or trade. The warranties provided
herein are the only warranties made by LCC, and will not be enlarged or
diminished without LCC's prior written consent.
In no event will LCC be liable in Ubiquitel or any other party for loss
of profits, business, use or data or for any special, incidental,
consequential or punitive damages of any kind or nature or for any reason
including, without limitation the breach of this agreement or any termination
hereof, whether asserted on the basis of contract, tort (including, without
limitation, negligence or strict liability) or otherwise whether or not LCC
has been advised 3f the possibility of such damages. In no event will the
aggregate liability of LCC hereunder, except in the case of gross negligence
or willful misconduct, exceed the total amount of fees paid to LCC hereunder.
Ubiquitel hereby agrees to engage LCC to provide all of the Services
that Ubiquitel, or any one or more of its affiliates (i.e. any person or
entity that is controlled by, controls, or is under common control with
Ubiquitel) may desire to procure from any third party in connection with the
design, implementation, deployment or operation of
<PAGE>
wireless telecommunications systems in the United States. In the event
Ubiquitel determines that it, or any affiliate thereof, may require such
Services, Ubiquitel shall promptly notify LCC, end the parties will diligently
negotiate, in good faith, a mutually acceptable scope of work and pricing
terms. If after thirty (30) days the parties are unable to agree on such
matters, after having used their best efforts to reach agreement, then
Ubiquitel shall have the right to solicit competing offers from third parties,
and LCC shall have a right of first referral to provide any and all such
services on terms, and at prices, substantially equal to the best bonafide,
written offer received by Ubiquitel to perform such services from vendor(s) of
comparable or greater size and scope of activity as LCC. Ubiquitel shall
provide LCC with a copy of each bonafide written offer received by Ubiquitel,
with a written request for LCC to consider the same under this provision, and
LCC shall have fourteen (14) days from its receipt of such request to exercise
its right of first refusal. Notwithstanding anything herein to the contrary,
the parties acknowledge that this provision shall not restrict Ubiquitel's
ability to perform these tasks with its own employees.
The term of this agreement shall commence as of the date hereof,
and-continue an initial term of five (5) years, and shall thereafter be
automatically renewed for one additional five (5) year renewal term, followed
by additional and successive terms of one (1) year unless terminated by either
party (a) at the conclusion of the initial term or any renewal term, upon
written notice provided at least ninety (90) days prior to the conclusion of
such initial or renewal terms, or (b) immediately upon written notice of
termination, in the event of a material breach of this agreement by the other
party that has not been cured within thirty (30) days after written notice of
such breach (provided, however, that with the exception of any failure to pay
sums when due, (i) such period shall be extended for a reasonable period so
long as the non-breaching party commences and diligently pursues a cure, and
(ii) the termination shall be effective only with respect to the region or
regions in which the breach occurred), (c) by Client or LCC, immediately upon
written notice of termination to the other party, in the event the other party
shall (a) make an assignment for the benefit of creditors; (I,) file a
voluntary bankruptcy petition; (c) acquiesce to any involuntary bankruptcy
petition; or (d) be adjudicated bankrupt.
During the term of this Agreement and for a period of one (1) year
thereafter, Ubiquitel covenants neither and agrees that neither it nor any of
its affiliates or such parties respective directors, officers, agents,
subsidiaries, successors or assigns shall, directly, indirectly or in concert
with any other person, solicit the services or employment of, or employ any
employee (including any person that was employed by LCC at anytime during the
six month period immediately prior to such solicitation or employment) of LCC.
This Agreement shall be binding upon and inure to the benefit of
parties hereto and their respective successors and assigns. Ubiquitel may not
assign or transfer any or all of its rights or obligations hereunder without
the prior written consent of LCC which shall not be unreasonably withheld.
Any attempted assignment or transfer which is made
<PAGE>
in violation of this paragraph Section 8.1 shall be null and void and shall be
deemed a material breach of this Agreement.
The obligations hereunder of each party (except for the payment of any
monies or invoices) shall be suspended while and to the extent that such party
is prevented from complying herewith in whole or in part by any event beyond
the reasonable control of such), which for purposes of this Agreement shall
include, without limitation, acts of God, earthquakes, unavoidable accidents,
laws, rules, regulations or orders of government authorities, acts of war
(declared or not), hostilities, blockades, civil disturbances, embargoes,
strikes or any other similar event or cause. If any event described in the
preceding sentence should result in the suspension of either party's
performance of its obligations hereunder, such party shall give written notice
of such suspension to the other party, specifying in reasonable detail the
nature of the event causing such suspension.
This Agreement (together with the Exhibits hereto) constitutes the
entire agreement between LCC and Ubiquitel regarding the subject matter
hereof. All prior or contemporaneous agreements, proposals, understandings
and communications between LCC and Ubiquitel regarding the subject matter
hereof, whether oral or written, are superseded by and merged into this
Agreement. Neither this Agreement nor any Exhibit hereto may be modified or
amended except by a written instrument executed by both LCC and Ubiquitel.
Notwithstanding anything herein to the contrary, all right, title and
Interest In and to any and all software, methodologies, inventions,
discoveries) techniques, computer programs, algorithms, databases and
documentation used, developed or conceived by LCC in the performance of the
Services shall be and remain the exclusive property of LCC; provided, however,
that all tangible reports, designs and/or drawings that are delivered to
Ubiquitel hereunder shall be the property of Ubiquitel.
No waiver by either party of a breach of any term, provision or
condition of this Agreement by the other party shall constitute a waiver of
any succeeding breach of the same or any other provision hereof. No such
waiver shall be valid unless executed in writing by the party making the
waiver.
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without regard to principles of
conflicts of law.
In the event it is necessary for either party to take any legal action
to enforce any of the terms, provisions or conditions of this Agreement, the
prevailing party will be entitled to recover from the other party all
reasonable attorneys' fees and all costs and expenses relating to such legal
action.
Sincerely
Donald R. Rose
<PAGE>
Senior VP, Sales and Marketing and the Americas
LCC International, Inc.
AGREED TO AND ACCEPTED
Ubiquitel Holdings, Inc.
By:
-----------------------------
Don Harris
Chief Executive Officer
<PAGE>
EXHIBIT A
Pricing and Payment Terms
I. RF ENGINEERING AND INITIAL OPTIMIZATION.
RF Engineering Design, Initial Optimization, and Drive Testing services
will be billed and paid for on a time and materials basis at the following
rates for the following titles:
Title Hourly Charge
----- -------------
Senior Principal $137.00
Engineer
Principal Engineer 125.00
Senior Engineer 110.00
Design Engineer 90.00
Associate Engineer 80.00
Technical Assistant 60.00
plus, reimbursement of all out-of-pocket expenses incurred by LCC in
performance of the services including, without limitation: (a) travel,
lodging, temporary housing, per clients for meals and incidentals (at $30.00
per person, per day), rental cars (1 per person), trips home for personnel
(once per month at coach rate), office space, rented furniture, utilities and
telecommunications, each of which will be invoiced to and paid by Ubiquitel at
cost plus 10%, and (b) the cost of temporary cranes, trucks and associated
rigging, airspace safety analysis, FAA form filing and opinion letters, each
of which will be billed at cost.
provided, however, that the combined hourly charges (excluding
expenses) for RF Engineering Design, Initial Optimization, and Drive Test
services shall not exceed $16,500 per site. This not to exceed price assumes
approximately 80 sites (52 sells and 28 repeaters), and includes all labor to
perform the RF design process (except third party services) for three
candidate site evaluations per search area ring. For each additional
evaluation over 3, the not to exceed price will be increased by $1,200. This
not to exceed price does not include AM tower detuning analysis, and
interference analysis to/from nearby or co-located systems.
All charges (hourly fees, reimbursable expenses, etc.) will be billed
on a monthly basis as incurred.
II. SITE ACQUISITION AND ZONING.
Site Acquisition and Zoning services will be billed and paid for on a
time and materials basis at the following rates for The following titles:
<PAGE>
Title Hourly Charge
----- -------------
Program Manager $125.00
Site Acquisition/Zoning 100.00
Manager
Site Acquisition/Zoning 80.00
Specialist
Project Coordinator 60.00
plus, reimbursement of all out-of-pocket expenses incurred by LCC in
performance of the services including, without limitation: (a) travel,
lodging, temporary housing, per diems for meals and incidentals (at $30.00 per
person, per day), rental cars (1 per person), trips home for personnel (once
per month at coach rate), office space, rented furniture, utilities and
telecommunications, each of which will be invoiced to and paid by Ubiquitel at
cost plus 10%, and (b) the cost of governmental fees (application fees, filing
fees, permitting fees, etc.), fees for third party experts, public relations,
witnesses, and similar expenses (e.g., zoning experts, attorneys, etc.), title
search costs, zoning, tax, USGS maps, plot plans and ordinances, environmental
compliance assessment, reports, or geotechnical services, A&E design and
construction documents as required as leasing and zoning-exhibits, each of
which will be billed at cost plus 10%.
provided, however, that the combined hourly charges (excluding
expenses) for Site Acquisition and Zoning Services shall not exceed $15,873
per site. This not to exceed price assumes approximately 80 sites (52 cells
and 28 repeaters), and includes all labor to perform the site acquisition and
zoning process (except for third party services and with only 60 hours of
zoning/permitting included) for three candidate site evaluations per search
ring. In the event a search ring is re-issued, re-designed or the 3
candidates prove unsuitable (in which case the search ring will be treated as
having been re-issued), the search ring will be treated as a new site.
All charges (hourly fees, reimbursable expenses, etc.) will be billed
on a monthly basis as incurred.
III. FIXED NETWORK DESIGN.
Fixed Network Design $100,000
This price assumes approximately 80 sites (as above) one LEC, and one
IXC, and includes all labor to perform the fixed network design for the Tahoe
Region. If the number of sites exceeds 80, then an additional charge of
$1,200 per candidate site will be billed.
This price excludes each of the items described in Section I(a) and
(e) above, which will be billed at cost, plus 10%.
The price for the Fixed Network Design will be billed (a) 20% upon
commencement of services, (b) 40% at four months following commencement of
<PAGE>
services, and (c) 40% upon completion of the Final Fixed Network Design.
Reimbursable expenses will be billed on a monthly basis as incurred.
IV. PROGRAM MANAGEMENT.
Program Management $10,000 per month
This price assumes approximately 80 sites (as above), and includes all
labor to perform program management services for the Tahoe Region.
This price excludes each of the items in Sections I (a) and (e) above,
which will be billed at cost plus 10%.
The price for program management services will be billed monthly, in
advance. Reimbursable expenses will be billed monthly as incurred.
<PAGE>
LCC INTERNATIONAL, INC.
7925 Jones Beach Drive
McLean, Virginia 22102
May 8, 2000
Mr. Dean Russell
Chief Operating Officer
UbiquiTel Operating Company
1 Bala Plaza, East
Suite 502
Bala Cynwyd, PA 19004
Dear Mr. Russell:
We are pleased to have had the opportunity to work with your
organization over the last few months on the Tahoe region project. Your
staff has proven to be both expert and professional. In connection with
UbiquiTel's expansion into Northern California/Eureka, Spokane, Logan,
Boise/Twin Falls/Pocatello, Southern Utah/Nevada, and
Indiana/Kentucky/Evansville markets, (the "Additional Markets"), and LCC's
provision of services for the Additional Markets on a fixed price basis, I am
providing the attached Scope of Work (Exhibit A), Pricing and Payment (Exhibit
B) and Additional Terms and Conditions (Exhibit C). It is intended that the
attachments apply to the Additional Markets only. LCC's provision of the
services shall also be governed by the following terms of that certain letter
agreement, dated September 24, 1999, between the parties, each of which are
incorporated herein by reference: paragraphs 4 (warranty), 5 (limit of
liability), 7 (term), 8 (non-solicitation), and the miscellaneous provisions
in paragraphs 9, 10, 11, 12, 13 and 14 thereof. This letter, the attached
Exhibits, and the foregoing provisions of the letter agreement, are referred
to as the "Agreement".
If the Scope of Work, Price and Payment and Terms and Conditions are
acceptable to you, please acknowledge UbiquiTel's agreement to engage LCC to
perform the selected services described in Exhibit A, at the prices set forth
in Exhibit B, subject to the terms of the Agreement. Again, we look forward
to this opportunity to continue our beneficial relationship with UbiquiTel.
Sincerely,
Peter Deliso
Vice President, General Counsel
Acknowledged and Agreed this 8th day of May, 2000:
UbiquiTel Operating Company
By:
----------------------------
Dean Russell
Chief Operating Officer
<PAGE>
EXHIBIT A
SCOPE OF WORK
1.0 GENERAL
LCC may perform program management, RF engineering, fixed network
engineering, site acquisition, zoning regulatory compliance, site design
management and permitting as described herein and such other services in support
of the design, implementation, deployment or operation of wireless
telecommunications networks as mutually agreed when authorized by a duly
executed Work Authorization (the "Services"). The form of the Work
Authorization is attached hereto as Attachment 1.
In a Work Authorization for a particular market, UbiquiTel will request the
performance of certain Services. The scope of work for each Service includes
references to other Services to clearly define what the obligations of UbiquiTel
or a third party are in the event UbiquiTel or a third party performs any
Service. UbiquiTel agrees and acknowledges that LCC's timely performance and
completion of the Services are dependent on the timely and effective completion
of the obligations of UbiquiTel's or any of its affiliates, representatives,
contractors, or agents including, but not limited to, Sprint PCS, Lucent
Technologies and SpectraSite Holdings, timely delivery of all relevant
information necessary to perform the Services and the timely decisions and
approvals by UbiquiTel. A list of UbiquiTel's obligations (or those of its
other third-party contractors, representatives or agents) and required decisions
and approvals of UbiquiTel, which shall not be unreasonably withheld, of
UbiquiTel is set forth in the UbiquiTel's Responsibilities list attached hereto
as Attachment 2. LCC agrees and acknowledges that certain of UbiquiTel's
obligations are dependent on LCC's timely performance of its obligations.
UbiquiTel may request, for certain specific sites within a market on a
site-by-site basis, performance of only a portion of the Services otherwise
specified in the respective Work Authorization. UbiquiTel shall designate in
writing the sites for which only a portion of the Services shall be provided and
shall specify which Services shall be performed for which sites (referred to
herein as a "Partial-Service Site").
UbiquiTel shall provide adequate project workspace and equipment located in
reasonable proximity to the work to be performed under each Work Authorization.
Such workspace shall be sufficient size as to accommodate LCC's staff and the
staff of the A&E Consultant (as such term is defined in Section 6.0).
Unless otherwise indicated by the context any reference to "site" herein
shall mean a cellsite or a base transceiver station ("BTS") site.
<PAGE>
1.1. Out-of-Scope Services
Any service provided to UbiquiTel by LCC that is not specifically set
forth as an obligation of LCC in this Scope of Work shall be deemed an out of
scope service, including, but not limited to, the following (an "Out-of-Scope
Service"):
1. Negotiation of Master Leases.
2. Identification of more than (3) qualified candidates per Search
Ring.
3. At UbiquiTel's request, Services provided in Section 5.1 and 5.2
prior to the issuance of a Search Ring.
4. Services performed for Partial Service Sites
5. Any services involving review, evaluation, or design which cannot
be completed by reviewing existing as-built drawings and
documents, including but not limited to any services connected
with on-site structure audit, inspection, tower climbing, or field
investigations of existing towers.
6. Any services involving review or evaluation by the A&E Consultant
(as defined in Section 5.0) of the localized structural elements
supporting antennas, waveguide and radio equipment.
7. Any services requested by UbiquiTel provided in connection with
re-negotiation or revisions to executed leases or to Executable
Leases (as defined in Section 6.0 or the continuation of
negotiations of a non Executable Lease.
8. Any zoning services provided in connection with more than three
public meetings or hearings for the application, per site, in
order to achieve a final zoning determination.
9. Any services provided in connection with any third-party subject
matter expert consulting required by the local zoning authority as
a part of the zoning application process.
10. Delays in Services performed by LCC due to the untimely delivery
or performance of the responsibilities or obligations of
UbiquiTel, its employees, affiliates, representatives, agents or
contractors.
2.0 PROGRAM MANAGEMENT (PM) SERVICES
Upon authorization by Work Authorization LCC shall provide Project
Management services as follows:
<PAGE>
2.1 OVERALL PROGRAM AND PROJECT MANAGEMENT
2.1.1 LCC shall oversee and manage the coordination and delivery of the
following Services to UbiquiTel, as these Services are defined in
the Agreement, regardless of who performs such Services:
(a) Fixed Network Engineering
(b) RF Engineering
(c) Site Identification, Qualification, Acquisition including:
Master Lease/Co-Location Opportunity Identification
Preliminary Zoning Investigation and Analysis
Candidate Site Identification, Qualification and Selection
Site Leasing
Zoning and Land Use Approvals
FAA/FCC Antenna Structure Registration Compliance
AM Tower Compliance
NEPA Land Use Compliance and RF Exposure Analysis
(d) Site Civil Design and Building Permit Processing
(e) Site Closeout and Turnover
(f) Other Services
Such other services which may be requested by UbiquiTel on
a case-by-case basis and mutually agreed upon by the
parties.
In no event does LCC's obligation to perform Program Management
Services impose any obligation or responsibility on LCC to perform
any Services for which it is not authorized by the Work
Authorization.
2.1.2 LCC shall deliver, in a form and at times mutually acceptable to
LCC and UbiquiTel, progress reports for the Services described
within each Work Authorization. Such reports shall provide
information as to the status of the project, any action or
consents required by UbiquiTel, and shall include the status of
the Master Schedule (as defined below).
2.1.3 LCC shall cooperate with UbiquiTel in its overall management of
the project. LCC's assistance and support shall be limited to
overall coordination with UbiquiTel's other representatives or
sub-contractors, input of relevant data into LCC's project
management and reporting systems and tracking of completion dates
for completed key activities as described in more detail in
SECTION 2.2 (Scheduling).
<PAGE>
2.1.4 Upon UbiquiTel's request, subject to any confidentiality
restrictions, LCC shall provide copies of LCC's approved scope of
work for the project, the Master Schedule (as described below) and
any other item UbiquiTel may request in its reasonable discretion
to third parties and to UbiquiTel's designated representatives.
2.2 SCHEDULING
2.2.1 For each Work Authorization, LCC shall prepare, subject to
UbiquiTel's reasonable approval, a schedule (the "Master
Schedule") which shall set forth Key Milestone dates to be
mutually agreed upon by UbiquiTel and LCC prior to the
commencement of work.
2.2.2 LCC shall use commercially reasonable efforts to meet Key
Milestone dates set forth in the Master Schedule.
2.2.3 LCC shall track all open items and outstanding items and shall
monitor and maintain updated forecast dates and completions dates
for all Key Milestone dates on a site-by-site basis. LCC shall
make such status reports available to UbiquiTel.
2.2.4 LCC shall meet with UbiquiTel, at mutually agreeable times and
places, to compare the progress of completion of the Services to
Key Milestone dates in the Master Schedule.
Either party may propose an amendment to the Master Schedule. The Master
Schedule shall be amended when both parties approve an amendment to the
Master Schedule with revised forecast dates. Such approval shall be given
in the parties reasonable discretion.
2.3 PROGRAM MANAGEMENT DELIVERABLES
2.3.1 The Master Schedule.
2.3.2 Status Reports, as described in SECTIONS 2.1.2 AND 2.2.3.
<PAGE>
3.0 FIXED NETWORK ENGINEERING (FNE) SERVICES
Upon the approval of a Work Authorization, LCC shall perform Fixed
Network Engineering services as follows:
3.1 MOBILE SWITCHING CENTER (MSC) LOCATION ANALYSIS AND CONFIGURATION
3.1.1 LCC shall perform MSC location analysis in accordance with
specifications set forth in the Work Authorization. LCC will
review the different options for the MSC location, analyze
appropriate locations, rank the selections, and provide a
recommendation for the MSC location.
3.1.2 UbiquiTel shall provide LCC information on subscriber patterns and
shall combine subscriber patterns with the network vendor
equipment specifications to provide final configuration parameters
for the MSC VLR (Visitor Location Register) and HLR (Home Location
Center).
3.2 BACKHAUL AND INTERCONNECTION DESIGN AND DIMENSIONING
3.2.1 LCC shall compare leased line and microwave solutions for the
UbiquiTel network and assist UbiquiTel in selecting and
maintaining leased lines where required in the network. Utilizing
published tariffs and estimated costs of deploying microwave
equipment, LCC shall perform a "least cost interconnection study"
and shall deliver a report of its the recommendations to
UbiquiTel.
3.2.2 LCC shall design a network topology providing interconnection
between cellsites and MSCs based on the results of the least cost
interconnection study. Upon completion of this activity, LCC
shall deliver a cellsite to MSC interconnection design plan. This
plan shall include the quantity of microwave links or T1s that
will be required to provide the necessary capacity between the
cellsite(s) and the MSC. LCC shall be responsible for management
of the procurement process of microwave/T1.
3.2.3 LCC shall evaluate, select and negotiate with various LEC/CAP to
be the lease line provider in a master service agreement between
UbiquiTel and the lease line provider for all backhaul and
interconnection requirements. LCC shall process order, track and
provide acceptance for each leased line.
3.2.4 LCC shall perform an analysis of the MSC to PSTN/PLMN
interconnection requirements. Upon completion of this activity,
LCC shall provide an MSC to PSTN/PLMN interconnection design plan.
This plan shall include the quantity of trunks that will be
required to provide the necessary capacity between the MSC and the
PSTN/PLMN, which includes 800 and 911 traffic. LCC shall be
responsible for the procurement process of all trunks.
<PAGE>
3.2.5 If required in LCC's discretion, as determined by the availability
of T1s and the results of the least cost interconnection study,
LCC shall prepare a microwave network design. The following tasks
will be performed:
(a) Path Profiles and Analysis
(b) Frequency Band Feasibility Study
(c) Site Surveys and Path Evaluation Report
(d) Development of the RFQ for the Microwave System
(e) Microwave Vendor Selection and Assessment
NOTE: ADDITIONAL ENGINEERING RESOURCES REQUIRED FOR THE MICROWAVE LINKS
IMPLEMENTATION PROCESS THAT WILL INCLUDING COORDINATION, INSTALLATION AND
ACCEPTANCE TEST. LCC AND UBIQUITEL BASING ON FINAL MICROWAVE NETWORK
DESIGN TOPOLOGY SHALL MUTUALLY AGREE THE ADDITIONAL SCOPE OF WORK.
3.3 CELLSITE COMMISSIONING AND INTEGRATION
3.3.1 LCC shall provide cellsite commissioning & integration services.
The specific tasks to be performed are as follows:
(a) Prepare the connectivity plan for the cluster of
cellsites to be interconnected to the MSC
(b) Prepare the BTS parameters for commissioning and
integration with the MSC through T1s or microwaves
(c) Prepare T1 timeslots allocation table for
interconnections to the MSC for voice and signaling.
(d) Commission and integrate cellsites into the network
3.4 SWITCH NETWORK DESIGN, ENGINEERING AND COORDINATION
3.4.1 LCC shall design and coordinate the switch network engineering
activities for implementation, commissioning and acceptance. This
includes managing and coordinating the "Change Control Process"
that initiates, requests, responds to or implements a change in
fixed network elements based on new requirements, additions or
upgrades to the original scope of work as mutually agreed by
UbiquiTel and the party providing the Service.
3.4.2 LCC shall coordinate with vendors on technical and engineering
issues, which includes:
(a) Participate in switch procurement process and
prepare customer switch questionnaire to ensure the
correctness and accuracy of the switch network
configuration
<PAGE>
(b) Dimension and order the DACS, DSX, GPS/BITS,
Access60 Telco system, IWF and ICOS equipment.
(c) Coordinate the inputs and prepare the ODD 5E switch
translation questionnaires
(d) Coordinate the inputs and prepare the ODA ECP switch
translation questionnaires
(e) Ensure the correctness and accuracy of switch
network equipment capability and functionality based
on UbiquiTel's network plan and market needs
(f) Verify switch equipment specifications and
performances
3.4.3 LCC shall manage and monitor the implementation of the switching
network infrastructure to include:
a) Negotiate with the LEC/CAP providers to obtain CFA
and POI for the interconnection to with landline
b) Plan, prepare and coordinate all facility and
equipment assignments between the switch an
transport network components, which includes the
DACS translation activities
c) Install, commission and help integrate the following
equipment
- ICOS system
- Access60 system
- IWF system
- GPS and BITS system
(d) Assist with switch dialing plan that includes
preparation for the Telephone Number Administration
(TNA) checklist and coordinate the CLLI Code
Assignment.
3.4.4 LCC shall coordinate with the local PSTN/PLMN on inter-network
integration and acceptance testing activities.
3.4.5 LCC shall participate in system commissioning and acceptance
testing as follows:
(a) Monitor vendor commissioning tests, Sprint network
integration tests, and Sprint network audit tests
(b) Coordinate UbiquiTel and commissioning acceptance
tests
(c) Participate with OPAC testing
(d) Compile a "Punch List" of defects
3.5 FIXED NETWORK ENGINEERING DELIVERABLES
3.5.1 MOBILE SWITCHING CENTER (MSC) LOCATION AND CONFIGURATION
<PAGE>
3.5.1.1 MSC LOCATION RECOMMENDATIONS
3.5.1.2 Initial switch configuration
3.5.2 BACKHAUL AND INTERCONNECTION DESIGN AND DIMENSIONING
3.5.2.1 Least Cost Interconnection Study
3.5.2.2 Cellsite to MSC Interconnection Design Plan
3.5.2.3 MSC to PSTN/PLMN Interconnection Design Plan
3.5.2.3 Microwave Network Design, if required
<PAGE>
3.5.3 CELLSITE COMMISSIONING AND INTEGRATION
3.5.3.1 Connectivity Plan for Cellsites to the MSC
3.5.3.2 BTS Parameters List
3.5.3.3 BTS Commissioning & Integration Plan
3.5.4 SWITCHING NETWORK IMPLEMENTATION MANAGEMENT AND COORDINATION
3.5.4.1 Switch Network Design questionnaires
3.5.4.2 Customer engineering questionnaires
3.5.4.3 CFA design document
3.5.4.4 ODD design document (switch translation table)
3.5.4.5 ODA design document (Executive Control Processor)
3.5.4.6 TNA checklist
3.5.4.7 Transport facilities design document,
3.5.4.8 Configuration and procumbent spec for ICOS, Access 60
systems.
3.5.4.9 Compile all vendors' commissioning and acceptance
document
Note: All deliverables will be documented for future references
<PAGE>
4.0 RF ENGINEERING (RF) SERVICES
Upon the approval of a Work Authorization, LCC shall provide RF
Engineering services as follows. In the performance of such Services, LCC will
use the design guidelines set forth in the Sprint PCS "RF Design Guidelines Rev.
9.0".
4.1 RF DESIGN OF THE MARKET
4.1.1 LCC shall prepare the databases required for each of the market
designs. The databases will be developed from LCC's existing
databases for the United States as well as from data obtained
through third-party sources and will include terrain and
demographics. If LCC's standard antenna database does not include
UbiquiTel desired antennas, then LCC will obtain digitized
patterns from third party vendors and have them added to the
database.
4.1.2 UbiquiTel shall provide coverage objectives to LCC in the form of
a map with coverage regions and service requirements indicated.
The coverage objectives will define the area in which the network
will be installed and the type of service required in each area.
4.1.3 LCC shall incorporate the results of any preliminary zoning
analysis into the design.
4.1.4 Any Master Lease Opportunity identified or other preferred site
locations which are provided will be considered in the design
process.
4.1.5 LCC shall license a propagation tool. The propagation tool and
the associated databases will be copied to local networks at the
UbiquiTel-provided project offices by LCC staff.
4.1.6 During the project, LCC shall test sites in each service area
(network) to characterize environmental distinctions such as dense
urban, urban, suburban, and rural. The drive test data will be
post-processed to determine environment specific correction
factors to the general propagation prediction model being used in
the design.
4.1.7 LCC shall prepare the preliminary design using the mutually agreed
design goals and objectives. Preference will be given to sites
preferred by UbiquiTel, its partners, affiliates, and any master
site agreements in place. Buildings and other existing structures
will be given preference over undeveloped land.
4.1.8 LCC shall perform the following engineering analyses to finalize
the design for UbiquiTel approval:
<PAGE>
- (a) Forward Path Ec/Io.
- (b) Coverage Analysis
- (c) Regions in soft handoff by type.
- (d) Required mobile Tx power on reverse path.
4.1.9 UbiquiTel shall supply LCC with projections of subscriber count,
subscriber usage, and blocking criteria if not included in the
Rev. 9.0 document.
4.1.10 LCC shall prepare search area maps (also referred to as "Search
Rings"), based upon the preliminary design, that identify desired
locations of all sites within the market. UbiquiTel shall approve
in writing the release of the search area map to Site Acquisition
for site identification and qualification. LCC shall modify the
design as needed to reflect actual field conditions of the
selected candidate sites.
4.2 SYSTEM DEPLOYMENT
4.2.1 LCC shall rank candidate sites and validate that the site is
acceptable for the design according to the information provided by
Site Acquisition.
4.2.2 When necessary in LCC's judgment, LCC shall perform a drive test
of the Primary Site Candidate (as defined in SECTION 5.3.6) using
an Ericsson RSAT-2000 scanning receiver. LCC will prepare the
drive test routes, set up the test transmitter, drive the test
route, collect the test data, and remove the test transmitter at
the conclusion of the test. After the test data is collected, LCC
will perform measurement integration to compare the received
signal strengths predicted by the propagation tool with the
collected data values. A correction factor for the site will be
determined for the propagation tool.
4.2.3 At the conclusion of the candidate site evaluation and drive
testing, if no candidate sites within a given search area are
acceptable, then a redesign of a portion of the network will be
required and pricing will be adjusted in accordance with Price and
Payment provisions. Redesigns will be subject to UbiquiTel's
reasonable approval. LCC and UbiquiTel will agree to a new
Delivery Milestone Deadline Date for the redesigned sites.
4.2.4 LCC shall support UbiquiTel in defending the final selected sites
before regulatory bodies. The preparation for these hearings may
include the creation of plots and short reports (1-2 pages long).
An LCC engineer will attend the hearing to discuss the technical
issues associated with the site. Approval by a regulatory board
is not guaranteed by the attendance of the LCC engineer.
4.2.5 Microwave relocation shall be performed by UbiquiTel.
<PAGE>
4.2.6 The final design site may be co-located with other RF facilities,
in which case, LCC shall perform isolation and intermodulation
studies to determine the best placement for the UbiquiTel
equipment so that it will not interfere with, or receive
interference from, the co-located RF facilities.
4.2.7 LCC shall utilize a planning tool, along with the results of the
site drive tests to provide a final RF site configuration.
4.2.8 LCC engineers shall review site drawings and approve those
drawings that meet design and co-site interference requirements.
The drawings to be reviewed include lease drawings, building
permit drawings, zoning drawings, and final Construction Drawings
(as defined in SECTION 6.1.6).
4.2.9 LCC shall perform a final site visit to verify that the
installation was performed in accordance with the final approved
drawings. The items to be verified will be antenna radiation
center, orientation, cable type and length, connectors, co-located
antennas, and other relevant RF issues.
4.3 PRIOR COORDINATION NOTICE (PCN)
For each site to be constructed, LCC shall provide a completed Prior
Coordination Request Form, the form and content of which shall be mutually
agreed upon prior to commencement of work, containing relevant engineering site
data to Sprint PCS's designated Regulatory Compliance representative for prior
coordination, analysis and notification to microwave incumbents prior to
activation of a PCS site. LCC shall submit the PCN Request Form with this
information no later than forty-five (45) days prior to the on-air date for the
market or site.
4.4 FCC NEPA RF EXPOSURE COMPLIANCE
In accordance with the requirements of the National Environmental Policy
Act of 1969 ("NEPA") contained in Title 47 CFR Section 1 - Subpart I and any
other environmental procedures of UbiquiTel or its affiliates including Sprint
PCS, LCC shall provide NEPA RF Exposure Compliance services in accordance with
Title 47 CFR Section 1.1307(b) (referred to herein as "NEPA RF Exposure
Requirements") as follows:
4.4.1 LCC shall prepare an analysis, using modeling software acceptable
to Sprint PCS, to determine if the RF exposure levels are in
compliance with NEPA RF Exposure Requirements.
4.4.2 LCC shall collect field measurements of a site's RF exposure
levels when the software analysis, using conservative assumptions
of antenna data, does not determine that the RF exposure level is
in compliance and the actual antenna data cannot be obtained; or
when other regulatory requirements, such as zoning, necessitate
the collection of field measurements.
<PAGE>
4.4.3 For each site, LCC shall prepare the Sprint PCS NEPA RF Exposure
Checklist form, the form of which shall be provided by UbiquiTel.
Required mitigation techniques for compliance shall be ascertained
from the NEPA RF Exposure Checklist form.
4.4.4 LCC shall inform UbiquiTel's construction contractor of any
required mitigation measures.
4.5 OPTIMIZATION OF THE NETWORK FOR COMMERCIAL LAUNCH
4.5.1 LCC shall prepare cell dependent measurement drive routes and
perform sector testing, using the RSAT, to ensure correct power
setting of the site, proper antenna orientation and correct PN
assignment.
4.5.2 LCC shall perform optimization of clusters consisting of 12 to 19
sites each. During the cluster optimization, LCC shall check hand
off, potential interference and forward and reverse link quality.
4.5.3 LCC shall perform system optimization testing to check overall
system performance. Several tests will be performed to collect
data and ensure that forward and reverse links quality is
maintained, proper hand-offs location and potential interference
is reduced.
4.5.4 LCC will perform optimization services in accordance with
generally accepted practices. LCC and UbiquiTel will mutually
agree on the criteria for optimization and will mutually agree,
prior to the commencement of optimization services, to define the
following: Dropped calls, FER, EC/LO and RSSI based in actual
drive test data.
<PAGE>
4.6 RF ENGINEERING SERVICES DELIVERABLES
The following deliverables will be provided in the RF Site Package to be
delivered at the completion of the project:
4.6.1 Search Area Map
4.6.2 Candidate Evaluation Form
4.6.3 Caravan Visit Form and Final Configuration Form
4.6.4 Drive Test Data Evaluation Form
4.6.5 Prior Coordination Notice Request Form
4.6.6 NEPA RF Exposure Checklist
4.6.7 Optimization Data Package to include: (1) Ec/Io Plots, (2) FER
Plots, (3) Dropped Call Plots, (4) Mobile Received Power, and (5)
Mobile Transmit Power
4.6.8 Format C on or before the 20th day of each month for each market
4.6.9 RF or system overlays as needed to provide to Sprint
<PAGE>
5.0 SITE ACQUISITION (SA), ZONING (Z) AND REGULATORY COMPLIANCE (RC)
SERVICES
Upon approval of a Work Authorization, LCC shall provide Site
Acquisition, Zoning and Regulatory Compliance Services as follows:
5.1 MASTER LEASE/CO-LOCATION OPPORTUNITY IDENTIFICATION
5.1.1 Upon the issuance of a Search Ring, LCC shall conduct an initial
investigation to identify and qualify potential new master lease
and co-location site opportunities (referred to herein as "Master
Lease Opportunities") that meet UbiquiTel approved site criteria,
which criteria shall include, but not be limited to, equipment
specifications, overall lease premise area, clearance and other
configuration information, site operational restrictions and any
information that would have an impact on leasing (the "Approved
Site Criteria").
5.1.2 Based on the initial investigation above, LCC shall conduct a
preliminary evaluation of each Master Lease Opportunity site for
consistency with Approved Site Criteria, engineering design
suitability, and UbiquiTel's business and financial requirements
("Site Financial Requirements"). The objective of the preliminary
evaluation shall be to determine:
(a) That the site can likely be leased under a Master
Lease Opportunity agreement with acceptable terms
and conditions.
(b) That zoning or other regulatory land use approvals
and permits may be obtained under acceptable terms
and conditions.
(c) That the intended construction and installation can
be feasibly accomplished under acceptable terms,
conditions and cost parameters.
(d) That the site will accommodate the equipment
contemplated for the site.
Based upon this evaluation, LCC shall make recommendations to
UbiquiTel for each Master Lease Opportunity, or for sites within
any Master Lease Opportunity which LCC believes may expedite
development of the network and which should be further
considered.
5.1.3 In any case where the owner of a Master Lease Opportunity site is
likely to require or may prefer its own form of lease agreement,
LCC shall obtain an unexecuted copy of the required or preferred
lease or license agreement.
<PAGE>
5.2 PRELIMINARY ZONING INVESTIGATION AND ANALYSIS
5.2.1 Upon the issuance of a Search Ring, for all jurisdictions within
which any search ringis likely to be located, LCC shall conduct a
preliminary jurisdiction-level zoning investigation (the
"Preliminary Zoning Investigation"), as described below, to
research, analyze, document and record preliminary zoning
information relevant to the proposed use. LCC shall consider this
information, and in particular the zone locations which may be
more favorable for candidate sites, in the design and overall
development strategy for the project.
5.2.2 LCC shall contact each relevant local land use jurisdictions in
which any Search Ring is located to obtain zoning or other land
use information that may be significant in the zoning strategy for
development of the proposed use within that jurisdiction. Key
zoning aspects, such as site development standards, land use
policies, submittal requirements, processing timeframes,
restrictions, the likelihood of moratoria or other regulatory
delay, filing fees and hearing schedules, shall be considered as a
part of the Preliminary Zoning Investigation.
5.2.3 LCC shall prepare and provide to UbiquiTel, as part of the Site
Candidate Information Package described in SECTION 5.3.2, a brief
summary of key information determined in the Preliminary Zoning
Investigation. This summary shall include:
(a) Land use designations.
(b) Applicable site development standards such as height
restrictions, setbacks, screening requirements and
site area coverage limits.
(c) Application requirements, the approval process and
the estimated timeframe necessary to achieve zoning
approvals, including periods for appeals.
(d) Names, addresses, phone and position of contact(s)
in each relevant department.
5.2.4 LCC shall develop and recommend strategies and tactics for zoning
or other land use approvals that will be required based upon the
Preliminary Zoning Investigation and other information.
5.2.5 LCC shall notify UbiquiTel of any areas or zones considered to be
"difficult-to-zone", and shall make reasonable attempts to avoid
dependence on them as a part of the system design.
5.3 CANDIDATE SITE IDENTIFICATION, QUALIFICATION AND SELECTION
<PAGE>
5.3.1 Upon issuance of the Search Ring, LCC shall perform a field search
for qualified sites meeting UbiquiTel's approved criteria. For
each Search Ring, LCC shall identify up to three (3) qualified
candidate sites which LCC believes meet the approved criteria.
Notwithstanding the foregoing, LCC shall not be obligated to
identify or to provide other services for more than one (1)
candidate site in any Search Ring unless additional candidates
are required in order to identify at least one qualified
candidate that ultimately is acceptable as the Primary Site
Candidate (as defined in SECTION 5.3.6) for that Search Ring.
5.3.2 Except in cases where the respective information is not readily
available (in which case LCC shall provide a brief explanation of
the circumstances), LCC shall provide a Site Candidate Information
Package (the "SCIP") for each identified candidate site. The SCIP
shall contain relevant preliminary physical, ownership, location
and other information in order to assess the sites substantial
acceptability and consistency with approved criteria and
engineering parameters, and shall substantially include the
following:
(a) Search Ring information such as site designation,
name.
(b) Candidate property information such as location,
address, latitude/longitude coordinates, approximate
age of the structure, terrain (for raw land sites),
number of floors, approximate roof or tower height
and driving directions to the site.
(c) Ownership information such as name, address, phone
and contact information for the owner (and owner's
manager or representative, if applicable).
(d) Likely lease information such as estimated rent,
land lease amount, approximate premise size
available and lease feasibility comments.
(e) Access information such as hours and days of access
to premise access contact information, elevator
capacity and size, availability of access road,
presence of loading dock and availability for crane
operating space if necessary.
(f) RF characteristics of the site such as approximate
structure height, recommended height of antenna and
Rad Center, notations of observable obstructions,
likely antenna mounting heights, presence of other
AM, microwave or other communications facilities, RF
emitters, and high voltage lines.
(g) Preliminary zoning information such as name,
address, phone and contact for zoning agency, zoning
classification in which the property is located,
approval process and general
<PAGE>
processing timeframe, and basic zoning development
standards and restrictions such as height and
setback limits.
(h) Approximately four (4) representative photographs
taken from the site and four (4) representative
photographs taken of the property from off-site.
(i) Other key relevant information that might affect the
feasibility and acceptability of the site.
5.3.3 LCC shall perform preliminary site-specific zoning research and
review for each identified candidate. LCC shall visit the site
and meet with appropriate representatives of the principal local
land use and zoning authority to discuss the proposed use and to
determine the relevant zoning environment affecting the site and
the proposed use. As a part of this research, LCC shall use
reasonable efforts to obtain copies of applicable zoning codes,
zoning application forms, application and hearing processes and
procedures and application fee amounts. Upon completion of the
research, all relevant data shall be stored and summarized as a
part of the SCIP described above.
5.3.4 LCC shall coordinate and attend a site qualification visit
(commonly referred to as the "Caravan Visit") for each candidate
site, if required, to make an on-site review of the property, to
obtain other relevant information not previously ascertained in
the initial site search, and to determine any further conditions
which might affect the site's acceptability or feasibility.
5.3.5 LCC shall review all data collected during the initial field
search, the investigations for qualified candidates, and the
Caravan Site Visits in order to ensure that it is adequately
informed of the site to enable LCC to make reasonable
recommendation of the site's acceptability and relative ranking
(as described below) to UbiquiTel.
5.3.6 Upon review and analysis of all known information affecting the
site, LCC shall complete a relative ranking of each site among the
others within the respective Search Ring. This relative ranking
will take into consideration all known zoning, construction, RF
(without drive test), lease and cost characteristics of the site
in the context of approved design and business parameters. This
ranking shall result in designation of one (1) of the candidate
sites as the site which LCC recommends for UbiquiTel's acceptance
(the "Primary Site Candidate"). In cases where identification of
only one candidate site is necessary in order to produce an
acceptable Primary Site Candidate, LCC shall, nevertheless,
complete a ranking of the site taking into consideration the
aspects above even though only one site is considered.
5.3.7 Upon completion of any drive test of the Primary Site Candidate as
described in SECTION 4.0 (RF Engineering Services), LCC shall
notify
<PAGE>
UbiquiTel of the findings and recommendations for approval of
the Primary Site Candidate for acceptance. UbiquiTel's written
approval of the Primary Site Candidate shall be deemed as
authorization to proceed with the review of title and lease
negotiations.
5.3.8 Upon request by UbiquiTel, for each approved Primary Site
Candidate, LCC shall order, receive and review a preliminary title
report and all relevant underlying documents of record that might
have an impact on the site and the intended use. LCC shall advise
UbiquiTel of any identified adverse title conditions and make
recommendation to UbiquiTel for remedy of such conditions if
UbiquiTel elects to proceed with lease of the site. The
preliminary title report shall contain and address information
customarily included in a preliminary report in accordance with
the standards of the American Land Title Association. A copy of
the preliminary title report and all documents of record, together
with LCC's summary of the conditions of title for the site
(collectively referred to as "Preliminary Title Documents"), shall
be provided to UbiquiTel.
5.4 SITE LEASING
5.4.1 Prior to the commencement of the work, UbiquiTel shall provide LCC
with a summary of terms and alternative lease provisions which
UbiquiTel considers acceptable and which LCC shall be authorized
to utilize and rely upon in lease negotiations.
5.4.2 Prior to the commencement of the work, UbiquiTel shall provide LCC
with details and specifications on UbiquiTel's equipment,
including size and weight, and the Approved Site Criteria.
5.4.3 At UbiquiTel's request, LCC shall assist UbiquiTel in the
development of standard-form lease contracts and other
documentation for use in the project.
5.4.4 Prior to the commencement of leasing, UbiquiTel shall designate a
point of contact authorized to act on UbiquiTel's behalf in all
lease matters, including approval of lease terms and the execution
of lease documents.
5.4.5 Upon approval by UbiquiTel of the Primary Candidate Site, LCC
shall enter into lease negotiations with the property's owner or
the owner's authorized representative, using a form of lease
mutually agreed by LCC and UbiquiTel.
5.4.6 LCC shall coordinate with Architectural & Engineering consultant
("A&E Consultant") in the A&E Consultant's preparation of
preliminary "design-definitive" plans to the extent such plans are
required for lease exhibits and shall request such plans in a
timely manner.
<PAGE>
5.4.7 LCC shall continue to pursue lease negotiations until approval of
lease terms by UbiquiTel and the property owner and delivery to
UbiquiTel of an Executable Lease. For the purposes of this
paragraph, an Executable Lease shall mean a lease which (i) has
been signed by the landlord, and (ii) which contains terms
previously approved by UbiquiTel or which meet UbiquiTel's
previously approved criteria, and (iii) which is in a condition to
be signed by UbiquiTel without further approval of the landlord
and (iv) does not require extended negotiations. If, in LCC's
reasonable professional judgment, negotiations are not likely
result in an Executable Lease, or that consummation of the lease
may take an inordinate amount of time, LCC shall notify UbiquiTel,
in which case UbiquiTel shall advise LCC of it's election to
terminate negotiations or continue negotiations as an Out-of-Scope
Service.
5.4.8 For the purposes of all sites identified as a part of a new Master
Lease Opportunity (as defined in SECTION 5.1) the performance of
LCC's Services in this SECTION 5.4 shall apply on a site-by-site
basis for individual site licenses or leases only and shall not
include the negotiation of the actual master lease agreement. Upon
UbiquiTel's request, LCC shall, as an Out-of-Scope Service pursue
negotiations of a master lease for sites identified as a Master
Lease Opportunity until approval of terms by UbiquiTel and the
property owner and delivery to UbiquiTel of an executable master
lease.
5.4.9 Upon request by UbiquiTel, LCC shall, as an Out-of-Scope Service,
order and coordinate delivery to UbiquiTel a policy of title
insurance from a title insurer acceptable to UbiquiTel and subject
to terms and conditions acceptable to UbiquiTel.
5.5 ZONING
5.5.1 LCC shall secure the property owner's signature on any zoning
documents for which the owner's signature may be required.
5.5.2 LCC shall coordinate with A&E Consultant in the Consultant's
preparation of site plans or other exhibits to the extent such
plans and exhibits are required for zoning applications. LCC
shall supervise Consultant's in the preparation of photo
simulation.
5.5.3 LCC shall prepare and submit all required land use applications
associated with required land use approvals.
5.5.4 LCC shall attend scheduled meetings with zoning authorities,
citizens groups and the business community as reasonably required
to complete the processing of zoning applications through the
approval and appeals. In cases where no discretionary zoning
approval is required, LCC shall provide evidence to UbiquiTel that
no such approval is required.
<PAGE>
5.5.5 LCC shall coordinate the services of all third-party professionals
necessary to support the zoning approval process. Such services
may include, A&E services required to complete plans and exhibits
for zoning applications, specialists necessary to address safety
or environmental issues, geotechnical and regulatory compliance
specialists, expert witnesses, legal counsel, and other similar
technical support services.
5.5.6 LCC shall provide to UbiquiTel copies of all zoning applications,
exhibits, zoning permits, records of approval and key
correspondence (collectively "Site Zoning Documents").
<PAGE>
5.6 FAA/FCC ANTENNA STRUCTURE REGISTRATION COMPLIANCE
5.6.1 For each Primary Candidate Site, UbiquiTel shall prepare and
provide to LCC, or cause to be prepared and provided, a new survey
statement letter with a minimum tolerance of "2-C".
5.6.2 For each new UbiquiTel-owned communication tower (referred to
herein as a "rawland" site), and for all cases where the height of
a non-UbiquiTel tower is increased, LCC will supervise and manage
preparation of an airspace analysis report from a third-party
airspace consultant approved by UbiquiTel and its affiliates, if
any, including Sprint PCS (the "Approved Airspace Consultant")
based on surveyed data with a minimum tolerance of "2-C".
UbiquiTel shall provide to LCC, or cause to be provided, a list of
all such airspace consultants approved by UbiquiTel and its
required affiliates.
5.6.3 For each new site involving co-location on an existing
communication tower site or a new communication tower site not
owned by UbiquiTel, LCC shall obtain a copy of the antenna
structure owner's FAA/FCC compliance documentation prior to
construction approval to mount the antennas. This will include a
copy of the owner's FAA determination and FCC Antenna Structure
Registration (FCC Form 854R), if FAA notice is required, or the
owner's airspace consultant's analysis report that identifies that
FAA notice is not required. If such documentation cannot be
reasonably obtained by LCC, LCC shall supervise and manage the
preparation of an airspace analysis report by an Approved Airspace
Consultant.
5.6.4 If FAA notice is required to be filed by UbiquiTel, LCC shall
supervise the preparation, filing and tracking of the required
documentation, including FAA Form 7460-1, by an Approved Airspace
Consultant.
5.6.5 When the FCC requires a UbiquiTel site to be registered in the FCC
Antenna Structure Registration database, LCC will (i) prepare and
file FCC Form 854 (Antenna Structure Registration) prior to the
commencement of construction and (ii) notify the FCC within
twenty-four hours of when the Antenna Structure is fully
constructed.
5.6.6 LCC shall coordinate and ensure substantial compliance of any
construction-related FAA requirements including, but not limited
to, any FAA-required (or voluntary) lighting and/or marking,
lighting surveillance, and backup for commercial power. UbiquiTel
shall provide to LCC specifications for any such
construction-related requirements required by UbiquiTel, or any
of its affiliates including Sprint PCS.
5.6.7 For all sites, UbiquiTel shall cause its Construction Manager to
comply with the requirements and procedures of Sprint PCS relating
to post-construction
<PAGE>
height verification including, but not limited to preparation
of, and immediately providing (within 24 hours of the
completion of the antenna structure construction) to LCC, a
completed Post-Construction Height Verification Form (the "PCHV
Form"), the form and content of which shall be provided by
UbiquiTel. LCC shall review the completed PCHV Form and notify
UbiquiTel or its Construction Manager, in writing, of any
apparent non-conformance with FAA requirements, or of LCC's
approval of the PCHV Form.
5.7 AM TOWER COMPLIANCE
5.7.1 In accordance with the requirements of Title 47 CFR Section
22.371, LCC shall determine if each site is listed in the FCC's AM
Radio Station database as being located within coordination
distance required for AM Tower compliance.
5.7.2 If the site is listed as being located within the coordination
distance, LCC shall supervise and manage an analysis by a vendor
approved by UbiquiTel and any required affiliates to determine the
required action necessary to achieve compliance (such as notifying
AM Radio operators of the proposed site, conducting
pre/post-construction measurements, and installation of detuning
hardware on the proposed communication tower structure).
5.7.3 LCC shall notify UbiquiTel's Construction Manager of any required
compliance procedures.
5.8 FCC NEPA LAND USE COMPLIANCE
In accordance with the requirements of the National Environmental Policy
Act of 1969 ("NEPA") contained in Title 47 CFR Section 1 - Subpart I and any
other environmental procedures of UbiquiTel or its affiliates including Sprint
PCS, LCC shall provide NEPA Land Use Compliance services in accordance with
Title 47 CFR Section 1.1307(a) (referred herein as "NEPA Land Use Requirements")
as follows:
5.8.1 LCC shall supervise and manage an investigation by a third-party
environmental consultant, acceptable to UbiquiTel, (an "Acceptable
Environmental Consultant") to determine the NEPA land use issues
for each Primary Candidate Site and the completion of a NEPA Land
Use Checklist form to be provided by UbiquiTel. LCC shall review
the completed NEPA Land Use Checklist for completeness and
consistency with NEPA Land Use Requirements and provide the
completed NEPA Land Use Checklist to UbiquiTel.
5.8.2 If the NEPA Land Use Checklist indicates a potential environmental
impact under NEPA Land Use Requirements, LCC shall notify
UbiquiTel. If UbiquiTel elects to proceed with development of the
subject site
<PAGE>
notwithstanding any potential impacts, LCC shall supervise and
manage the preparation and filing of an Environmental Assessment
(the "EA") with the FCC by an Acceptable Environmental Consultant.
LCC shall coordinate the preparation and filing of the EA with
the designated representative of Sprint PCS (External Affairs
Department).
5.8.3 If the ground will be disturbed by any work at the site, LCC shall
supervise and manage preparation by an Acceptable Environmental
Consultant a "Phase I Environmental Site Assessment" report in
accordance with ASTM Standard E1527-97. For co-location sites,
this requirement shall be waived if LCC obtains and provides a
copy of the landlord's or other tenant's Phase I Environmental
Site Assessment report and the report was prepared within the
previous three years and no significant changes to the site
condition have occurred since the report was prepared.
5.9 SITE ACQUISITION, ZONING AND REGULATORY COMPLIANCE SERVICES DELIVERABLES
5.9.1 List of Master Lease Opportunities, if any as identified in
SECTION 5.1.3.
5.9.2 Site Candidate Information Package (SCIP) as described in SECTION
5.3.2.
5.9.3 Recommendations for approval of Primary Site Candidate as
described in SECTIONS 5.3.6 AND 5.3.7.
5.9.4 Preliminary Title Documents as described in SECTION 5.3.9.
5.9.5 Executable lease for each approved Primary Site Candidate as
described in SECTION 5.4.6.
5.9.6 Site Zoning Documents as described in SECTION 5.5.6.
5.9.7 Antenna Structure owner's FAA and FCC Compliance Documentation or,
if required, an Airspace consultant's airspace analysis report in
accordance with SECTION 5.6.2. and SECTION 5.6.3
5.9.8 Any documentation required to be filed with the FAA pursuant to
SECTION 5.6.4.
5.9.9 Any documentation required to be filed with the FCC pursuant to
SECTION 5.6.5.
5.9.10 Any documentation sent to UbiquiTel or its Construction Manager
regarding LCC's approval of the PCHV form pursuant to SECTION
5.6.7.
5.9.11 Any documentation required to determine AM Radio compliance
pursuant to SECTION 5.7.
5.9.12 Notification of non-compliance or compliance and acceptance of the
Post-Construction Height Verification Form pursuant to SECTION
5.6.7.
5.9.13 NEPA Land Use Checklist as described in SECTION 5.8.1.
5.9.14 FCC Environmental Assessment application, if required pursuant to
SECTION 5.8.2.
5.9.15 Phase I Environmental Site Assessment report, if required, or any
assessment previously prepared by others pursuant to SECTION
5.8.3.
<PAGE>
6.0 SITE DESIGN MANAGEMENT AND PERMITTING
6.1 SITE CIVIL DESIGN
6.1.1 LCC shall supervise and manage the third-party professional civil
surveyor in the preparation of 2-C surveys to be used in the
preparation of the A&E Drawings, as described below.
6.1.2 LCC shall provide to UbiquiTel a 2-C survey for each approved
Primary Site Candidate site to be used in the preparation of the
A&E Drawings, as described below prepared by a third-party
professional civil surveyor duly licensed or registered in the
state in which the site is located.
6.1.3 LCC shall supervise and manage any third-party professional
geotechnical consultants in the investigation, analysis and
preparation of reports, drawings, specifications and
recommendations on the site's subsurface conditions, footing and
foundation design, pile specification and design, and other
relevant geotechnical aspects of the site and its contemplated
use.
6.1.4 LCC shall supervise and manage any third-party professional
structural consultants in the investigation, analysis and
preparation of reports, drawings, specifications and
recommendations on the site's structural conditions, roof or
structural loading, structural adequacy and capacities, the design
of all relevant structural members, and other relevant structural
characteristics of the site and its contemplated use.
6.1.5 LCC shall supervise and manage any third-party professional
electrical and mechanical consultants in the investigation,
analysis and preparation of reports, drawings, specifications and
recommendations of all relevant electrical and mechanical systems
and other relevant electrical and mechanical characteristics of
the site and its contemplated use.
6.1.6 LCC shall supervise and manage the A&E Consultant in the
preparation of all drawings and specifications for all civil
construction (the "Construction Drawings") and all exhibits that
may be necessary for lease and zoning applications (collectively,
the "A&E Drawings").
6.1.7 LCC shall provide A&E Drawings shall be in a format which shall
include information customarily provided in typical site
construction drawings such as, to the extent appropriate or
applicable:
(a) Detailed site plans indicating pertinent dimensioned data
for layout of the site facilities.
(b) Equipment locations and details.
(c) Electrical panel location and details.
<PAGE>
(d) Telco demarcation point and details.
(e) Antenna descriptions, locations, and details.
(f) Cable locations and details.
(g) Support pads, platform structures and related details.
(h) Grounding system based on design based on provided
documentation or instruction.
(i) Lightning protection system.
(j) Wave guide and ice bridge details.
(k) Fences and details.
(l) Access road and details.
(m) Lighting systems.
(n) Latitude and longitude coordinates.
(o) Schematic elevation view including the structure height,
antenna height and total height of structure.
(p) Design and details of the equipment layout and support
frame.
(q) Details for other miscellaneous site work including
fencing, gates, utility trenches, drainage, and gravel
surfacing or paving.
(r) Details for erosion control and protection of existing
trees as required
(s) Route of telephone and electrical power services.
(t) FAA lighting/marking.
6.1.8 UbiquiTel or its construction contractor shall obtain and provide
to LCC the design parameters for the tower and tower foundation
from the tower manufacturer.
6.1.9 LCC shall require that Construction Drawings be signed by a civil
Professional Engineer (P.E.), or an Architect registered in the
state where the site is located and that up to 5 originally signed
copies of the Construction Drawings are provided for permit
applications (additional copies shall be a reimbursable expense).
6.1.10 UbiquiTel or its Site Acquisition contractor shall arrange for
reasonable access to each site at reasonable times and under
reasonable conditions as necessary to conduct any on-site
investigations in connection with the services in this section.
<PAGE>
6.1.11 UbiquiTel or its construction contractor shall provide adequate
power, water or other utilities necessary to conduct any on-site
investigations in connection with the services in this section.
6.2 BUILDING PERMIT APPLICATION AND PROCESSING
6.2.1 LCC shall submit building permit applications, together with
Construction Drawings, exhibits, and other information necessary
to obtain building permits (collectively "Building Permit
Documents").
6.2.2 LCC shall supervise the processing of building permit
applications, including coordination of plan submittal, retrieval,
delivery and correction or amendment by the A&E Consultant as
necessary to obtain final permit approval to an issuance-ready
condition.
6.2.3 LCC will assist the construction contractor as reasonably
necessary in the final issuance of the building permit directly to
the construction contractor from the local permitting authority.
6.3 SITE DESIGN MANAGEMENT AND PERMITTING DELIVERABLES
6.3.1 The 2-C Civil survey as defined in SECTION 6.1.2.
6.3.2 Geotechnical reports, drawings, specifications and recommendations
as described in SECTION 6.1.3.
6.3.3 Structural reports, drawings, specifications and recommendations
as described in SECTION 6.1.4.
6.3.4 Electrical and mechanical reports, drawings, specifications and
recommendations as described in SECTION 6.1.5.
6.3.5 A&E Drawings as defined in SECTION 6.1.6.
6.3.6 Building Permit Documents as described in SECTION 6.2.2.
7.0 OTHER SERVICES
LCC may perform such other services in support of the design,
implementation, deployment or operation of wireless telecommunications networks
as mutually agreed upon authorization by Work Authorization.
<PAGE>
EXHIBIT B
PRICE AND PAYMENT
1 PRICE
Prices for work performed for each of the Services as specified in the Scope of
Work shall be in accordance with the terms set forth herein unless otherwise
specified in the Work Authorization. In addition to any pricing provisions
referenced in the Scope of Work, the following shall apply:
(1) FIXED PRICE. All fixed price amounts are on a per site basis
unless otherwise specified and, in addition to the assumptions
included in the individual discipline sections herein, assume the
following:
(a) Services are provided within a period mutually agreed upon
by UbiquiTel and LCC as reflected in the Work
Authorization. Pricing will be subject to change in
accordance with the terms of the Scope of Work and the
Terms and Conditions.
(b) UbiquiTel must complete all of its obligations in a timely
manner including decisions and approvals and other
responsibilities as listed in Attachment 1 to the Scope of
Work.
(c) One or more Services is performed for all of UbiquiTel's
sites in a given market.
(d) Reimbursable expenses and expenses paid directly by
UbiquiTel are not included in the Fixed Price.
(e) The following circumstances exist: (i) up to three (3)
qualified candidates per Search Ring, (ii) no force
majeure or other events set forth in Section 3.1.3 of
Exhibit B, (iii) timely delivery of any of UbiquiTel's or
any of its contractors, representatives or agents,
deliverables (iv) commercially reasonable lease negotiation
periods and (v) no redesign or reperformance of work at
UbiquiTel's request unless due to LCC's failure to perform
its obligations. In the event of any of the foregoing
circumstances and for the performance of all Out-of-Scope
Services, LCC will bill UbiquiTel on a time-and-expenses
("T&E") basis unless otherwise mutually agreed in writing.
<PAGE>
The Fixed Price is for Services performed in the Additional Markets. In
the event LCC performs Services in subsequent markets, pricing may be
adjusted by mutual agreement for those markets on a market by market
basis.
(2) REIMBURSABLE EXPENSES. LCC shall be reimbursed for expenses,
which shall include all reasonable travel expenses to and from
market, copying and office supplies, maps, cell phone charges not
to exceed an amount equal to $250 per person per month, not
including 10% markup, as well as other expenses designated as
reimbursable herein in an amount equal to actual costs plus 10%.
The reimbursable expenses designated herein constitute a
reasonable estimation of the types of expenses that are likely to
be incurred by LCC in performing the Services. UbiquiTel and LCC
shall mutually agree on an approval process for such reimbursable
expenses that takes into consideration the category and amount of
the expense, and items not specifically enumerated herein.
(3) EXPENSES PAID DIRECTLY BY UBIQUITEL. Certain expenses will be
paid directly by UbiquiTel to third parties which LCC may be
required to supervise and manage, or to other entities such as
Governmental Agencies. Those direct paid expenses are listed
herein to provide examples of the types of expenses which shall be
directly paid by UbiquiTel. LCC will advise UbiquiTel in advance
of the need of a direct paid expense to allow UbiquiTel to enter
into a contract with a third party or to make other arrangements
for payment. UbiquiTel will notify LCC of the execution of any
third party contact. UbiquiTel will make payment directly to the
third party. In the event that UbiquiTel requests payment to be
made by LCC, or LCC is required by circumstances to advance
payment on behalf of UbiquiTel for these items during the normal
course of business, reimbursement shall be treated as a
reimbursable expense.
UbiquiTel shall also pay directly any costs associated with the
setup, furnishing, equipping and operation of the project offices,
including rent, utilities, telephone, furnishing, equipment,
required services, and other reasonable expenses customarily
associated with project and market office operation and reasonable
costs and expenses associated with the security and protection for
LCC's personnel and property.
(4) ADDITIONAL OR OUT OF SCOPE SERVICES. Unless otherwise specified
in a work authorization or otherwise mutually agreed, for
additional services or services that are Out-of Scope Services (as
defined in the Scope of Work), LCC will provide the requested
services on a T&E basis at the hourly rates listed in Attachment
1. In addition to the hourly rate or unit price, in
<PAGE>
connection with any additional or Out-of-Scope Services,
reasonable travel costs to include lodging, transportation,
meals, and telecommunications as well as reimbursable expenses
as described above will be reimbursed to LCC at actual cost
plus 10%.
(5) PARTIAL-SERVICE SITES. All Partial-Service Sites shall be billed
on a T&E basis at the rates specified in Attachment 1 unless
otherwise specified in a work authorization or otherwise mutually
agreed.
<PAGE>
1.1 PROGRAM MANAGEMENT SERVICES
UbiquiTel shall pay LCC for the Program Management Services set forth in
the Scope of Work, Section 2.0 as follows:
FIXED PRICE:
$18,750 per month per each Additional Market.
REIMBURSABLE EXPENSES:
All expenses described in Section 1.0 and as otherwise mutually agreed.
Expenses Paid Directly by UbiquiTel:
All expenses described in Section 1.0 and as otherwise mutually agreed.
<PAGE>
1.2 FIXED NETWORK ENGINEERING SERVICES
UbiquiTel shall pay LCC for the Fixed Network Engineering Services
described in the Scope of Work as follows:
FIXED PRICE:
$ 35,000/switch for Mobile Switching Center (MSC) Location Analysis and
Configuration $ 2,125/site plus $ 15,000/market area for Backhaul and
Interconnection Design and Dimensioning
$ 1,500/site for Cellsite Commissioning and Integration
$ 210,000/switch for Switching Network Implementation Management and
Coordination
Work performed as a result of any delays caused by equipment delivery delay or
other delay that affects the schedule shall be paid on a T&M basis.
Microwave implementation and commissioning shall be an Out-of-Scope Service.
REIMBURSABLE EXPENSES:
All expenses described in Section 1.0 and as otherwise mutually agreed.
EXPENSES PAID DIRECTLY BY UBIQUITEL:
All expenses described in Section 1.0 and as otherwise mutually agreed.
<PAGE>
1.3 RF ENGINEERING SERVICES
LCC will be compensated for the RF Engineering Services described in the
Scope of Work as follows:
FIXED PRICE: $ 8,800.00/site
This price per cell site is based upon LCC providing turnkey RF engineering
services for all of the UbiquiTel markets.
The fixed price is based upon services being performed up to the amounts as
identified below. Services in excess of these amounts will be performed as an
Additional Service.
1. Initial Design Coverage Redesigns: 20% of the Sites
2. Zoning assistance: 80% of the Sites (3 hrs/site-2
meetings)
3. Intermod Study: 80% of the Sites
4. Redesign during System 20% of the Sites
Implementation
5. Drive Testing: 60% of the Sites
6. Compliance (NEPA) Study: (3 hours per site)
REIMBURSABLE EXPENSES:
A. Expenses for cranes and other unusual hoisting equipment and
riggers.
B. Hardware and field measurement required for the measurement of
data for the NEPA study of the compliance task. It is assumed
that a very small number of sites will actually need to be
measured and for most cases analysis will be sufficient.
C. License for the planning tool for propagation modeling. LCC will
bill UbiquiTel for the propagation tool license, hardware and any
software necessary to operate the propagation tool on a monthly
basis at a rate of $2251.00 per work station as follows:
<TABLE>
<CAPTION>
<S> <S>
Northern California 1 license, 1 workstation
Spokane, Washington No license or workstation
required
Idaho 3 licenses, 3 workstations
Logan, Utah No license or workstation
required
(Included in Idaho
Market)*
Southern Utah/Nevada No license or workstation
required
(Included in Idaho
Market)*
Indiana/Kentucky 3 licenses, 3 workstations
</TABLE>
* LCC will provide 3 licenses for the Idaho market, 2 for
Idaho and 1 for Utah/Nevada
Plotter and Printer. For those markets in which LCC will provide
UbiquiTel plotters and printers, LCC will charge UbiquiTel on a monthly basis
for the cost of 1 plotter and 1 printer at $860.00 per month per market.
The parties mutually agree to UbiquiTel's purchase of plotters and printers
for certain markets.
EXPENSES PAID DIRECTLY BY UBIQUITEL:
All expenses described in Section 1.0 and as otherwise mutually agreed.
<PAGE>
1.4 SITE ACQUISITION, ZONING AND REGULATORY COMPLIANCE SERVICES
Except as otherwise specified herein, UbiquiTel shall pay LCC for the
Site Acquisition, Zoning and Regulatory Compliance Services described in
the Scope of Work as follows:
FIXED PRICE: $15,783/site
REIMBURSABLE EXPENSES:
A. Zoning ordinances, photo simulations, viewshed analysis, zoning
application fees, and insurance performance bonds.
B. Film and Developing
C. Expenses for cranes or other unusual hoisting equipment and
riggers
EXPENSES PAID DIRECTLY BY UBIQUITEL:
A. Lease payments, option payments, property purchase costs,
deposits, application fees, review charges or other acquisition
expenses required by, or paid to, a third-party in connection with
acquisition of the site.
B. Third party title services including preliminary title reports,
title chains, title policies, and providing of record documents.
C. Filing fees, deposits, inspection fees, and other charges paid
directly to regulatory agencies, utility providers or other
governmental or quasi-governmental entities in connection with
zoning, permitting, inspection, service commitments, utility
services, environmental review, or other processes for which an
agency assesses charges.
D. Except as may be specified in any Work Authorization, all
third-party professional or vendor fees including but not
limited to civil surveyors, geotechnical consultants,
structural consultants, electrical consultants A&E consultants,
electrical consultants, mechanical consultants, airspace
consultants, legal or other specialized services in connection
with preparation and filing of FAA Applications or FCC
notifications, environmental
<PAGE>
consultants, AM Tower Compliance consultants or vendors, NEPA
land use environmental consultants, zoning experts, expert
witnesses, legal counsel, graphic artists, site planners,
litigation support, and similar support functions or
specialists in connection with unusual or atypical zoning or
permit applications.
<PAGE>
1.5 SITE DESIGN MANAGEMENT AND PERMITTING SERVICES
Except as otherwise specified herein, UbiquiTel shall pay LCC for the
Site Design Management and Permitting Services described in the Scope
of Work as follows:
FIXED PRICE: $12,860/site
The entire Fixed-Price fee above, together with any reimbursable expense
amounts, including any portion thereof which may by attributable to the A&E
Drawings, shall be payable for all sites, regardless of whether zoning or
leasing exhibits are required for the site.
REIMBURSABLE EXPENSES:
A. Film and Developing
B. Expenses for crane or other unusual hoisting equipment and riggers
EXPENSES PAID DIRECTLY BY UBIQUITEL:
A. Except as may be specified in any Work Authorization, all
third-party professional or vendor fees including but not
limited to civil surveyors, electrical consultants, mechanical
consultants geotechnical consultants, electrical consultants,
structural consultants, airspace consultants, legal or other
specialized services in connection with preparation and filing
of FAA Applications or FCC notifications, environmental
consultants, AM Tower Compliance consultants or vendors, and
NEPA land use environmental consultants.
<PAGE>
2.0 PAYMENT
All payments will be made in accordance with the terms of the Agreement
unless otherwise provided herein.
2.1 FIXED PRICE SERVICES
All Fixed Price Services shall be billed monthly by LCC to UbiquiTel
for Services performed in the previous month, at the rates set forth in
Attachment 1. The monthly billings shall not exceed the respective total fixed
price amounts set forth herein for each site.
Upon completion of each specific category of Services for all sites in
any given Work Authorization (for example, upon completion of Site Acquisition,
Zoning and Regulatory Compliance Services and notwithstanding those sites for
which Services cannot be completed due to events beyond LCC's reasonable
control), LCC shall invoice UbiquiTel the balance of the Fixed Price amount not
yet paid. Such amounts shall be due and payable in accordance with the terms
set forth above.
In the event the Agreement, or any of the requested Services for a
particular site or market is terminated, UbiquiTel shall pay LCC for the full
amount of the Services performed to the date of termination.
2.2 REIMBURSABLE EXPENSES
LCC shall invoice reimbursable expenses on a monthly basis as incurred.
LCC reserves the right to request an advance payable upon execution of
this agreement for such reimbursable expenses.
2.3 ADDITIONAL OR OUT OF SCOPE SERVICES
LCC shall invoice for these services on a monthly basis.
<PAGE>
EXHIBIT C
ADDITIONAL TERMS AND CONDITIONS
1.0 GENERAL
The terms and conditions set forth in this attachment are in addition to the
terms and conditions of the Agreement and shall apply to the Services provided
to UbiquiTel for the Additional Markets authorized by a Work Authorization.
2.0 PENALTY/BONUS
3.1 PENALTY FOR FAILURE TO MEET DELIVERY MILESTONE DEADLINE DATE
3.1.1 LCC shall perform of all Fixed Network Engineering, RF
Engineering, Site Acquisition, Zoning, Regulatory Compliance, Site
Design Management and Permitting Services under each Work
Authorization on or prior to the date(s) shown as "Delivery
Milestone Deadline Date" in the Work Authorization. Program
Management Services, if any, will be completed in accordance with
the Master Schedule.
3.1.2 Except as otherwise provided herein, in the event LCC fails to
complete the all of the Services requested for a particular market
in the respective Work Authorization on or before the Delivery
Milestone Deadline Date (due wholly to LCC's fault), LCC's
compensation shall be reduced by the amount of Five Thousand
Dollars ($5,000.00) only for each site that was not completed by
the Delivery Milestone Deadline Date.
3.1.3 LCC shall not be penalized or have any liability for a delay in
its performance if such delay is the result of (i) delays beyond
LCC's reasonable control, (ii) UbiquiTel's, or its affiliates,
representatives, agents, or contractor's, failure to deliver any
of the deliverables or complete any of the responsibilities set
forth on Attachment 1 to the Scope of Work in a timely manner,
(iii) the failure on the part of any UbiquiTel employee or
affiliate, representative, agent, or contractor assigned to
support LCC's performance to perform his/her responsibilities in a
professional, competent and timely manner, (iv) a delay caused by
UbiquiTel's request for Out-of-Scope Services that adversely
affects LCC's ability to perform on or before the Delivery
Milestone Deadline Date-, (v) force majeure, which shall include,
without limitation, acts of God (including unforeseen or weather
conditions that prelude or significantly hinder LCC in performing
its services), earthquakes, unavoidable accidents, laws, rules,
regulations or orders of government authorities, government
moratoria, acts of war, hostilities, blockades, civil
disturbances, embargoes, strikes or other similar events or cause
or (vi) if a Search Ring for any site is issued more than thirty
(30) days after commencement of the Services under a Work
Authorization (except if caused by LCC's failure to perform its
obligations).
3.1.4 If a Search Ring is issued as a replacement for a previously
issued, terminated cancelled or failed Search Ring (except if
caused by LCC's failure to perform its obligations) such Search
Ring shall be considered an entirely new Search Ring with a new
mutually agreed Delivery Milestone Deadline Date.
3.1.5 A Delivery Milestone Deadline Date shall be amended and extended
in the event of any of the circumstances described in Section
3.1.3 or if the parties otherwise agree in writing to an amendment
to such dates.
<PAGE>
3.2 BONUS FOR EARLY DELIVERY MILESTONES
3.2.1 Each Work Authorization shall set forth the Early Delivery Date.
In the event LCC completes the Services authorized in the Work
Authorization for 80% of the sites by the Early Delivery Date,
LCC shall be eligible for an Early Delivery Bonus in the amount of
Two Thousand Dollars ($2,000.00) per site. In the event
completion of a Service is delayed beyond the Early Delivery Date
for reasons beyond LCC's control, and provided that LCC has
performed all of its authorized Services in a timely manner in
order to meet the Early Delivery Date, then the Early Delivery
Bonus will still be paid upon completion of the Service.
3.2.2 If a Search Ring is issued as a replacement for a previously
issued, terminated cancelled or failed Search Ring (except if
caused by LCC's failure to perform its obligations) such Search
Ring shall be considered an entirely new Search Ring for the
purposes of the Early Delivery Date.
3.2.3 The Early Delivery Date shall be amended and extended in the event
of any of the circumstances described in Section 3.2.2 or if the
parties otherwise agree in writing to an amendment to such dates.
<PAGE>
EXHIBIT 10.26
Lucent Technologies, Inc.
1701 Golf Rd., Suite 205
Rolling Meadows, Illinois 80008
December 21, 1999
Mr. Dean Russell
Chief Operating Officer
UbiquiTel Holdings, Inc.
3 Bala Plaza, Suite 502
Bala Cynwyd, PA 19004
Dear Mr. Russell:
I AM FORWARDING A REVISED WIRELESS PROFESSIONAL SERVICES QUOTE TO CLARIFY THE
MONTHLY PRICE AND FLEXIBLE START/END DATE FOR EACH PROGRAM MANAGER. CHANGES
MADE TO THE COVER LETTER PRICE AND QUOTE HAVE BEEN UNDERLINED.
The attached proposal encompasses the current Reno/Tahoe buildout and the 5
markets as defined in the attachment entitled "Amended Exhibit 2.1".
As you know, the project time-tables are very aggressive. We should already
be jointly planning the Phase I and Phase II projects. If we let any issue,
no matter how minor it seems today, fall through the cracks the network
launch dates could be jeopardized.
We are proposing two Project Managers for your network buildout. Shari Pace
would be the Lead Project Manager with responsibility for the Western
markets. Shari would also be UbiquiTel's primary project management contact
for all UbiquiTel markets. The 2nd Project Manager (TBD) would be
responsible for the Southern Indian and Kentucky markets. There are two
sample "high level" Gantt chats for your review. The first chart shows a
schedule for the Indiana/Kentucky Phase II buildout (100 base stations, 1
MSC). The second chart is for the Northern California Phase I buildout (30
base stations, 0 MSC). THE START/STOP DATES FOR EACH PROGRAM MANAGER ARE
INDEPENDENT OF ONE ANOTHER AND WILL BE AGREED TO BETWEEN LUCENT AND
UBIQUITEL. THE 24 MONTH DURATION OF THIS PROJECT IS AN ESTIMATE AND WILL BE
PRORATED TO THE EXACT DURATION.
Lucent's Program Management Organization has a long history of successful
wireless network implementations and depth that will undoubtedly play a role
in successful completion of this project. Dick Seim (Director of Program
Management) and I hope to meet with you, at your earliest convenience, to
review our support plan and how the depth of the Program Management
Organization will support the project.
<PAGE>
To accept this quotation, please sign below.
___________________________________
Signature/Date
___________________________________
Title
Sincerely,
J. Ryan Stewart
Attachment
NOTE: Shari Pace will begin January 11, 2000. Length of contract will be
established on buildout.
2
<PAGE>
SERVICES PRICING SUMMARY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NO. OF NO. OF
MONTHS PROGRAM MONTHLY TOTAL
SERVICE DEPLOYED MANAGERS PRICE PRICE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PROGRAM
MANAGEMENT
18 MONTHS 24 2 $17,216 PER $619,776
BILLED, 6 PROGRAM
MONTHS MANAGER
PROVIDED FREE
* TRAVEL &
LIVING
INCLUDED
- -------------------------------------------------------------------------------
</TABLE>
PROGRAM MANAGEMENT PRICING ASSUMPTION:
DUE TO THE EXTREME VARIABILITY IN SCOPE, THIS SERVICE IS PRICED USING THE
TIME AND MATERIAL METHOD. PRIOR TO PROJECT INCEPTION, UBIQUITEL AND LUCENT
TECHNOLOGIES MUST AGREE TO THE EXPECTED DURATION OF THE PROJECT. ANY PARTIAL
MONTHS WOULD BE PRORATED. A PURCHASE ORDER MUST BE SIGNED PRIOR TO START OF
WORK EFFORTS.
<PAGE>
PROGRAM MANAGEMENT
(System Element Filed Installation and Commissioning)
SCOPE OF WORK
Program Management is defined as the coordination, scheduling, tracking and
controlling of a Wireless Project with the presence of a local project
manager in the local market to ensure the task of meeting schedules and
budgets are accomplished. Vendor Wireless Program Managers (WPM's) will be
responsible for tracking cell site development from the RF engineering phase
through site acquisition, construction, BTS installation, integration and
optimization. All vendors and contractors will have been selected and
contracted by UbiquiTel.
The Vendor Wireless Program will be a delegate of the UbiquiTel Regional
Implementation Manager. The Implementation Manager is free to customize the
role of the WPM by assigning whichever responsibilities they choose to
Lucent. The WPM will represent the Implementation Manger's interest in
meetings and correspondence with all key contractors, vendors and other Owner
units. The WPM will provide written and verbal communication to the project
status at whatever responsibilities they choose to Lucent. The WPM will
represent the Implementation Manager's interest in meetings and
correspondence with all key contractors, vendors and other Owner units. The
WPM will provide written and verbal communication to the project status at
whatever intervals requests. The WPM will also provide at least monthly
management review sessions to be conducted in person at the Regional
Headquarters.
PROGRAM MANAGEMENT ROLE
The WPM is expected to ensure discipline across the deployment of the
project. Criteria in this area include:
- - Meeting performance standards
- - Ensuring consistency in application
- - Achieving excellence in execution
- - Working for continuous improvement
ACCOUNTABILITY
The Wireless Program Manager assumes accountability for the entire project.
The areas of accountability are:
- - Defining the project scope
- - Assembling and directing the project team
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- - Engaging all support organizations
- - Identifying resource requirements
- - Serving as the primary customer liaison
- - Reporting project status
- - Managing all changes
- - Acquiring customer's acceptance
PROGRAM MANAGEMENT SERVICE COMPONENTS
- - PROJECT CONTROL
Project Control consists of all the activities required to manage the
program costs and schedule.
(1) CHANGE CONTROL - Provides support that not only includes the
management of changes as per the contact, but also ongoing assessment
and trending of changes.
(2) MANAGEMENT OF SCHEDULES AND REPORTS
- Master Project Schedule
- Schedule for the functional service areas
- Charts that reflect progress against plan
- Weekly status reports, which could include:
RF Plan, Site Acquisition, Spectrum Clearance Plan,
Microwave Facilities-Design Activities, Microwave
Facilities - Detailed Engineer Plan, Site Construction,
Network Design Plan, Cell Engineering Plan, Switch
Engineering Plan, Cell Plan, Optimization Plan
- - CONTRACT ADMINISTRATION
Contract Administration functions interpret and maintain the contract to
ensure that there is total understanding of planned deliverables. This
function ensures that every member of the team understands their
responsibilities and addresses the proper objectives.
- Provide claims management
- Perform project administration
- Provide records management
- Contract administration functions ensure that every member of the team
understands their responsibilities and addresses the proper
objectives.
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- - ACCOUNTING/CONTROLLER MANAGEMENT
This function is utilized in order to analyze all vendor and subcontractor
billing to verify product delivery and performance as per the purchase
agreements.
- - MANAGEMENT OF LUCENT SERVICES
Management of the Lucent Services and equipment deployed to the UbiquiTel
Wireless Network.
- - EXPERIENCE AND EDUCATION
The WPM is a veteran project manager with two years service working on
Wireless projects as well as extensive project management experience in
other areas of the telecommunications industry. The WPM has proven to have
strong leadership, organizational and personal relations skills and has
achieved or is in pursuit of accreditation of a Professional Project
Manager (PMP).
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EXHIBIT 10.27
MASTER SITE AGREEMENT
THIS MASTER SITE AGREEMENT (hereinafter referred to as this "MSA"), is
made as of the 11th day of May, 2000 (the "MSA Commencement Date"), by and
between SPECTRASITE COMMUNICATIONS, INC., a Delaware corporation, and its
subsidiaries, affiliates, successors and permitted assigns (hereinafter
collectively referred to as "SpectraSite") and UBIQUITEL LEASING COMPANY, a
Delaware corporation, and its successors and permitted assigns (hereinafter
referred to as the "User").
WHEREAS, SpectraSite is the owner of communications towers located on
property either owned, leased or licensed by SpectraSite (individually, a
"Tower", collectively, "Towers");
WHEREAS, User is a provider of certain wireless communications
services in the United States as such services are more particularly defined
in Section 3 hereinbelow ("User's Wireless Business");
WHEREAS, SpectraSite and User desire to enter into this MSA which will
establish the general terms and conditions whereby User will license or
sublicense, as appropriate, from SpectraSite space on one or more of the
Towers and ground space on SpectraSite's land [real property owned, leased or
licensed by SpectraSite with respect to each Site (as defined below) hereinafter
the "Property")] for the construction or housing of an equipment shelter or
cabinet(s) for the placement of User's communications equipment for operation
of User's Wireless Business;
NOW, THEREFORE, for valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereby agree as follows:
1. MSA. This MSA sets forth the general terms and conditions upon
which all Sites, as defined below, shall be licensed or sublicensed to User.
From time to time during the term hereof, User and SpectraSite may execute
Site Agreements in the form attached hereto as SCHEDULE "I" and by reference
made a part hereof. Each Site Agreement shall identify a particular Site
made subject to this MSA and more fully set forth specific terms particular
to that Site. In the event of a conflict or inconsistency between the terms
of this MSA and a Site Agreement, the terms of the Site Agreement shall
govern and control for that Site.
2. DEMISE.
(a) By each Site Agreement and subject to the following terms and
conditions, SpectraSite shall license or sublicense, as applicable, to User
certain space on one or more of the Towers ("Tower Space") together with
sufficient space on the Property ("Ground Space") with easements for access and
utilities and if SpectraSite owns an equipment shelter at any site, to the
extent space within the equipment shelter is available, space in the equipment
shelter for the housing of User's transmission equipment.
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(b) User's use of the Tower and Property shall be limited to the
Tower and Property, together with easements for access and utilities
described and depicted in EXHIBITS "A" AND "B" to each Site Agreement (the
Tower Space, the Ground Space and any easements providing access and
utilities to the Property are sometimes referred to herein individually as a
"Site" or collectively as "Sites").
(c) A Site will either be a Site that SpectraSite has agreed to
construct, own and lease a portion to User at a location and on a Site
acquired for User ("Build-to-Suit Site"), or all other Site's currently owned
by SpectraSite or owned by SpectraSite in the future ("Non-Build-to-Suit
Site").
(d) In order to enter into a Site Agreement, the Parties shall perform
the following tasks:
(i) User shall submit a site application to SpectraSite. at the
address provided in Section 29 hereof, of its desire to license or
sublicense, as applicable, any such Site;
(ii) Upon receipt by SpectraSite of the completed Site
Application, SpectraSite shall:
(A) evaluate the feasibility of the occupancy of the
Site specified in the Site Application
(B) transmit all information in SpectraSite's possession
which may assist User in ascertaining whether the Site
meets the conditions specified in Section 5 (b) of this
MSA;
(e) For Non-Build-to-Suit Sites, SpectraSite may deny and return
any Site Application (i) if the Site is structurally inadequate to
accommodate the occupancy specified in the Site Application; (ii) if the
available ground space at the Site cannot accommodate the occupancy specified
in the Site; (iii) if SpectraSite is subject to conflicting contractual
obligations in existence at the time of the Site Application, (iv) if the
occupancy or installation proposed in the Site Application would violate any
law, rule or regulation, applicable to User, SpectraSite or the Site or (v)
if the installation or occupancy proposed by the Site Application would
require SpectraSite to expend more than $ 2,000, without reimbursement
("Cause").
(f) If SpectraSite evaluates a Site Application and finds there is
no Cause SpectraSite shall deliver to User three (3) completed, unexecuted
counterparts of a Site Agreement for the Site User shall have a period of
fifteen (15) business days from User's receipt of such Site Agreement to
execute and return same to SpectraSite;
(g) If, after SpectraSite tenders a Site Agreement to User, in
accord with Section 2(d) of this MSA, and if all conditions specified in
Section 5(b) of this MSA are satisfied, User elects not to occupy the Site or
if User fails to return the Site Agreement, fully executed, within fifteen
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(15) business days after receipt of the Site Agreement, User shall pay to
SpectraSite a cancellation fee of one thousand five hundred dollars
($1,500.00) ("Cancellation Fee") for the Site and neither SpectraSite nor
User shall have any further obligations to the other with respect to the
Site.
3. PERMITTED USE. Subject to the terms of this MSA and the Site
Agreement for each respective Site, User shall be permitted the right to
install, maintain, operate, service. Subject to SpectraSite's prior
written approval, which approval shall not be unreasonably withheld,
conditioned or delayed, User may modify and replace its communications
equipment as more particularly described on the User's Site Application
attached as EXHIBIT "C" to each Site Agreement and at such Site, including
without limitation, the Tower, which "Equipment", as defined in Section 8(c),
shall be utilized for the transmission and reception of wireless voice and
data communications using communications services technology. These shall be
the only permissible uses under this MSA and each Site Agreement.
SpectraSite shall not permit any other tenant or licensee to attach its
equipment within User's Tower Space without first obtaining User's prior
written approval, which approval shall not be unreasonably withheld,
conditioned or delayed.
4. PRIME LEASE/LICENSE. (a) SpectraSite has an agreement with
the owner of each Site ("Prime Landlord") by which it derives its rights to
occupy and to sublicense each Site ("Prime Lease").
(b) SpectraSite represents and warrants that each Prime Lease
currently is in full force and effect;
(c) SpectraSite shall exercise all options for renewal of any and
all renewal terms of each Prime Lease;
(d) SpectraSite shall refrain from any activities, which would
cause a default under any Prime Lease.
(e) Each Site Agreement is subject and subordinate to all of the
terms and conditions of the Prime Lease, which are incorporated in the Site
Agreement by reference and a copy of which will be attached to the Site
Agreement as EXHIBIT "A-1", subject to redaction of the financial terms set
forth therein or as otherwise required by confidentiality and non-disclosure
provisions contained therein.
(f) SpectraSite will notify User within twenty (20) days after
SpectraSite learns of the termination of the Prime Lease.
(g) SpectraSite agrees to cooperate with User to obtain a letter of
assurance or non-disturbance from the Prime Landlord for the Term.
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5. CONDITIONS PRECEDENT.
(a) CONSENT OF PRIME LANDLORD. If SpectraSite is party to a Prime
Lease/License for a Site that requires SpectraSite to give notice or to
obtain consent from the Prime Landlord, SpectraSite shall diligently provide
notice to or obtain the required consent from the Prime Landlord. If
SpectraSite fails to obtain the required consent within thirty (30) days from
submission of the Site Application, User may withdraw the site application
without further obligation. If SpectraSite determines that it will be unable
to obtain consent, then it shall notify User of that the Consent will not be
obtained and return the Site Application to User. With the return of the
Site Application, SpectraSite shall refund to User any application fees or
other amounts tendered to SpectraSite for the Site at which SpectraSite
failed to obtain the Prime Landlord's consent. Upon return of the Site
Application and refund of application fees or other amounts tendered to
SpectraSite for the site at which SpectraSite failed to obtain the Prime
Landlord consent, neither SpectraSite nor User shall have any obligations to
the other except for any indemnity obligations, including without limitation,
environmental indemnity and tax obligations, arising prior to the date of
termination.
(b) CONDITIONS. User's obligations under any Site Agreement are
further contingent upon the satisfaction of the following conditions prior to
the Site Commencement Date, as defined in Section 6(b):
(i) APPROVALS. After receipt of the materials specified in
Section 2(b)(ii) of this MSA, User shall obtain all certificates,
permits, licenses and other approvals that may be required by any
federal, state or local authorities (the "Approvals") to permit User's
intended use of the Site. SpectraSite shall cooperate, at User's cost,
with User in its effort to obtain such Approvals. In the event that User
notifies SpectraSite that (A) any application for an Approval is
rejected, (B) an Approval is canceled, expires, lapses, or is otherwise
withdrawn or terminated for any reason whatsoever prior to installation
of the Equipment by User, or (C) any application for Approval is not
likely to be obtained or approved, as determined in User's sole
discretion, the Approvals shall be deemed to not have been obtained by
User.
(ii) RADIO FREQUENCY PROPAGATION TEST. User determining, in
User's sole discretion, that the results of any radio frequency
propagation tests are satisfactory, such that User is able to use the
Site for User's intended use.
(iii) UTILITIES AND ACCESS. User determining, in User's sole
discretion, that (A) telephone and electric utilities are available at
the Site of sufficient capacity to accommodate User's Equipment and (B)
ingress and egress is available to and from the Site and to and from a
publicly dedicated road.
(iv) TOWER CAPACITY. User determining in User's sole discretion
based on a Tower analysis satisfying the requirements of Section 8(b)
(ii) hereof that the Tower is of sufficient capacity to accommodate the
load requirements of User's Equipment.
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(v) TITLE. User determining in User's sole discretion that the
status of title as to the Property and easements granted herein is
acceptable to User.
(vi) HAZARDOUS SUBSTANCES. User determining in User's sole
discretion that the Site and Property are free of all Hazardous
Substances, as defined in Section 13(b) hereof.
(c) If any one (1) of the conditions set forth above is not satisfied
within thirty (30) days of site application, User may withdraw its application.
If any of the above cannot be satisfied within sixty (60) days, SpectraSite may
return the site application
6. TERM.
(a) MSA TERM. The MSA term shall begin on the MSA Commencement
Date and shall continue until the expiration or earlier termination of the
last Site Agreement governed hereby. (the "Term").
(b) SITE AGREEMENT INITIAL TERM. Provided the applicable
contingencies set forth in Section 5 of this MSA have been satisfied, a Site
Agreement Initial Term shall begin on the earlier of: (i) the Site
Commencement Date; or (ii) thirty (30) days from the Site Agreement Execution
Date; (the "Site Commencement Date"), and shall continue until: a) for
Build-to-Suit Sites, midnight of the tenth (10th) anniversary of the Site
Commencement Date or b) for Non-Build-to-Suit sites, midnight of the fifth
(5th) anniversary of the Site Commencement Date (the "Initial Term"), unless
earlier terminated pursuant to Section 18 of this MSA. During the Initial
Term, any Site may only be terminated by User upon the payment to SpectraSite
of liquidated damages in an amount equal to: a) the rent due SpectraSite for
the remainder of the Initial Term or b) for Build-to-Suit sites, the lesser
of the rent due SpectraSite for the remainder of the Initial Term or
SpectraSite's total construction costs for the Site, payable within thirty
(30) days of such termination. Within five (5) business days of the
Commencement Date, User shall provide SpectraSite written notice of the date
User commenced installation of its Equipment on the Site in the form of
EXHIBIT "D" of the Site Agreement attached hereto and made a part hereof by
reference.
(c) SITE AGREEMENT RENEWAL TERM. Provided the Prime Lease/License
remains in effect and has not expired or been terminated, and User is not in
default, User shall have the option of extending any Site Agreement for three
(3) additional five (5) year terms (the "Renewal Terms"). Such renewal
options shall be deemed automatically exercised without notice by User to
SpectraSite unless User gives SpectraSite written notice of its intention not
to exercise any such option at least ninety (90) days prior to the expiration
of the then current term, in which case, the term of the Site Agreement shall
expire at the end of the then current term. Notwithstanding the expiration of
this MSA, the terms and conditions of this MSA shall continue to apply to
each Site Agreement until the Site Agreement Term, including any renewal
terms expires or terminates.
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7. RENT.
(a) BASE RENT. User shall pay initial monthly rent in the amount
of: a) for Build-to-Suit Sites, the lesser of the sum of the underlying
ground lease monthly rental payments, plus $850 or $1,500, or (b) for
Non-Build-to-Suit sites, the sum of $1,500 (hereinafter referred to as "Base
Rent") for a maximum antenna loading of not more than nine (9) panel
antennas, not to exceed five (5) feet by eight (8) inches by six (6) inches,
nine (9) runs of 1 5/8" coax cables and Ground Space not to exceed twelve
(12) feet by twenty (20) feet. The first annual installment of Base Rent is
due and payable not later than the Site Commencement Date. Commencing on the
fifth (5th) anniversary of the Site Commencement Date for that particular
site, the Base Rent for each Site governed by this MSA shall increase each
year on the anniversary of the Site Commencement Date for that particular
Site Agreement by an amount equal to three percent (3%) over the Base Rent
payable for the immediately preceding year. The Base Rent paid by User to
SpectraSite shall be due without set-off, notice, or demand from SpectraSite
to User. Any Base Rent or other payment made by User shall contain a notation
of the applicable SpectraSite site number applicable to the Site Agreement,
which Site number is referenced in Section numbered 1 of the Site Agreement.
(b) TAXES.
(i) PERSONAL PROPERTY TAXES. User shall be responsible for the
reporting and payment when due of any tax directly related to User's
ownership or operation of the Equipment and such reporting and payment
shall be made directly to the appropriate tax authorities.
(ii) SALES TAXES. SpectraSite shall be responsible for billing,
collecting, reporting, and remitting sales taxes directly related to rent
payments received pursuant to this MSA and any Site Agreement, if any.
User shall be responsible for reimbursing SpectraSite for all sales taxes
billed related to rent payments received pursuant to this MSA and any
Site Agreement, such reimbursement to be due and payable within thirty
(30) days of SpectraSite's delivery to User of a written invoice and
copies of paid tax receipts specifying the payments made by SpectraSite.
(iii) REAL PROPERTY TAXES. Consistent with its obligations under
each Prime Lease, SpectraSite shall pay when due any and all real
property taxes for the Property; however, User shall be responsible for
any increases in the real property taxes for the Property associated with
User's Equipment or use of the Property
8. IMPROVEMENTS BY USER.
(a) APPROVAL OF ENGINEERING AND CONSTRUCTION COMPANIES. User shall
use the company of SpectraSite's choice for structural Analysis, RF Analysis and
the design and construction of platforms, antenna systems, cable runs and any
other modification of any type to the Property and the easement and the
installation of the User's Equipment on the Tower and
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User shall be solely responsible for and shall indemnify SpectraSite from all
costs and expenses associated with these materials and services.
(b) PLANS, STRUCTURAL ANALYSIS AND RF ANALYSIS.
(i) Prior to the commencement of any construction or
installation on the Site by User, User shall furnish, for review and
approval by SpectraSite, which approval may be withheld in SpectraSite's
reasonable discretion, plans and specifications for such construction or
installation of the improvements and User shall not commence the
construction or installation on the Site until such time as User has
received written approval of the plans and specifications from
SpectraSite. Unless approved in writing by SpectraSite, User shall
exercise best efforts to utilize antenna-mounting structures, which
minimizes the overall loading on the tower. Platforms shall be painted
to match the existing structure. Antennae shall be centered on platforms
or frames and pipe mounts shall be cut to length. Future pipe mounts
shall not be left on the structure. User shall be responsible for paying
in advance to SpectraSite the cost of any structural enhancements to be
made to the Tower to accommodate the Equipment. Such structural
enhancements shall become part of the Tower.
(ii) Prior to the commencement of any modification, which would
have the effect of increasing the loading on the tower, User shall
conduct at User's sole cost and expense a structural analysis and wind
load analysis of the Tower which includes any existing loads (as well as
the loads that third-party users have the right to place on the Tower)
and the load of User's antennas, cabling and appurtenances.
(iii) User shall be responsible for securing all building permits
from any and all applicable governmental authorities prior to the
commencement of any construction or installation on the Site. Copies of
the construction permit issued to User shall be provided to SpectraSite.
(iv) SpectraSite shall, at its option, require all construction
or repair activities not performed by SpectraSite, to be supervised by a
SpectraSite representative and User shall reimburse SpectraSite for
SpectraSite's actual, reasonable costs related thereto plus fifteen
percent (15%) within thirty (30) days of SpectraSite's delivery to User
of a written invoice for such costs.
(c) EQUIPMENT. User's communications system, including antennas,
radio equipment and operating frequency, cabling and conduits, shelter and/or
cabinets, and other personal property owned or operated by User, which User
anticipates shall be located by User on the Site, is more particularly
described on User's collocation application, a copy of which is attached
hereto as EXHIBIT "C" ("Equipment"). SpectraSite hereby grants User and its
duly authorized agents, employees, and contractors reasonable access to the
Tower and the Site for the purpose of installing and maintaining the
Equipment and appurtenances. User shall be responsible for all site work to
be done on the Site pursuant to this MSA. User shall provide all materials
and shall pay for all labor for the construction, installation, operation,
maintenance and repair of the
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Equipment. User shall not construct or install any equipment or improvements
on the Site other than which are described in EXHIBIT "C" or alter the radio
frequency or operation of the Equipment without first obtaining the prior
consent of SpectraSite which consent may be withheld by SpectraSite in
SpectraSite's reasonable discretion. SpectraSite may not charge additional
fees unless User exceeds the Ground Space or tower loading granted to User
under Section 7(a) and the equipment listed on EXHIBIT "C". The Equipment
shall remain User's exclusive personal property throughout the term and upon
termination of the Site Agreement. User shall have the right to remove all
Equipment at User's sole expense on or before the expiration or earlier
termination of the Site Agreement; provided User repairs any damage to the
Property or the Tower caused by such removal.
(d) COMPLIANCE WITH GOVERNMENTAL RULES. All work shall be
performed by User or User's employees, contractors or agents in a good and
workmanlike manner. SpectraSite shall be entitled to require strict
compliance with the plans and specifications approved by SpectraSite pursuant
to Sections 8(a) and 8(b), including specifications for the grounding of
the Equipment. All construction, installations and operations in connection
with this MSA by User shall meet with all applicable Rules and Regulations of
the Federal Communications Commission ("FCC"), the Federal Aviation
Administration ("FAA") and all applicable codes and regulations of the city,
county, and state concerned. SpectraSite assumes no responsibility for the
licensing, operation and maintenance of the Equipment. User has the
responsibility of carrying out the terms of User's FCC license with respect
to tower light observation and notification to the FAA if those requirements
imposed on User are in excess of those required of SpectraSite. User
covenants that the Equipment and the construction, installation, maintenance
and operation thereof shall not damage the Tower or improvements or interfere
with the use of the Tower by SpectraSite or pre-existing users on the Tower.
(e) POST-CONSTRUCTION DRAWINGS. Following the installation of its
Equipment, User shall provide SpectraSite with post-construction field
drawings satisfactory to SpectraSite, highlighting any field changes made
during installation and verifying the antenna RAD centers.
9. INGRESS AND EGRESS.
(a) Upon the Execution Date of a Site Agreement, SpectraSite hereby
grants to User, subject to the limitations set forth herein, in the Prime
Lease/License or in the applicable Site Agreement, (i) the non-exclusive
right to use the Tower Space, at locations mutually agreed upon by User and
SpectraSite, for the term hereof for ingress, egress, and access to the Tower
Space adequate to service User's Equipment and (ii) a non-exclusive easement
for the term hereof, for ingress, egress, and access to the Ground Space, on
a twenty-four (24) hours per day, seven (7) days per week basis (subject to
limitations contained in the Prime Lease/License and subject to reasonable
rules and limitations established by SpectraSite), across (A) the Property in
locations mutually agreed upon by SpectraSite and User and (bb) if the
Property is leased or licensed by SpectraSite, across the property of the
Prime Landlord to the extent and in the locations of the Prime Landlord
granted ingress, egress and access easements to SpectraSite in the Prime
Lease/License. User or User's qualified, insured contractors under User's
direct supervision shall have access to the Tower upon twenty-four (24) hours
notice to SpectraSite, which access
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shall be subject to the accompaniment, at SpectraSite's option, of
SpectraSite's field personnel to provide an escort and/or supervision, and
User shall reimburse SpectraSite for SpectraSite's actual, reasonable costs
related thereto within thirty (30) days of SpectraSite's delivery to User of
a written invoice for such costs. The foregoing notwithstanding, User shall
have access to the Site and User's Equipment immediately and without notice
in the event of an emergency, and User shall notify SpectraSite as soon as
practicable of User's access during such emergency. Other security measures
required for a particular Site may be set forth in the Site Agreement.
(b) Prior to the Execution Date of a Site Agreement, User may have
access to a Property and the Tower situated thereon only upon the execution and
delivery by SpectraSite and User of an entry and testing agreement in form and
substance substantially similar to SCHEDULE "II" attached hereto and by
reference made a part hereof (an "Entry and Testing Agreement") which will
establish the terms under which User may access the Property and Tower for the
"Permitted Activities," as defined in the applicable Entry and Testing
Agreement.
10. UTILITIES, CABLE RUNS. Upon execution of a Site Agreement,
SpectraSite hereby grants to User the non-exclusive right to use the Tower
for the term hereof to place any utilities and cable runs on the Tower, at
locations mutually agreed upon in writing by SpectraSite and User, in order
to service or operate the Equipment, subject to SpectraSite's prior written
approval of the design and installation method and procedures, such approval
not to be unreasonably withheld, conditioned or delayed. Upon execution of
the Site Agreement, SpectraSite hereby grants to User a non-exclusive
easement to the Ground Space for the term hereof to place any utilities or
cable runs on or bring utilities across the Property and if the Property is
leased or licensed by SpectraSite, the property of the Prime Landlord to the
extent and in the locations the Prime Landlord granted utility and cable run
easements. User shall pay the cost of all utility service necessary to
install, maintain and operate the Equipment, including, if User occupies
space within a shelter owned by SpectraSite, a proportionate share of the
utilities for the environmental controls for the shelter (based on a
percentage of space used by User in the shelter). User shall install a
separate meter for User's use within the Site, unless User obtains
SpectraSite's prior written approval of an alternate location. If
installation of a meter is not practicable, the parties shall prorate such
charges based on approximate actual use within thirty (30) days of User
having been provided a copy of the invoice and details of the calculations by
which the amount due from User was derived by SpectraSite. User shall obtain
and pay the cost of telephone connections. Installation of telephone service
shall be in compliance with the procedures for installation and maintenance
of Equipment set forth herein.
11. USER'S COVENANTS. User covenants that from the Execution Date
of a Site Agreement, that the Equipment, and all installation, operation,
modification, relocation and maintenance associated therewith, will:
(a) In no way damage the Tower, Property, any other structure or
accessories thereto, any Prior User's, as defined below, facilities or equipment
or any Subsequent User's, as defined below, facilities or equipment, normal wear
and tear excepted. If damage, other than normal wear and tear, occurs and such
damage is caused by User, or User's employees, agents,
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contractors, or subcontractors, then User shall be liable for repair or
reimbursement of repair for said damages;
(b) Not interfere with SpectraSite's operation on the Tower or the
operations of any Prior User (as defined herein). For purposes hereof, a
"Prior User" shall mean any other user of the Tower that has submitted to
SpectraSite a site application in good faith prior to the submission of
User's Site Application for such Tower, which site application serves as the
basis for a written agreement for the use of the Tower by such user. In the
event SpectraSite determines, in its sole discretion based on standard and
accepted engineering practices, that User's Equipment are interfering with
the operation of SpectraSite's or a Prior User's equipment, authorized
frequency spectrum or signal strength, User shall, within forty-eight (48)
hours of notification, take all steps necessary to eliminate the
interference, with the exception of ceasing User's operations. If User
cannot eliminate or resolve such interference within the forty-eight (48)
hour period, SpectraSite shall have the right to require that User turn off
its Equipment and only turn on its Equipment during off-peak hours specified
by SpectraSite in order to test whether such interference continues or it has
been satisfactorily eliminated. In the event that User is unable to resolve
or eliminate, to the satisfaction of SpectraSite, such interference within
thirty (30) days from the initial notification of such interference, User
will immediately remove or cease operations of the objectionable Equipment
and SpectraSite shall have the right to terminate the applicable Site
Agreement. User shall not on any Site interfere with SpectraSite's use of
the Site, the provision of services to SpectraSite's customers, or the use of
the Site by other Prior Users. Such interference shall be deemed a material
breach of the Site Agreement.
(c) Not interfere with the maintenance of the Tower and the Tower
lighting system;
(d) Keep the Equipment in a state of repair acceptable to
SpectraSite in SpectraSite's reasonable discretion;
(e) Identify the Equipment with metal tags fastened securely to its
bracket on the Tower and to each transmission line;
(f) Comply with all applicable rules and regulations of the FCC and
all federal, state and local laws governing use of the Equipment on the Site;
(g) Comply with all applicable laws and ordinances and promptly
discharge or bond off any lien for labor or material for which User
contracted, within thirty (30) days of filing same;
(h) Within thirty (30) days after the expiration or termination of
a Site Agreement, remove all Equipment from the Property and restore the
Tower and the Site to its original condition, normal wear and tear excepted.
If User does not remove the Equipment on or prior to the expiration or
termination of the applicable Site Agreement, User shall remove such
Equipment within a reasonable period thereafter provided User pays to
SpectraSite 125% of the Rent in effect during such holdover period. If User
does not remove its Equipment within thirty (30) days after the expiration or
termination of the Site Agreement, SpectraSite shall have the
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right to remove and store the Equipment, at User's sole expense, and User
shall reimburse SpectraSite for such expenses upon demand. If SpectraSite
removes the Equipment, SpectraSite shall not be responsible for any damage to
the Equipment during the removal and storage thereof unless caused by the
gross negligence of SpectraSite. Notwithstanding the foregoing, except as
may be required under any lease or license agreement pursuant to which
SpectraSite has rights in and to the Property, User shall not be required to
remove any concrete pads upon which User's Equipment shelters or cabinets may
have been located upon the expiration or termination of a Site Agreement;
(i) Upon the completion of the initial installation of the
Equipment on the Site, or within thirty (30) days of the completion of the
relocation of the Equipment or installation of additional equipment on the
Site and, for any year in which User has performed a site audit on the Site
or the Equipment or User's operations at the Site have changed or been
modified, by December 1 of each year throughout the term of the Site
Agreement, provide SpectraSite with the number of batteries, battery model
numbers, battery manufacturers, the number of cells in each battery and the
amount of sulfuric acid in User's batteries on the Site in order for
SpectraSite or if, the property is leased or licensed by SpectraSite, the
Prime Landlord, to file such information with the Environmental Protection
Agency ("EPA") and any state and local authorities as required by applicable
law. Further, within thirty (30) days of User's receipt of a written request
from SpectraSite, User will provide SpectraSite with any other information
and copies of documents relating to the Equipment located on the Site which
SpectraSite or Prime Landlord may be required to file with the FCC, EPA or
any other governmental agencies. User agrees to indemnify and hold
SpectraSite harmless from any liabilities resulting from any inaccuracies in
such information or documentation delivered by User to SpectraSite or User's
failure to provide SpectraSite with such information or documentation in
accordance with the provisions of this Section 11 (i);
(j) Be coordinated through SpectraSite and User shall cooperate with
SpectraSite.
(k) Comply with the rules and regulations of the FCC. SpectraSite
has constructed its Towers in compliance with the rules and regulations of
the FCC. By User's collocation on any SpectraSite Tower, User accepts full
responsibility (including financial responsibility) to take any and all
measures to comply with the FCC mandate as it pertains to modifications of
existing towers. After this mandate has been satisfied, all documentation to
substantiate compliance will be forwarded to SpectraSite for record
maintenance.
(l) In the event that an AM radio station is located on a site and
the site is fitted with a detuning apparatus to protect the AM radio
station's antenna array, User will follow the following procedure:
(i) Prior to the Site Commencement Date, User will transmit a
certified letter to the licensee of record of the collocated AM radio
station at the address listed in the FCC's records, giving notice
("Collocation Notice") of the User's intent to collocate its equipment at
the site. The Collocation Notice will state that SpectraSite has
detuned the structure with the installation of a detuning apparatus and
that Tower will not increase its
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electrical height due to User's collocation. The installation of
User's equipment will cause no further perturbation to the AM radio
station's signal.
(ii) User will furnish a copy of the Collocation Notice to
SpectraSite for its records.
(iii) After the Site Commencement Date at the site at which any
AM radio station is collocated, at its own expense, User will ensure the
proper working condition of the detuning apparatus by retaining the
appropriate SpectraSite detuning consultant to take proximity
measurements at the site and to adjust said apparatus to accommodate
User's equipment.
(m) If, due to User's collocation, it becomes necessary to modify
the actual height of the Tower, it will be the responsibility of User to
retain a detuning consultant and perform a partial proof of performance
report and/or install/modify detuning apparatus to ensure the integrity of a
given AM Signal.
12. SPECTRASITE'S COVENANTS. SpectraSite covenants that during the
term of a Site Agreement it shall:
(a) keep Equipment free from any liens arising from any of
SpectraSite's tax liability, work performed, materials furnished or
obligations incurred by or at SpectraSite's request. All persons either
contracting with SpectraSite or furnishing or rendering labor and materials
to SpectraSite shall be notified in writing by SpectraSite that they must
look only to SpectraSite for payment for any labor or materials. If any lien
is filed against the Equipment as a result of SpectraSite's acts or
omissions, its employees, agents or contractors or subcontractors,
SpectraSite shall discharge it or bond it off within thirty (30) days after
SpectraSite learns that the lien has been filed.
(b) Maintain the Tower and surrounding area in a workmanlike
condition;
(c) Upon User's payment of rent and performance of its covenants,
but subject to the terms of any Prime Lease/License pursuant to which
SpectraSite has rights in and to the Property, and subject to any prior lien
or encumbrance on the Property, ensure User's quiet use and enjoyment of the
Site;
(d) Comply with all applicable rules and regulations of the FCC,
the FAA, and all federal, state and local laws governing the Tower and
Property;
(e) Not permit any Subsequent User (as defined herein) to interfere
with the operation of User's Equipment, authorized frequency spectrum, signal
strength or Equipment. For purposes hereof, a "Subsequent User" shall mean any
other user of the Tower that submits to SpectraSite a site application for the
use of such Tower after the submission of User's Site Application for such Tower
or any existing user which modifies its use materially, including, without
limitation, any change to frequency channel or range, antenna height, output
power
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or effective radiated power or relocation of the transmission equipment at
the site. In the event SpectraSite determines, in its discretion based on
standard and accepted engineering practices, that the Subsequent User is
interfering with the operation of User's Equipment, authorized frequency
spectrum, signal strength or Equipment, SpectraSite shall, within forty-eight
(48) hours of notification, take all steps necessary to eliminate the
interference, with the exception of ceasing the Subsequent User's operations.
If the Subsequent User cannot eliminate or resolve such interference within
the forty-eight (48) hour period, SpectraSite shall take all steps reasonably
necessary to require that the Subsequent User turn off its equipment and only
turn on its equipment during off-peak hours specified by SpectraSite in order
to test whether such interference continues or it has been satisfactorily
eliminated. In the event that the Subsequent User is unable to resolve or
eliminate, to the satisfaction of SpectraSite, such interference within
thirty (30) days from the initial notification of such interference, the
Subsequent User will immediately remove or cease operations of the
objectionable equipment. Notwithstanding the foregoing, if the Subsequent
User is a governmental entity, SpectraSite shall have the right to give the
governmental entity five (5) business days notice prior to SpectraSite being
required to take any actions required by this Section 12 (d) to cure such
interference. SpectraSite shall give such governmental entity written notice
of the interference within two (2) business days of SpectraSite's
determination that such action is reasonably necessary. SpectraSite's notice
to the governmental entity shall be deemed given on the day it is delivered
by hand or on the day it is deposited with an overnight courier or the United
States mail.
13. COMPLIANCE WITH LAWS.
(a) FCC AND FAA COMPLIANCE. SpectraSite acknowledges that it is
aware of its obligations under Section 303 of the Communications Act of 1934
(47 U.S.C. 303), as amended, and the rules promulgated thereunder, to
maintain the painting and illumination of Towers as prescribed by the FCC.
SpectraSite further acknowledges that it is aware that it is subject to
forfeitures assessed by the FCC for violations of such rules and
requirements. SpectraSite further acknowledges that it, and not User, shall
be responsible for compliance with all Tower or building marking and lighting
requirements, which may be required by the FAA or the FCC. SpectraSite shall
indemnify and hold harmless User from any fines or other liabilities caused
by SpectraSite's failure to comply with such requirements. Further, should
User be cited by either the FCC or FAA because a Tower is not in compliance
within the time frame allowed by the citing agency, User may terminate the
Site Agreement for such Tower immediately upon notice to SpectraSite, or, at
User's option, cause the Tower to comply with FAA or FCC requirements and
SpectraSite shall be responsible for reimbursing User for its actual costs
incurred to bring the Tower into compliance with FAA or FCC requirements.
Notwithstanding the foregoing, if FAA or FCC compliance requires the removal
and/or relocation of the Tower, User's sole remedy shall be to terminate the
Site Agreement for such Tower. Upon such termination, the parties to the
Site Agreement shall be released from all duties, obligations, liabilities
and responsibilities under the Site Agreement except for any indemnity
obligations, including without limitation, environmental indemnity and tax
obligations, and User's obligation to remove the Equipment from the Property.
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(b) HAZARDOUS SUBSTANCES. Each Party warrants and represents that
it will not use, store, dispose, or release any Hazardous Substances on the
Property in violation of any applicable federal, state or local law,
regulation, or order. "Hazardous Substances" means any hazardous material or
substance which is or becomes defined as a hazardous substance, pollutant or
contaminant subject to reporting, investigation or remediation pursuant to
any federal, state or local law, regulation or order; and any substance which
is or becomes regulated by any federal, state or local governmental
authority; and any oil, petroleum products and their by-products.
(c) PHASE I - ENVIRONMENTAL SITE ASSESSMENT. After the execution
and delivery by SpectraSite and User of an Entry and Testing Agreement for a
Site User may perform a Phase I - environmental site assessment on the
Property pertaining to such Site provided such Phase I - environmental site
assessment does not involve any subsurface soils testing and further provided
that User provides SpectraSite with a complete written copy of the Phase I -
environmental site assessment within ten (10) days of completion at no
expense to SpectraSite. Only with SpectraSite's prior written consent and
subject to SpectraSite's supervision may User perform a Phase II -
environmental site assessment on the Property.
14. ASSIGNMENT OR SUBLETTING; NO LIENS. (a) This MSA and any Site
Agreement shall be binding upon and inure to the benefit of the legal
representatives, heirs, successors, and assigns of SpectraSite and User.
(b) ASSIGNMENT. (i) Either Party may assign all of its right,
title or interest hereunder to its affiliates or subsidiaries.
(ii) Either Party may assign this Agreement as part of a larger
transaction, which includes the sale, or transfer of substantially all of
its assets.
(iii) Either Party may assign all or a portion of its rights,
title or interests hereunder only upon SpectraSite's prior written
consent, which consent shall not be withheld or delayed if the proposed
assignee agrees in writing to be bound hereby and maintains at the time
of such assignment, as demonstrated by current financial statements
provided to SpectraSite, a financial position reasonably demonstrating
the ability of such assignee to meet and perform the obligations to be
assigned hereunder through the unexpired balance of the current Initial
Term or Renewal Term, as the case may be (or delivers to SpectraSite a
full guaranty of such obligations by a guarantor that so demonstrates
such a financial position).
(iv) Any purported assignment, which violates of the terms of
this MSA or any Site Agreement shall be void.
(v) User may not sublicense all or any part of the Site without
SpectraSite's prior written consent.
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(c) LIENS. User shall keep the Property, the Tower, the Site and
the Equipment free from any liens arising from any work performed, materials
furnished or obligations incurred by or at the request of User. All persons
either contracting with User or furnishing or rendering labor and materials
to User shall be notified in writing by User that they must look only to User
for payment for any labor or materials. If any lien is filed against the
Property, the Tower, the Site or the Equipment as a result of the acts or
omissions of User, its employees, agents or contractors or subcontractors,
User shall discharge it or bond it off within thirty (30) days after User
learns that the lien has been filed.
15. INSURANCE; RISK OF LOSS.
(a) USER'S INSURANCE. Prior to installation of the Equipment and
to having access to a Site and at all times during the term of a Site
Agreement, User shall provide proof of insurance for each individual Site, as
outlined below, satisfactory to SpectraSite, and maintain the coverages
specified below during the term of a Site Agreement and until all Equipment
are removed from the Site following termination of a Site Agreement:
(i) Commercial General Liability Insurance with limits of not
less than $2,000,000 per occurrence and in the aggregate.
(ii) Workers' Compensation coverage in the statutory amount.
(iii) Employers Liability coverage with limits of not less than
$500,000 each accident, $500,000 each employee by disease and $500,000
policy limit by disease.
(iv) Automobile Liability for Owned and Non-Owned Autos,
Combined Single Limit of $1,000,000.
(b) SPECTRASITE'S INSURANCE. Prior to installation of the User's
Equipment and at all times during the term of a Site Agreement, SpectraSite
shall provide proof of insurance for each individual Site, as outlined below,
and maintain the coverages specified below during the term of a Site
Agreement and until all of User's Equipment is removed from the Site
following termination of a Site Agreement:
(i) Commercial General Liability Insurance with limits of not
less than $2,000,000 per occurrence and in the aggregate.
(ii) Workers' Compensation coverage in the statutory amount.
(iii) Employers Liability coverage with limits of not less than
$500,000 each accident, $500,000 each employee by disease and $500,000
policy limit by disease.
(iv) Automobile Liability for Owned and Non-Owned Autos,
Combined Single Limit of $1,000,000.
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(c) ADDITIONAL INSURED. Each Party shall name the other Party as
an additional insured under its liability policy. Additionally, each Party
shall obtain a waiver of subrogation from its insurer on the policies listed
above. No policy may be cancelable or subject to reduction of coverage.
(d) THIRD PARTIES. User and SpectraSite shall require their
respective contractors and subcontractors to carry workers' compensation
insurance and adequate liability insurance in conformity with the minimum
requirements listed above.
(e) RISK OF LOSS; LIMITATION OF LIABILITY. Notwithstanding
anything herein to the contrary, each party shall bear the risk of loss of or
damage to the respective personal property during the term of each Site
Agreement except to the extent caused by the negligence or willful misconduct
of the other party. Neither party shall be liable for any damage to the other
party's personal property except to the extent caused by a party's negligence
or willful misconduct. Notwithstanding anything herein to the contrary, the
parties shall not be liable for any consequential or incidental damages
incurred by the other party due to any malfunction, vandalism, acts of God
(including, without limitation, lightning, wind, rain, hail, fire or storms)
or any other damage resulting from any reason. In the event the Tower or
other portions of the Site are destroyed or so damaged as to be unusable;
SpectraSite shall exercise best efforts to restore the Site in a prompt
matter. In the event SpectraSite is unable to restore the site in a timely
manner (i.e. within 90 days), or User may elect to cancel and terminate the
Site Agreement, or in the alternative may elect to restore the Site, in which
case User and SpectraSite shall remain bound hereby but shall be entitled to
an abatement of rent during the loss of use. In no event shall the leasehold
or other interest created by the Site Agreement be specifically enforceable
and in no event shall SpectraSite be responsible to any party for
consequential damages, lost business opportunities, profits or market share.
(f) REMOVAL OF EQUIPMENT. User's obligation to provide the
insurance coverages set forth in this Section 15 shall survive the expiration
or termination of the Site Agreement until the Equipment is removed from the
Property.
16. INDEMNIFICATION. User and SpectraSite each indemnifies the
other against and holds the other harmless from any and all costs, demands,
damages, suits, expenses, or causes of action (including reasonable attorneys
fees and court costs) which arise out of the use, maintenance and/or
occupancy of the Site by the indemnifying party, including any and all
claims, liabilities, demands, causes of action, losses, damages, orders,
judgments, penalties, clean-up costs, costs and expenses including, without
limitation, attorneys fees and costs arising from the other Party's
misrepresentation, breach of warranty or breach of agreement, contained in
Section 13 (b). This indemnity does not apply to any claims arising from the
gross negligence or intentional misconduct of the indemnified party. Except
for claims arising from its own acts of gross negligence or intentional
misconduct, neither Party will have any liability for personal injury or
death, loss of revenue due to discontinuance of operations at the Site, or
imperfect communications operations experienced by User for any reason. The
obligations of indemnity
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pursuant to Section 13 (b) shall survive the termination or expiration of
this MSA and each Site Agreement for a period of two (2) years.
17. DEFAULT.
(a) USER'S DEFAULT. Each of the following shall be considered a
default of a Site Agreement by the User:
(i) The failure to pay any rent required pursuant to this MSA
and the Site Agreement within twenty (20) business days after receipt of
SpectraSite's written notice of such failure;
(ii) The failure to cure, within (30) days after receipt of
SpectraSite's written notice thereof, any breach of any other term of
this MSA or the Site Agreement, provided, however, that if such breach is
not capable of being cured within such period but User has undertaken
efforts to cure such breach, and such breach is capable of being cured,
such thirty (30) day period shall be extended for so long as User is
diligently attempting in good faith, to cure such breach, not to exceed
an additional thirty (30) calendar days (except for promises relating to
interference as set forth in Section 11 (b) hereof);
(iii) The failure of User to eliminate interference problems as
set forth in Section 11(b); or
(iv) If (a) User gives notice to any governmental body of its
insolvency or pending insolvency or makes an assignment for the benefit
of creditors or takes any other similar action for the protection or
benefit of its creditors, or files an answer admitting the material
allegations of, or consenting to, or defaults in answering any pleading
filed with respect to the commencement of any case or proceeding
respecting User under any bankruptcy or insolvency law, or (b) any order
for relief is entered against User in any case in bankruptcy, any order,
judgment or decree is entered against User by a court of competent
jurisdiction appointing a receiver, trustee, custodian or liquidator of
User or of all or a substantial part of its assets, and such order,
judgment, or decree continues unstayed and in effect for a period of
ninety (90) consecutive days, or any proceeding for the reorganization of
a party under, or for an arrangement under, any bankruptcy or insolvency
law applicable to User is commenced whether by or against User and not
dismissed within ninety (90) days from commencement thereof.
(b) REMEDIES. Upon default of a Site Agreement by User, in
addition to all other remedies provided at law or in equity, SpectraSite may,
at its option:
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(i) elect to terminate the Site Agreement and to remove all of
the Equipment by legal process, thereby terminating the Site Agreement,
and store the Equipment at User's expense, payable upon demand by
SpectraSite
(ii) elect to treat the Site Agreement in full force and effect
and shall be entitled to collect the rent provided for hereunder.
(c) CROSS DEFAULT Notwithstanding anything to the contrary
contained in the foregoing, in the event User is in default in respect of the
payment of Rent on more than ten percent (10%) of the Sites covered by this
MSA at the time of such default, and if such default shall remain uncured
thirty (30) days after written notice of cross default (hereinafter referred
to as "Cross Default Notice"), SpectraSite may, at its option, terminate this
MSA with respect to all of the Sites covered thereby. Any Cross Default
given by SpectraSite shall (i) identify the Sites for which User is in
default with respect to the payment of Rent and (ii) set forth the amount of
Rent past due for each Site so identified.
(d) Upon the termination of a Site Agreement pursuant to this
Section, the parties hereto shall be released from all duties, obligations,
liabilities and responsibilities under the Site Agreement except for
indemnity obligations, including without limitation, environmental indemnity
and tax obligations, any obligations arising prior to the date of
termination, and User's obligation to pay the accelerated rent as described
above and to remove its Equipment from the Property.
18. TERMINATION. In the event SpectraSite's right to occupy the
Property is terminated at any time following execution of a Site Agreement as
a result of the termination or expiration of the Prime Lease/License,
SpectraSite shall have no liability to User as a result of such termination,
the Site Agreement shall automatically terminate upon the effective
termination date of the Prime Lease/License and be of no further force and
effect, and except for any indemnity obligations and User's obligation to
remove the Equipment from the Property, the parties hereto shall be released
from all duties, obligations, liabilities and responsibilities under the Site
Agreement. SpectraSite represents and warrants that with respect to each
Site, SpectraSite shall timely exercise any and all renewal options which
become available during the Term of any Site Agreement or any Renewal Term
thereof.
19. CONDEMNATION AND DESTRUCTION. If the whole or any substantial
part of the Property, except for any shelter owned by SpectraSite, shall be
taken by any public authority under the power of eminent domain, or if the
whole or any substantial part of the Property, except for any shelter owned
by SpectraSite, shall be destroyed by fire or other casualty, so as to
interfere with SpectraSite's use and occupancy thereof, then the applicable
Site Agreement shall cease on the part so taken on the date of possession by
such authority of that part or the destruction of that part, and SpectraSite
shall exercise best efforts to locate, secure and obtain all required
governmental approvals and construct a reasonable replacement site. If the
replacement site is acceptable to User, User shall relocate its equipment to
the replacement site at its sole cost and expense. Prior to SpectraSite
commencing its best efforts described above, User shall determine if it
wishes to continue the Site Agreement at the replacement site, or shall have
the
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right to terminate the applicable Site Agreement upon written notice to
SpectraSite If User chooses not to terminate the applicable Site Agreement,
the Base Rent shall be reduced or abated in proportion to the actual
reduction or abatement of User's use of the Site.
20. EMISSIONS. If antenna power output ("RF Emissions") are
presently or hereafter become subject to any restrictions imposed by the FCC
or other governmental agency for RF Emissions standards on Maximum
Permissible Exposure ("ME") limits, or if the Tower otherwise become subject
to federal, state or local rules, regulations, restrictions or ordinances,
User shall comply with SpectraSite's requests for modifications to User's
Equipment which are necessary for SpectraSite to comply with such limits,
rules, regulations, restrictions or ordinances. The RF Emissions
requirements of User shall be subordinate to any prior users of the Tower.
Similarly, the RF Emissions of users subsequent to User shall become
subordinate to any requirements of User. If SpectraSite requires an
engineering evaluation or other power density study be performed to evaluate
RF Emissions compliance with ME limits, then a propionate share of the
reasonable costs of such an evaluation or study. If said study indicates
that RF Emissions at the facility do not comply with ME limits, then User,
SpectraSite, and subsequent tenants shall immediately take any steps
necessary to ensure that they are individually in compliance with such limits
or shall at the demand of SpectraSite cease operation until a maintenance
program or other mitigating measures can be implemented to comply with ME.
If User's facilities cannot be modified because of FCC licensing concerns,
diminished coverage resulting from the modification or any other adverse
impact on User's operations from the site, User may terminate the Site
Agreement without penalty and receive a refund of any unused rent.
21. RELOCATION OF TOWER. SpectraSite may, at its election,
relocate the Tower to an alternative location or property owned or leased by
SpectraSite. Such location will (i) be at SpectraSite's sole cost, (ii) not
result in an interruption of User's communications services or effect the
services that User provides to its customers and (iii) User shall pay rent in
the same amount as paid for the previous site, or User may terminate the Site
License. Upon such relocation, the Property covered herein shall be the new
Tower and the new ground area on which the new Tower sits. At the request of
either party, User and SpectraSite shall enter into an amendment of the Site
Agreement, to clarify the rights of SpectraSite to the new Tower.
22. LIMITATION OF PARTIES' LIABILITY. Neither User nor SpectraSite
shall assert any claim against the other for loss of anticipatory profits or
any other direct, special, incidental or consequential damages incurred as a
result of User's use of any Site pursuant to this MSA.
23. RULES. SpectraSite may, from time to time, establish
reasonable rules relating to access to and from the Property, which apply
equally to all attachers at a Site. User agrees to comply with such rules.
Such rules shall not materially impede User's access rights or adversely
impact User or its operations.
24. MORTGAGE BY SPECTRASITE. This MSA and each Site Agreement is
and shall be subject to a security interest or mortgage which might now or
hereafter constitute a lien upon the Site. This MSA and each Site Agreement
is and shall be subject and subordinate in all respects
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to any and all such mortgages on the Site and to all renewals, modifications,
consolidations, replacements and extensions thereof. In the event any
proceedings are brought for foreclosure or in the event of the exercise of
the power of sale under any mortgage covering any Site, the User shall attorn
to the purchaser upon any such foreclosure or sale and recognize such
purchaser as the lessor/User, as applicable, under this MSA and the
applicable Site Agreement(s); provided that so long as the User is not in
default hereunder, this MSA and the applicable Site Agreement(s) shall remain
in full force and effect, and User's use and occupancy pursuant to this MSA
and applicable Site Agreements shall not be disturbed.
25. ENTIRETY. This MSA and Site Agreement, including all Schedules
and Exhibits hereto and thereto, constitute the entire agreement between
SpectraSite and User and any modification to the MSA or Site Agreement, any
Schedule or Exhibits hereto or thereto, must, in order to be effective, be in
writing, signed by authorized representatives of each party.
26. WAIVER. Failure or delay on the part of either party to
exercise any right, power, privilege or remedy hereunder shall not operate as
a waiver thereof; nor shall any single or partial exercise of any right under
this MSA of under a Site Agreement preclude any other or further exercise
thereof or the exercise of any other right.
27. BINDING EFFECT. This MSA and the Site Agreements shall extend
to and bind the heirs, personal representatives, successors, permitted
assigns, or its successors in interest of the parties hereto.
28. GOVERNING LAW. This MSA and performance hereunder and
thereunder shall be governed, interpreted, construed and regulated by the
laws of the state of Delaware. Each Site Agreement and performance hereunder
and thereunder shall be governed, interpreted, construed and regulated by the
laws of the state where the Property and Site are located.
29. NOTICE. All notices hereunder shall be deemed validly given if
sent by certified mail, return receipt requested, or with a nationally
recognized courier which provides notice of receipt, postage fully prepaid,
addressed as follows, or to such other addresses as may be given from either
party in writing to the other:
SpectraSite: SpectraSite Communications, Inc.
100 Regency Forest Drive, Suite 400
Cary, NC 27511
Attn: Legal Department
User: Ubiquitel Leasing Company
1 Bala Plaza East
Bala Cynwid, Pennsylvania 19004
Attn: Dean Russell
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30. HEADINGS. Section headings in this MSA and in each Site
Agreement are included for the convenience of reference only and shall not
constitute a part of this MSA or the Site Agreement for any other purpose.
31. BROKERAGE. User warrants and represents to SpectraSite that it
has not dealt with a real estate agent or broker with respect to this MSA or
any Site Agreement, and shall hold SpectraSite harmless against all claims by
any real estate agent or broker claiming a commission hereunder or thereunder
on behalf of User. SpectraSite warrants and represents to User that it has
not dealt with a real estate agent or broker with respect to this MSA or any
Site Agreement, and shall hold User harmless against all claims by any real
estate agent or broker claiming a commission hereunder or thereunder on behalf
of SpectraSite.
32. MEMORANDUM OF LEASE. At the request of User, SpectraSite hereby
agrees to execute a memorandum or short form of lease (a "Memorandum of
Lease"), in form satisfactory for recording, and such Memorandum of Lease may
be filed of record by the User, at User's sole cost, including taxes or
assessments incurred in connection therewith. The parties understand and
agree that this MSA and the Site Agreements shall not be recorded of record.
User agrees to prepare, execute and record, at its expense, a release, within
thirty (30) days of expiration or termination of a Site Agreement. In the
event User fails to do so, SpectraSite has a contractual right as User's agent
for this limited purpose to prepare, execute and record such release and User
shall reimburse SpectraSite, upon demand, for all expenses, including attorney
fees and filing fees, incurred in connection therewith.
33. COUNTERPARTS. This MSA and each Site Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute but one instrument.
34. AUTHORITY. Each party hereby represents and warrants to the
other that all necessary corporate authorizations required for execution and
performance of this MSA and each Site Agreement have been given and that the
undersigned officer is duly authorized to execute this MSA and each Site
Agreement and bind the party for which it signs.
35. SEVERABILITY. If any term, covenant, condition or provision of
this MSA or the Site Agreement or any application hereof or thereof shall, to
any extent, be invalid or unenforceable, the remainder of this MSA and each
Site Agreement shall not be affected thereby, and shall be valid and
enforceable to the fullest extent permitted by law.
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36. DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, SPECTRASITE HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ASSOCIATED WITH THE
PROPERTY OR THE TOWER. USER ACCEPTS THE SITE "AS IS."
IN WITNESS WHEREOF, the parties hereto have set their hands the day and
year first above written.
SPECTRASITE:
SPECTRASITE COMMUNICATIONS, INC., a Delaware
corporation
By:
----------------------------
Printed Name:
----------------------------
Title:
----------------------------
Signature Date:
----------------------------
USER:
UBIQUITEL LEASING COMPANY, a Delaware
corporation
By:
----------------------------
Printed Name:
----------------------------
Title:
----------------------------
Signature Date:
----------------------------
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SCHEDULE "I"
SITE AGREEMENT
THIS SITE AGREEMENT (the "Site Agreement") is made as of the latter
signature date hereof (the "Execution Date"), by and between SPECTRASITE
COMMUNICATIONS, INC., its successors and assigns [as attorney-in-fact for ,
pursuant to Tower Management Agreement dated ] (hereinafter referred to as
"SpectraSite") and [ , a subsidiary or affiliate of] UBIQUITEL LEASING
COMPANY. (hereinafter referred to as "User"). Unless otherwise defined herein,
capitalized terms shall have the meaning set forth in the MSA. The parties
agree that except as otherwise set forth herein, the terms and conditions of
the MSA shall govern the relationship of the parties under this Site Agreement
and the MSA is incorporated herein by reference. In the event of a conflict
or inconsistency between the terms of the MSA and this Site Agreement, the
terms of this Site Agreement shall govern and control.
1. SPECTRASITE SITE NAME/NUMBER:
2. USER SITE NAME/NUMBER:
3. NAME OF USER:
4. NAME OF PRIME LANDLORD:
5. DATE OF PRIME LEASE/LICENSE:
6. SITE ADDRESS:
7. SITE LATITUDE AND LONGITUDE:
8. CENTERLINE ANTENNA HEIGHT: .
9. BASE RENT: subject to three
percent (3%) increases annually, commencing on the fifth (5th)
anniversary of the Site Commencement Date of this Site Agreement.
10. SITE COMMENCEMENT DATE. the earlier of: (i) the date
User commences the installation of its Equipment on the Tower; or
(ii) thirty (30) days from the Execution Date of the Site
Agreement.
11. INITIAL TERM: five (5) or ten (10) years commencing
on the Site Commencement Date.
12. RENEWAL TERM: three (3) five year renewal terms.
13.
14. SQUARE FEET OF GROUND SPACE:
23
<PAGE>
15. SPECTRASITE CONTACT FOR EMERGENCIES: TowerSentry
1-888-498-3667
16. SPECTRASITE ADDRESS FOR PAYMENTS:
SpectraSite Communications, Inc.
PO Box 751760
Charlotte, NC 28275-1760
*USER MUST INCLUDE THE SPECTRASITE SITE NUMBER ON EACH RENT CHECK
17. USER CONTACT FOR EMERGENCIES:
18. SITE SPECIFIC PROVISIONS:
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
signature date set forth below.
SPECTRASITE:
SpectraSite Communications, Inc., a Delaware
corporation
By: EXHIBIT - NOT FOR SIGNATURE
----------------------------
Printed Name:
----------------------------
Title:
----------------------------
Signature Date:
-----------------
USER:
Ubiquitel Leasing Company, a Delaware
corporation
By: EXHIBIT - NOT FOR SIGNATURE
----------------------------
Printed Name:
----------------------------
Title:
----------------------------
Signature Date:
-----------------
25
<PAGE>
EXHIBIT "A"
-----------
Site Description
- ----------------
Site Name: _____________ MSA/RSA/MTA/BTA: ___________
Site Number: _____________ Site Address: ______________
Legal Description of Property:
- -----------------------------
Legal Description of Access Easement:
- ------------------------------------
Legal Description of Utility Easement:
- -------------------------------------
26
<PAGE>
EXHIBIT "A-1"
-------------
PRIME LEASE/LICENSE AGREEMENT
(Subject to redaction)
27
<PAGE>
EXHIBIT "B"
USER'S GROUND SPACE
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT "C"
USER'S TOWER EQUIPMENT AND GROUND EQUIPMENT
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
RETURN THIS APPLICATION TO: (E-MAIL IS PREFERRED) Date Received by SCI:
----------------
SPECTRASITE COMMUNICATIONS, INC. Revision Dates:
100 REGENCY FOREST DRIVE, SUITE E- Error! Bookmark not defined ----------------
400 MAIL
CARY, NC 27511 OFFICE: 919-468-0112 SCI Site Name: ----------------
ATTN: COLLOCATION MANAGEMENT FAX: 919-465-3343 SCI Site Number: ----------------
- ----------------------------------------------------------------------------------------------------------------
APPLICANT INFORMATION
- ----------------------------------------------------------------------------------------------------------------
Applicant Contact Name:
------------------------- ----------------------------------------
Applicant Site Name: Contact Number:
------------------------- ----------------------------------------
Applicant Site Name: Contact Fax:
----------------------------------------------------- ----------------------------------------
Applicant Legal Entity Name: Contact Address:
------------------------- ----------------------------------------
Notice Address for Lease:
------------------------- ----------------------------------------
Contact Email:
- ----------------------------------------------------------------------------------------------------------------
ADDITIONAL CARRIER INFORMATION
- ----------------------------------------------------------------------------------------------------------------
Leasing Contact Name/Number:
------------------------------------------------------------------------------
RF Contact Name/Number:
------------------------------------------------------------------------------
Construction Contact Name/Number:
------------------------------------------------------------------------------
Emergency Contact Name/Number:
------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
SPECTRASITE TOWER INFORMATION
- ----------------------------------------------------------------------------------------------------------------
Latitude: Existing Structure Type:
Longitude: ----------------------------- Existing Structure Height: -------------------------------
-------------------------------------------------------------------------------------------------
Site Address:
- ----------------------------------------------------------------------------------------------------------------
ANTENNAS
- ----------------------------------------------------------------------------------------------------------------
Sector V1 V2 V3
- ----------------------------------------------------------------------------------------------------------------
Desired Rad Center (Feet AGL)
- ----------------------------------------------------------------------------------------------------------------
Antenna Quantity
- ----------------------------------------------------------------------------------------------------------------
Antenna Manufacturer
- ----------------------------------------------------------------------------------------------------------------
Antenna Model (Attach Spec Sheet)
- ----------------------------------------------------------------------------------------------------------------
Weight (per antenna)
- ----------------------------------------------------------------------------------------------------------------
Antenna Dimensions
- ----------------------------------------------------------------------------------------------------------------
ERP (watts)
- ----------------------------------------------------------------------------------------------------------------
Antenna Gain
- ----------------------------------------------------------------------------------------------------------------
Orientation/Azimuth
- ----------------------------------------------------------------------------------------------------------------
Mechanical Tilt
- ----------------------------------------------------------------------------------------------------------------
Channels
- ----------------------------------------------------------------------------------------------------------------
Tower Mount Dimensions
- ----------------------------------------------------------------------------------------------------------------
Tower Mount Weight
- ----------------------------------------------------------------------------------------------------------------
Tower Mount Mounting Height
- ----------------------------------------------------------------------------------------------------------------
Transmit Frequency
- ----------------------------------------------------------------------------------------------------------------
Receive Frequency
- ----------------------------------------------------------------------------------------------------------------
Number of Coax Cables (PER ANTENNA)
- ----------------------------------------------------------------------------------------------------------------
Diameter of Coax Cables
- ----------------------------------------------------------------------------------------------------------------
Type of Service (i.e. CELLULAR, CDMA, GSM, TDMA, PAGING):
- ----------------------------------------------------------------------------------------------------------------
GROUND SPACE REQUIREMENTS
- ----------------------------------------------------------------------------------------------------------------
Total Lease Area Dimensions
- ----------------------------------------------------------------------------------------------------------------
Cabinet Pad Dimensions Cabinet Manufacturer/Model
- ----------------------------------------------------------------------------------------------------------------
Shelter Pad Dimensions Shelter Manufacturer/Model
- ----------------------------------------------------------------------------------------------------------------
POWER REQUIREMENTS
- ----------------------------------------------------------------------------------------------------------------
AC Power Required Voltage and Total Amperage
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
EXHIBIT "D"
Notice of Installation of User's Equipment
[DATE]
SpectraSite Communications, Inc.
100 Regency Forest Drive, Suite 400
Cary, NC 27511
Attn: Collocation Management
RE: SITE AGREEMENT FROM SPECTRASITE TO UBIQUITEL HOLDINGS, INC. AT
[SpectraSite's Tower #]
[SpectraSite's Tower Name]
[SpectraSite's Tower Address]
Dear Collocation Management:
Pursuant to SECTION 6(b) of the Master Site Agreement, this letter
serves to advise you that Ubiquitel Leasing Company. commenced the installation
of its Equipment on the Site on the above-referenced property on
___________________, 19__.
Sincerely,
Ubiquitel Holdings, Inc.
30
<PAGE>
SCHEDULE "II"
ENTRY AND TESTING AGREEMENT
This Entry and Testing Agreement ("Agreement") is made as of the ___day
of _______199_, between SPECTRASITE COMMUNICATIONS, INC., a Delaware corporation
("SpectraSite"), and UBIQUITEL LEASING COMPANY, a Delaware corporation
("Entrant"), concerning the following described property owned or leased by
SpectraSite ("Property"): [insert site address]
- -------------------------------------------------------------------------------
SpectraSite currently owns and operates a communications tower (the
"Tower") on the Property. SpectraSite and Entrant are in the process of
negotiating an agreement whereby Entrant will lease, sublease or license certain
portions of the Property. In order for Entrant to determine the viability and
feasibility of the Property as a tower or antenna site, Entrant desires to enter
upon and inspect the Property to conduct boundary surveys and/or locate
temporarily communications equipment on the Property to conduct short term radio
propagation tests; and
As an accommodation to Entrant, SpectraSite is willing to grant
permission to Entrant, its employees, agents or contractors to enter upon the
Property solely to conduct such investigations, under the terms and conditions
stated herein. In consideration of the mutual covenants and agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows.
1. SpectraSite grants to Entrant, its contractors, agents, employees
and assigns a right of entry and license to enter upon the Property solely to
conduct and perform boundary surveys, Phase I environmental studies, and radio
propagation tests (the "Permitted Activities"). Entrant's entry rights are
specifically limited to the Permitted Activities and to the Property or any
other portion of the property surrounding the Property. Entrant shall be
responsible for any and all costs related to the Permitted Activities, including
any temporary installation, operation and removal of equipment on the Property
and the Tower. Any entry or activity on the Tower by Entrant shall be
coordinated in advance with SpectraSite and shall be subject to SpectraSite's
approval and supervision, at Entrant's cost.
2. Entrant agrees to comply with all local, state and federal laws,
rules and ordinances applicable to the Permitted Activities. Entrant further
agrees to exercise due care in the performance of all Permitted Activities on
the Property, and not to interfere with SpectraSite's or any other party's
activities on the Property. Entrant shall promptly repair, at its cost, any
damage to the Property, the Tower, or any other property caused by the acts or
omissions of Entrant, its agents, employees, contractors or subcontractors.
3. Entrant shall indemnify and hold harmless SpectraSite, its
employees, agents or contractors, from all claims, actions, damages, liability
and expense, including without limitation attorneys' fees and costs, in
connection with personal injury or property damage arising out of
31
<PAGE>
the negligence or willful misconduct of Entrant, its employees, agents or
contractors, including without limitation the Permitted Activities, upon the
Property, the Tower, or any other portion of the property surrounding the
Property. This indemnification shall survive the expiration or termination
of this Agreement.
4. Entrant shall maintain, and shall have its contractors and
subcontractors maintain, adequate insurance coverage, as determined by
SpectraSite. At SpectraSite's request, Entrant agrees to provide certificates
of insurance evidencing such insurance coverage of Entrant, its contractors, or
subcontractors.
5. The term of this Agreement shall be from the Execution Date to the
earlier of (i) three hundred sixty-five (365) days from the Execution Date or
(ii) until SpectraSite and Entrant enter into a Site Agreement with respect to
the Property; provided, however, that SpectraSite may immediately terminate this
Agreement in the event Entrant breaches any term of this Agreement.
6. In the event this Agreement expires or is terminated without the
existence of a fully executed lease, sublease or license, Entrant will
immediately remove any and all of its equipment from the Property and restore
the Property to its condition existing immediately prior to such entry,
reasonable wear and tear and damage not caused by Entrant excepted.
7. This Agreement constitutes the entire understanding between the
parties with respect to the activities contemplated by this Agreement. All
prior agreement or understandings, with respect to the Site, whether oral or
written, are superseded. This Agreement may be amended only by a written
document duly executed by the parties. This Agreement is governed by the laws
of the State wherein the Property is located.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
32
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the date first above written.
SPECTRASITE COMMUNICATIONS, INC.
By:
------------------------------------
Printed Name:
--------------------------
Title:
--------------------------------
ENTRANT:
UBIQUITEL LEASING COMPANY
By:
------------------------------------
Printed Name:
--------------------------
Title:
--------------------------------
33
<PAGE>
EXHIBIT 10.28
NOTE GUARANTEE
Each Guarantor, as defined in the Indenture (the "INDENTURE"),
(referred to in the Note upon which this notation is endorsed), (i) has
jointly and severally unconditionally guaranteed (a) the due and punctual
payment of the principal of, premium and interest and Liquidated Damages, if
any, on the Notes, whether at maturity or an interest payment date, by
acceleration, call for redemption or otherwise, (b) the due and punctual
payment of interest on the overdue principal and premium of, and interest and
Liquidated Damages, if any, on the Notes, and (c) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, the
same shall be promptly paid in full when due in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise and (ii) has agreed to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder
in enforcing any rights under this Note Guarantee.
Notwithstanding the foregoing, in the event that the Note Guarantor
would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of such
Guarantor under its Note Guarantee shall be reduced to the maximum amount
permissible under such fraudulent conveyance or similar law.
No past, present or future director, officer, employee, agent,
incorporator, stockholder or agent of any Guarantor, as such, shall have any
liability for any obligations of the Company or any Guarantor under the
Notes, any Note Guarantee, Indenture, any supplemental Indenture delivered
pursuant to the Indenture by such Guarantor or any Note Guarantees, or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability.
This Note Guarantee shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and Holders and, in the event of any transfer or
assignment of rights by the Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested
in such transferee or assignee, all subject to the terms and conditions
hereof.
This Note Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Note Guarantee is noted have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers. Capitalized terms
used herein have the meaning assigned to them in the Indenture.
UIBIQUITEL INC.
By:
--------------------------------------
Name: Peter Lucas
Title: Interim Chief Financial Officer
<PAGE>
EXHIBIT 10.29
GUARANTY
GUARANTY, dated as of March 31, 2000 (as amended, modified or
supplemented from time to time, this "Guaranty"), made by each of the
undersigned (each, a "Guarantor" and, together with any other entity that
becomes a party hereto pursuant to Section 28 hereof, the "Guarantors"). Except
as otherwise defined herein, terms used herein and defined in the Credit
Agreement (as hereinafter defined) shall be used herein as therein defined.
W I T N E S S E T H:
WHEREAS, UbiquiTel Inc., a Delaware corporation ("Holdings"),
UbiquiTel Operating Company, a Delaware corporation (the "Borrower"), various
financial institutions from time to time party thereto (the "Banks"),
Paribas, as Lead Arranger (the "Lead Arranger") and Paribas, as
Administrative Agent (the "Administrative Agent"), have entered into a Credit
Agreement, dated as of March 31, 2000 (as modified, supplemented or amended
from time to time, the "Credit Agreement"), providing for the making of Loans
to the Borrower and the issuance of, and participation in, Letters of Credit
for the account of the Borrower, all as contemplated therein (the Banks, the
Lead Arranger, the Administrative Agent and the Collateral Agent being herein
called the "Bank Creditors");
WHEREAS, the Borrower may from time to time enter into, or guaranty,
one or more (i) interest rate protection agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar
agreements), (ii) foreign exchange contracts, currency swap agreements or
other similar agreements or arrangements designed to protect against the
fluctuations in currency values and/or (iii) other types of hedging
agreements from time to time (collectively, the "Interest Rate Protection or
Other Hedging Agreements"), with Paribas in its individual capacity, any Bank
or a syndicate of financial institutions organized by Paribas or any Bank,
any such financial institution or any affiliate of any such person, even if
any such person subsequently ceases to be a Bank under the Credit Agreement
for any reason, together with such Bank's or affiliate's successors and
assigns (collectively, the "Other Creditors" and, together with the Bank
Creditors, are herein called the "Creditors");
WHEREAS, the Guarantors shall include Holdings and all direct or
indirect Subsidiaries of Holdings (other than the Borrower);
WHEREAS, it is a condition to the making of Loans and the issuance of,
and participation in, Letters of Credit under the Credit Agreement and to the
entering into the Interest Rate Protection or Other Hedging Agreements that
each Guarantor shall have executed and delivered this Guaranty; and
<PAGE>
WHEREAS, each Guarantor will obtain benefits from the incurrence of
Loans by the Borrower and the issuance of, and participation in, Letters of
Credit for the account of the Borrower under the Credit Agreement and the
entering into of the Interest Rate Protection or Other Hedging Agreements
and, accordingly, desires to execute this Guaranty in order to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Creditors and hereby covenants and agrees with each
Creditor as follows:
1. Each Guarantor irrevocably and unconditionally, and jointly and
severally, guarantees: (i) the full and prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of (x) the principal of
and interest on the Notes issued by, and Loans made to, the Borrower under
the Credit Agreement and all reimbursement obligations and Unpaid Drawings
with respect to Letters of Credit issued under the Credit Agreement, and (y)
all other obligations (including obligations which, but for the automatic
stay under Section 362(a) of the Bankruptcy Code, would become due),
indebtedness and liabilities (including, without limitation, indemnities,
fees and interest thereon) of the Borrower owing to the Bank Creditors now
existing or hereafter incurred under, arising out of or in connection with
the Credit Agreement and the other Credit Documents and the due performance
and compliance by the Borrower with the terms, conditions and agreements
contained in the Credit Documents (all such principal, interest, obligations
and liabilities under this clause (i), except to the extent consisting of
obligations or liabilities with respect to Interest Rate Protection Agreement
or Other Hedging Agreements, being herein collectively referred to as the
"Credit Document Obligations") and (ii) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due), indebtedness and
liabilities (including, without limitation, indemnities, fees and interest
thereon) owing by the Borrower to the Other Creditors under any Interest Rate
Protection or Other Hedging Agreement, whether such Interest Rate Protection
or other Hedging Agreement is now in existence or hereafter arising, and the
due performance and compliance by the Borrower with the terms, conditions and
agreements contained therein (all such obligations and indebtedness being
herein collectively called the "Other Obligations"; and together with the
Credit Document Obligations are herein collectively called the "Guaranteed
Obligations"). Subject to Section 22 of this Agreement, each Guarantor
understands, agrees and confirms that the Creditors may enforce this Guaranty
up to the full amount of the Guaranteed Obligations against such Guarantor
without proceeding against the Borrower, against any security for the
Guaranteed Obligations, against any other Guarantor, or against any other
guarantor under any other guaranty covering the Guaranteed Obligations. This
Guaranty shall constitute a guaranty of payment and not of collection. All
payments by each Guarantor under this Guaranty shall be made on the same
basis as payments by the Borrower under Sections 4.03 and 4.04 of the Credit
Agreement.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations of the Borrower to
2
<PAGE>
the Creditors whether or not due or payable by the Borrower upon the
occurrence in respect of the Borrower of any of the events specified in
Section 10.05 of the Credit Agreement, and unconditionally and irrevocably,
jointly and severally, promises to pay such Guaranteed Obligations to the
Creditors, or order, on demand, in lawful money of the United States.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of such Guarantor
hereunder shall not be affected or impaired by: (i) any direction as to
application of payment by the Borrower; (ii) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the indebtedness of the Borrower; (iii) any payment on or in
reduction of any such other guaranty or undertaking; (iv) any dissolution,
termination or increase, decrease or change in personnel by the Borrower; or
(v) payment made to any Creditor on the indebtedness which any Creditor
repays the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding,
and each Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
4. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or the Borrower,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower, and whether or not any other Guarantor, any
other guarantor or the Borrower he joined in any such action or actions. Each
Guarantor waives, to the fullest extent permitted by law, the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
thereof. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to each Guarantor.
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other
action taken by the Administrative Agent or any other Creditor against, and
any other notice to, any party liable thereon (including such Guarantor or
any other Guarantor or guarantor).
6. Any Creditor may at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
any Guarantor, without impairing or releasing the obligations of any
Guarantor hereunder, upon or without any terms or conditions and in whole or
in part (and each Guarantor hereby irrevocably waives any defenses it may now
or hereafter have in any way relating to any and all of the following):
(i) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations, any security therefor, or any
liability incurred directly or indirectly in respect thereof, and the
guaranty herein made shall apply to the Guaranteed Obligations as so changed,
extended, renewed or altered;
3
<PAGE>
(ii) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by whomsoever
at any time pledged or mortgaged to secure, or howsoever securing, the
Guaranteed Obligations or any liabilities (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and/or any
offset there against;
(iii) exercise or refrain from exercising any rights against
the Borrower, any Guarantor or others or otherwise act or refrain from acting,
(iv) settle or compromise any of the Guaranteed Obligations,
any security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the Borrower;
(v) apply any sums by whomsoever paid or howsoever realized
to any liability or liabilities of the Borrower to the Creditors regardless
of what liabilities of the Borrower remain unpaid;
(vi) consent to or waive any breach of, or any act, omission
or default under, any of the Interest Rate Protection or Other Hedging
Agreements or any of the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or supplement any
of the Interest Rate Protection or Other Hedging Agreements or any of the
Credit Documents or any of such other instruments or agreements; and/or
(vii) act or fail to act in any manner referred to in this
Guaranty which may deprive any Guarantor of its right to subrogation against
the Borrower to recover full indemnity for any payments made pursuant to this
Guaranty.
7. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or
equitable discharge of a surety or guarantor except payment in full of the
Guaranteed Obligations.
8. This Guaranty is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed
to have been created in reliance hereon. No failure or delay on the part of
any Creditor in exercising any right, power or privilege hereunder and no
course of dealing between any Guarantor and any Creditor shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein expressly specified are cumulative and not exclusive of any rights or
remedies which any Creditor would otherwise have. No notice to or demand on
any Guarantor in any case shall entitle such Guarantor to any other further
notice or demand in similar or other circumstances or constitute a waiver of
the rights of any Creditor to any other or
4
<PAGE>
further action in any circumstances without notice or demand. It is not
necessary for any Creditor to inquire into the capacity or powers of the
Borrower or any of its Subsidiaries or the officers, directors, partners or
agents acting or purporting to act on its behalf and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
9. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors, and such indebtedness of the Borrower to any Guarantor, if the
Administrative Agent, after an Event of Default has occurred, so requests,
shall be collected, enforced and received by such Guarantor as trustee for
the Creditors and be paid over to the Creditors on account of the
indebtedness of the Borrower to the Creditors, but without affecting or
impairing in any manner the liability of such Guarantor under the other
provisions of this Guaranty. Prior to the transfer by any Guarantor of any
note or negotiable instrument evidencing any indebtedness of the Borrower to
such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination. Without
limiting the generality of the foregoing, each Guarantor hereby agrees with
the Creditors that it will not exercise any right of subrogation which it may
at any time otherwise have as a result of this Guaranty (whether contractual,
under Section 509 of the Bankruptcy Code, or otherwise) until all Guaranteed
Obligations have been irrevocably paid in fill in cash.
10. (a) Each Guarantor waives any right (except as shall be
required by applicable statute and cannot be waived) to require the Creditors
to (i) proceed against the Borrower, any other Guarantor, any other guarantor
or any other party, (ii) proceed against or exhaust any security held from
the Borrower, any other Guarantor, any other guarantor or any other party or
(iii) pursue any other remedy in the Creditors' power whatsoever. Each
Guarantor waives any defense based on or arising out of any defense of the
Borrower, any other Guarantor, any other guarantor or any other party other
than payment in full of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of the
Borrower, any other Guarantor, any other guarantor or any other party, or the
unenforceability of the Guaranteed Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of the Borrower other
that payment in full of the Guaranteed Obligations. The Creditors may, at
their election, foreclose on any security held by the Administrative Agent,
the Collateral Agent or the other Creditors by one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Creditors may have against
the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of any Guarantor hereunder except to the
extent the Guaranteed Obligations have been paid in full. Each Guarantor
waives any defense arising out of any such election by the Creditors, even
though such election operates to impair any fight of reimbursement or
subrogation or other right or remedy of such Guarantor against the Borrower
or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. Each Guarantor assumes all
responsibility for
5
<PAGE>
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks
which such Guarantor assumes and incurs hereunder, and agrees that the
Creditors shall have no duty to advise any Guarantor of information known to
them regarding such circumstances or risks.
11. In order to induce the Banks to make Loans to the Borrower, and
to issue, and participate in, Letters of Credit for the account of the
Borrower pursuant to the Credit Agreement and in order to induce the Other
Creditors to execute. deliver and perform the Interest Rate Protection and
Other Hedging Agreements, each Guarantor hereby represents, warrants and
covenants that:
(i) Such Guarantor and each of its Subsidiaries (x) is a
duly organized and validly existing corporation in good standing under the
laws of the jurisdiction of its incorporation, (y) has the corporate 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 (z) 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 qualification except for failures to be
so qualified which, in the aggregate, would not have a material adverse
effect on the performance, business, assets, nature of assets, liabilities
(contingent or otherwise), operations, properties, condition (financial or
otherwise), solvency or prospects of such Guarantor or of such Guarantor and
its Subsidiaries taken as a whole.
(ii) Such Guarantor has the corporate power and authority to
execute, deliver and perform the terms and provisions of this Guaranty and
each other Credit Document to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance by it
of each such Credit Document. Such Guarantor has duly executed and delivered
this Guaranty and each other Credit Document to which it is a party, and each
such Credit Document 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).
(iii) Neither the execution, delivery or performance by such
Guarantor of this Guaranty or any other Credit Document to which it is a
party, nor compliance by it with the terms and provisions hereof or thereof,
(x) will contravene any provision of any law, statute, rule or regulation or
any order, writ, injunction or decree of any court or govern-mental
instrumentality, (y) 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 such Guarantor or any of its Subsidiaries pursuant to
the terms of any indenture, mortgage, deed of trust, credit agreement or loan
agreement, or any other agreement, contract or instrument to which such
Guarantor or any of 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 (z) will
6
<PAGE>
violate any provision of the Certificate of incorporation or By-Laws (or
similar organizational documents) of such Guarantor or any of its
Subsidiaries.
(iv) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as have been
obtained or made 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, (x) the execution, delivery and performance of this Guaranty
or any other Credit Document to which such Guarantor is a party or (y) the
legality, validity, binding effect or enforceability of this Guaranty or any
other Credit Document to which such Guarantor is a party.
(v) There are no actions, suits or proceedings pending or
threatened (x) with respect to this Guaranty, (y) with respect to any
Indebtedness of the Guarantor or any of its Subsidiaries or (z) that are
reasonably likely to materially and adversely affect the performance,
business, assets, nature of assets, liabilities (contingent or otherwise),
operations, properties, condition (financial or otherwise), solvency or
prospects of such Guarantor and its Subsidiaries taken as a whole.
(vi) On the date hereof and after giving effect to the
incurrence by each Guarantor of the Contingent Obligations evidenced by this
Guaranty, (x) the assets of such Guarantor, at a fair valuation, will exceed
its debts, (y) such Guarantor will have sufficient capital to conduct its
business and (z) such Guarantor will not have incurred debts, and does not
intend to incur debts, beyond its ability to pay such debts as they mature.
For purposes of this clause (vi), "debt" means any liability on a claim, and
"claim" means (x) right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured or (y) 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, disputed, undisputed,
secured, or unsecured,
12. Each Guarantor covenants and agrees that on and after the date
hereof and until the Total Commitment, all Interest Rate Protection or Other
Hedging Agreements and all Letters of Credit have terminated and all
Guaranteed Obligations have been paid in full, such Guarantor shall take, or
will refrain from taking, as the case may be, all actions that are necessary
to be taken or not taken so that no violation of any provision, covenant or
agreement contained in Section 8 or 9 of the Credit Agreement, and so that no
Default or Event of Default, is caused by the actions of such Guarantor or
any of its Subsidiaries.
13. Each Guarantor hereby jointly and severally agrees to pay all
reasonable out-of-pocket costs and expenses of each Creditor in connection
with the enforcement of this Guaranty and the protection of such Creditor's
rights hereunder, and in connection with any amendment, waiver or consent
relating hereto (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) employed by any of the
Creditors).
7
<PAGE>
14. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and
their successors and assigns.
15. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated in any manner whatsoever unless in writing
duly signed by the Administrative Agent (with the consent of (x) the Required
Banks (or to the extent required by Section 13.12 of the Credit Agreement,
each of the Banks) at all times prior to the time at which all Credit
Document Obligations have been paid in full or (y) the holders of at least a
majority of the outstanding Other Obligations at all times after the time at
which all Credit Document Obligations have been paid in full) and each
Guarantor directly affected thereby (it being understood that the release or
addition of any Guarantor hereunder shall not constitute a change or waiver
affecting any Guarantor other than the Guarantor SO released or added);
provided, however, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class (as defined below) of
Creditors (and not all Creditors in a like or similar manner) shall require
the written consent of the Requisite Creditors (as defined below) of such
Class of Creditors. For the purpose of this Guaranty, the term "Class" shall
mean each class of Creditors, i.e., whether (x) the Bank Creditors as holders
of the Credit Document Obligations or (y) the Other Creditors as holders of
the Other Obligations. For the purpose of this Guaranty, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to the Credit
Document Obligations, the Required Banks and (y) with respect to the Other
Obligations, the holders of at least a majority of all obligations
outstanding from time to time under the Interest Rate Protection or Other
Hedging Agreements.
16. Each Guarantor acknowledges that an executed (or conformed)
copy of the Credit Agreement has been made available to its principal
executive officers and such officers are familiar with its contents.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights,
upon the occurrence and during the continuance of an Event of Default (such
term to mean and include any "Event of Default" under, and as defined in, the
Credit Agreement or any payment default (after giving effect to any grace
period applicable thereto) under any Interest Rate Protection or Other
Hedging Agreement and shall in any event, include without limitation any
payment default on any of the Guaranteed Obligations after giving effect to
any grace period applicable thereto), each Creditor is hereby authorized at
any time or from time to time, without presentment, demand, protest or other
notice of any kind to any Guarantor 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 time
held or owing by such Creditor (including, without limitation, by branches
and agencies of such Creditor wherever located) to or for the credit or the
account of such Guarantor, against and on account of the obligations and
liabilities of such Guarantor to such Creditor under this Guaranty,
irrespective of whether or not such Creditor shall have made any demand
hereunder and although said obligations, liabilities, deposits or claims, or
any of them, shall be contingent or unmatured.
8
<PAGE>
18. Au notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to
such party at (i) in the case of any Bank Creditor, as provided in the Credit
Agreement, (ii) in the case of any Guarantor, at its address set forth
opposite its signature below, and (iii) in the case of any Other Creditor, as
provided in the Security Agreement. or in any case at such other address as
any of' the Persons listed above may hereafter notify the others in writing.
19. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part
of said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its
property or (b) any settlement or compromise of any such claim effected by
such payee with any such claimant (including the Borrower), then and in such
event each Guarantor agrees that any such judgment, decree, order, settlement
or compromise shall be binding upon it, notwithstanding any revocation hereof
or the cancellation of any Note or any Interest Rate Protection or Ocher
Hedging Agreement or other instrument evidencing any liability of the
Borrower, and such Guarantor shall be and remain liable to the aforesaid
payees hereunder for the amount so repaid or recovered to the same extent as
if such amount had never originally been received by any such payee.
20. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by the Borrower or other
Persons liable in respect of the Guaranteed Obligations (including any
Guarantor), with respect to any of the Guaranteed Obligations shall, if the
statute of limitations in favor of any Guarantor against any Creditor shall
have commenced to run, toll the running of such statute of limitations, and
if the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
21. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY OR ANY OTHER CREDIT DOCUMENT TO WHICH SUCH GUARANTOR IS A PARTY MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY
OF THIS GUARANTY, EACH GUARANTOR. HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND
TN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO SUCH ACTIONS OR
PROCEEDTNGS. EACH GUARANTOR HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH COURTS LACK JURISDICTION OVER SUCH GUARANTOR, AND AGREES NOT TO
PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY OR ANY OTHER CREDIT DOCUMENT TO WHICH SUCH GUARANTOR IS A PARTY
BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURT
9
<PAGE>
LACKS JURISDICTION OVER SUCH GUARANTOR. EACH GUARANTOR FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING AND FURTHER HEREBY IRREVOCABLY DESIGNATES,
APPOINTS AND EMPOWERS CT CORPORATION SYSTEM WITH ITS OFFICES ON THE DATE
HEREOF AT II 1 EIGHTH AVENUE, 13Th FLOOR, NEW YORK, NEW YORK 10011, AS ITS
DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON
ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH
ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT
SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH GUARANTOR AGREES TO
DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT ON THE TERMS AND FOR THE
PURPOSES OF THIS PROVISION SATISFACTORY TO THE AGENT FOR THE BANKS UNDER THIS
GUARANTY. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH
SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD O
CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER
CREDIT DOCUMENT TO WHICH SUCH GUARANTOR IS A PARTY THAT SERVICE OF PROCESS
WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF ANY OF THE CREDITORS TO SERVE PROCESS IN ANY O'I'HER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY
GUARANTOR [N ANY OTHER JIJRISDICTION.
(B) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES 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 GUARANTY 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 SUCH ACTION OR PROCEEDING BROUGHT
[N ANY SUCH COURT HAS BEEN BROUGHT [N AN INCONVENIENT FORTJM.
22. (a) Each Guarantor, in addition to the subrogation rights it
shall have against the Borrower under applicable law as a result of any
payment it makes hereunder, shall also have a right of contribution against
all other Guarantors in respect of any such payment pro rata among same based
on their respective net fair value as enterprises, provided any such right of
contribution shall be subject and subordinate to the prior payment in full of
the Guaranteed Obligations (and such Guarantor's obligations in respect
thereof). It is the desire and intent of each Guarantor and the Creditors
that this Guaranty shall be enforced against each Guarantor to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought.
(b) If, however, and to the extent, that the obligations of any
Guarantor under this Guaranty would, in the absence of this sentence, be
adjudicated to be invalid or
10
<PAGE>
unenforceable fir any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or
transfers), then the amount of the Guaranteed Obligations of such Guarantor
(but not the Guaranteed Obligations of any other Guarantor unless such other
Guarantor or Guarantors are individually subject to the circumstances covered
by this Section 22) shall be deemed to be reduced AB INITIO to that maximum
amount which would be permissible under applicable law without causing such
Guarantor's obligations hereunder to be so invalidated.
23. The Creditors agree that this Guaranty may he enforced only by
the action of the Administrative Agent or the Collateral Agent, in each case
acting upon the instructions of the Required Banks and that no Creditor shall
have any right individually to seek to enforce or to enforce this Guaranty or
to realize upon the security to be granted by the Security Documents, it
being understood and agreed that such rights and remedies may be exercised by
the Administrative Agent or the Collateral Agent for the benefit of the
Creditors upon the terms of this Guaranty and the Security Documents. The
Creditors further agree that this Guaranty may not be enforced against any
director, officer or employee of any Guarantor.
24. This Guaranty 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 alt the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
25. In the event that all of the capital stock of one or more
Guarantors is sold in connection with a sale permitted by Section 9.02 of the
Credit Agreement and the proceeds of such sale or sales are applied in
accordance with the provisions of Section 4.02 of the Credit Agreement, to
the extent applicable, each Guarantor (x) all of the capital stock of which
is so sold or (y) which is a Subsidiary of a Guarantor all of the capital
stock of which is so sold, shall be released from this Guaranty and this
Guaranty shall, as to each Guarantor or Guarantors, terminate, and have no
further force or effect.
26. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
27. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense.
28. It is understood and agreed that any Subsidiary of 'Holdings
that is required to execute a counterpart of this Guaranty after the date
hereof pursuant to the Credit Agreement shall automatically become a
Guarantor hereunder by executing a counterpart hereof and delivering the same
to the Administrative Agent.
11
<PAGE>
29. (a) Each Guarantor's obligations hereunder and under the
other Credit Documents to make payments in Dollars shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than Dollars, except to the extent that
such tender or recovery results in the effective receipt by the
Administrative Agent, the Collateral Agent or the respective Bank of the full
amount of Dollars expressed to be payable to the Administrative Agent, the
Collateral Agent or such Bank under this Agreement or the other Credit
Documents. If for the purpose of obtaining or enforcing judgment against any
Guarantor in any court or in any jurisdiction, it becomes necessary to
convert into or from any currency other than Dollars (such other currency
being hereinafter referred to as the "Judgment Currency") an amount due in
Dollars, the conversion shall be made at the dollar equivalent thereof (as
quoted by the Administrative Agent or if the Administrative Agent does not
quote a rate of exchange on such currency, by a known dealer in such currency
designated by the Administrative Agent) determined, in each case, as of the
day immediately preceding the day on which the judgement is given (such
Business Day being hereinafter referred to as the "Judgement Currency
Conversion Date").
(b) If there is a change in the rate of exchange prevailing
between the Judgement Currency Conversion Date and the date of actual payment
of the amount due, each Guarantor covenants and agrees to pay, or cause to be
paid, such additional amounts, fi any 9but in any event not a lesser amount)
as may be necessary to ensure that the amount paid in the Judgement Currency,
when converted at the rate of exchange prevailing on the date of payment,
will produce the amount of Dollars which could have been purchased with the
amount of Judgement Currency stipulated in the judgment or judicial award at
the rate of exchange prevailing on the Judgement Currency Conversion Date.
(c) For purposes of determining the dollar equivalent or any
other rate of exchange for this Section, such amounts shall include any
premium and costs payable in connection with the purchase of Dollars.
12
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
Address: UBIQUITEL INC.,
1 Bala Plaza, Suite 402 as a Guarantor
Bala Cynwyd, PA 19004
Attention: Donald A. Harris
Telephone No.: (610) 660-9512 By: /s/ Donald A. Harris
Facsimile No.: (610) 660-9558 ------------------------------
Title: Chief Executive Officer
Accepted and Agreed to:
PARIBAS,
as Collateral Agent, as Pledgee
UBIQUITEL TNC.,
as a Guarantor
By: /s/ Salo Aizenberg
------------------------------------
Title: Vice President
By: /s/ William B. Schink
------------------------------------
Title: Director
13
<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
Amendment No. 3 to the registration statement on Form S-1 (No. 333-32236) of
UbiquiTel Inc.
ARTHUR ANDERSEN LLP
New York, New York
May 15, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "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 Amendment No. 3 to the Registration Statement (Form S-1
No. 333-32236) and related Prospectus of UbiquiTel Inc. related to the issuance
of common stock.
Ernst & Young LLP
Kansas City, Missouri
May 12, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 33,729,232
<SECURITIES> 0
<RECEIVABLES> 12,181
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,795,905
<PP&E> 1,765,949
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,362,858
<CURRENT-LIABILITIES> 6,305,654
<BONDS> 5,811,869
0
19,119
<COMMON> 19,417
<OTHER-SE> 37,448,645
<TOTAL-LIABILITY-AND-EQUITY> 52,362,858
<SALES> 0
<TOTAL-REVENUES> 68,519
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 31,428,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (35,101)
<INCOME-PRETAX> (31,428,963)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,325,343)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,722,879)
<CHANGES> 0
<NET-INCOME> (33,048,222)
<EPS-BASIC> (4.84)
<EPS-DILUTED> (4.84)
</TABLE>
