<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WESTERN WIRELESS CORPORATION
(Exact name of registrant as specified in its charter)
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WASHINGTON 4812 91-1638901
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
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2001 NW SAMMAMISH ROAD
ISSAQUAH, WASHINGTON 98027
(206) 313-5200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
ALAN R. BENDER, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL
WESTERN WIRELESS CORPORATION
2001 NW SAMMAMISH ROAD
ISSAQUAH, WASHINGTON 98027
(206) 313-5200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
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G. SCOTT GREENBURG, ESQ. ALISON S. RESSLER, ESQ.
PRESTON GATES & ELLIS SULLIVAN & CROMWELL
5000 COLUMBIA CENTER 444 SOUTH FLOWER STREET, SUITE 1200
701 FIFTH AVENUE LOS ANGELES, CALIFORNIA 90071
SEATTLE, WASHINGTON 98104-7078 (213) 955-8000
(206) 623-7580
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities to be registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1993, check the following box. /X/
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED REGISTRATION FEE
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Senior Subordinated Notes...................................... $200,000,000 $60,606.06
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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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
The Prospectus relating to the Exchange Notes being registered hereby to be
used in connection with the exchange offer (the "Exchange Offer Prospectus") is
set forth following this page. The Prospectus to be used in connection with
certain market-making transactions in the Exchange Notes (the "Market-Making
Prospectus") will consist of alternate pages set forth following the Exchange
Offer Prospectus and the balance of the pages included in the Exchange Offer
Prospectus. The Exchange Offer Prospectus and the Market-Making Prospectus are
identical except that they contain different front, inside front and back cover
pages and different descriptions of the plan of distribution (contained under
the caption "The Exchange Offer" and "Plan of Distribution" in the Exchange
Offer Prospectus and under the caption "Plan of Distribution" in the
Market-Making Prospectus). Alternate pages for the Market-Making Prospectus are
separately designated.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 25, 1996
LOGO
WESTERN WIRELESS CORPORATION
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 10 1/2% SENIOR SUBORDINATED
NOTES
DUE 2007 FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING
10 1/2% SENIOR SUBORDINATED NOTES DUE 2007
THAT WERE ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
---------------------
Western Wireless Corporation (the "Company"), hereby offers to exchange (the
"Exchange Offer") $200,000,000 in aggregate principal amount of its 10 1/2%
Senior Subordinated Notes Due 2007 (the "Exchange Notes") for $200,000,000 in
aggregate principal amount of its outstanding 10 1/2% Senior Subordinated Notes
Due 2007 that were issued and sold in a transaction or series of transactions
exempt from registration under the Securities Act of 1933, as amended (the
"Original Notes" and, together with the Exchange Notes, the "Notes"). There will
be no cash proceeds to the Company from the Exchange Offer.
The terms of the Exchange Notes are the same in all respects (including
principal amount, interest rate, maturity and ranking) as the terms of the
Original Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Original Notes and will not be entitled to registration rights. The Exchange
Notes will be issued under the indenture governing the Original Notes. For a
complete description of the terms of the Exchange Notes, see "Description of the
Notes."
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Original Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
the Exchange Notes, such interest to be payable with the first interest payment
on the Exchange Notes, but will not receive any payment in respect of interest
on the Original Notes accrued after the issuance of the Exchange Notes.
The Original Notes were originally issued and sold on October 24, 1996 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided in Section 4(2) of,
and Rule 144A and Regulation S under, the Securities Act (the "Offering").
Accordingly, the Original Notes may not be reoffered, resold or otherwise
pledged, hypothecated or transferred in the United States unless so registered
or unless an applicable exemption from the registration requirements of the
Securities Act is available. Based upon their view of interpretations provided
to third parties by the Staff of the Securities and Exchange Commission (the
"Commission"), the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act (an "Affiliate"), (ii) a broker-dealer who acquired Original
Notes directly from the Company or (iii) a broker-dealer who acquired Original
Notes as a result of market making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders are not engaged in, and do not
intend to engage in, and have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes. Each broker-dealer who
receives Exchange Notes pursuant to the Exchange Offer in exchange for Original
Notes acquired for its own account as a result of market-making activities or
other trading activities may be a statutory underwriter and must acknowledge
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes. The Letter of Transmittal
that is filed as an exhibit to the Registration Statement of which this
Prospectus is a part (the "Letter of Transmittal") states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Broker-dealers who acquired Original Notes as a result of market making or other
trading activities may use this Prospectus, as supplemented or amended, in
connection with resales of the Exchange Notes. The Company has agreed that it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale for a period ending on the earlier of the 90th day after
the Exchange Offer has been completed or such time as broker-dealers no longer
own any Registrable Securities (as defined in the Registration Rights Agreement,
defined below). Any holder that cannot rely upon such interpretations must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
The Original Notes and the Exchange Notes constitute new issues of
securities with no established public trading market. The Original Notes,
however, have traded on the National Association of Securities Dealers, Inc.'s
PORTAL Market. Any Original Notes not tendered and accepted in the Exchange
Offer will remain outstanding. To the extent that Original Notes are tendered
and accepted in the Exchange Offer, a holder's ability to sell untendered, and
tendered but unaccepted, Original Notes could be adversely affected. Following
consummation of the Exchange Offer, the holders of Original Notes will continue
to be subject to the existing restrictions on transfer thereof and the Company
will have no further obligation to such holders to provide for the registration
under the Securities Act of the Original Notes except under certain limited
circumstances. See "Description of the Notes -- Registration Covenant; Exchange
Offer". No assurance can be given as to the liquidity of the trading market for
either the Original Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered or accepted for exchange. The Exchange
Offer will expire at 5:00 p.m., New York City time, on , 1996, unless
extended (the "Expiration Date"). The date of acceptance for exchange of the
Original Notes (the "Exchange Date") will be the first business day following
the Expiration Date, upon surrender of the Original Notes. Original Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date; otherwise such tenders are irrevocable.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
TO BE CONSIDERED IN CONNECTION WITH THE EXCHANGE NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is October , 1996.
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the Exchange Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to in the Registration Statement are necessarily summaries of those
documents, and, with respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved.
The Company is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934 (the "Exchange Act").
Periodic reports, proxy statements and other information filed by the Company
with the Commission may be inspected at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its regional offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Company upon request. The Commission maintains a Web site that
contains reports, proxy and information statements and other materials that are
filed through the Commission's Electronic Data Gathering, Analysis, and
Retrieval system. This Web site can be accessed at http://www.sec.gov.
The Company is required by the terms of the indenture dated as of October
24, 1996 by and between the Company and Harris Trust Company of California, as
trustee (the "Trustee"), under which the Original Notes were issued, and under
which the Exchange Notes are to be issued (the "Indenture"), to furnish the
Trustee with annual reports containing consolidated financial statements audited
by their independent certified public accountants and with quarterly reports
containing unaudited condensed consolidated financial statements for each of the
first three quarters of each fiscal year.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE ISSUER SINCE THE DATE HEREOF.
------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
------------------------
This prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Mr. Alan R. Bender, who may be contacted at 2001 N.W. Sammamish Road, Issaquah,
Washington (206) 313-5200. In order to ensure timely delivery of the documents,
any request should be made by five business days prior to the Expiration Date.
------------------------
Western Wireless(R) is a registered service mark and VoiceStreamSM is a
trademark of the Company. CELLULAR ONE(R) is a registered service mark of
Cellular One Group. See "Business -- Intellectual Property."
2
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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SUMMARY............................................................................... 5
RISK FACTORS.......................................................................... 17
Consequences of Exchange and Failure to Exchange.................................... 17
High Leverage; Debt Service; Restrictive Covenants.................................. 17
Limited Operating History; Past and Future Operating Losses and Negative Cash
Flow............................................................................. 18
Competition......................................................................... 19
Risks Relating to GSM Technical Standard............................................ 20
Absence of PCS Operating History in the United States; Handset Availability......... 21
Intellectual Property and Branding.................................................. 21
Holding Company Structure; Subordination............................................ 21
PCS Build-out and Capital Expenditures.............................................. 22
Relocation of Fixed Microwave Licenses.............................................. 23
Governmental Regulation............................................................. 23
Radio Frequency Emission Concerns; Medical Device Interference...................... 24
Finality of PCS Auctions............................................................ 25
Dependence on Key Personnel......................................................... 25
Seasonality......................................................................... 26
Absence of a Public Market for the Notes; Possible Volatility of Note Price......... 26
Forward-Looking Statements.......................................................... 26
THE EXCHANGE OFFER.................................................................... 28
Purpose of the Exchange Offer....................................................... 28
Terms of the Exchange............................................................... 28
Expiration Date; Extensions; Termination; Amendments................................ 29
How to Tender....................................................................... 29
Terms and Conditions of the Letter of Transmittal................................... 31
Withdrawal Rights................................................................... 32
Acceptance of Original Notes for Exchange; Delivery of Exchange Notes............... 32
Conditions to the Exchange Offer.................................................... 32
Exchange Agent...................................................................... 33
Solicitation of Tenders; Expenses................................................... 33
Federal Income Tax Consequences..................................................... 34
Other............................................................................... 34
THE COMPANY........................................................................... 35
USE OF PROCEEDS....................................................................... 35
CAPITALIZATION........................................................................ 36
SELECTED CONSOLIDATED FINANCIAL DATA.................................................. 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 39
BUSINESS.............................................................................. 51
MANAGEMENT............................................................................ 76
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3
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Summary Compensation Table.......................................................... 79
Option/SAR Grants in Last Fiscal Year............................................... 79
Option Exercises and Holdings....................................................... 80
Employment Agreements............................................................... 80
Compensation Committee Interlocks and Insider Participation......................... 81
Compensation of Directors........................................................... 81
PRINCIPAL SHAREHOLDERS................................................................ 82
CERTAIN TRANSACTIONS.................................................................. 85
DESCRIPTION OF THE NOTES.............................................................. 88
General............................................................................. 88
Maturity, Interest and Principal.................................................... 88
Form, Denomination, Book-Entry Procedures and Transfer.............................. 89
Subordination....................................................................... 91
Optional Redemption................................................................. 92
Registration Covenant; Exchange Offer............................................... 93
Change of Control................................................................... 94
Covenants........................................................................... 95
Consolidation, Merger, Conveyance, Transfer or Lease................................ 99
Events of Default and Remedies...................................................... 100
Certain Definitions................................................................. 100
Modification and Waiver............................................................. 108
Defeasance.......................................................................... 108
Notices............................................................................. 109
Title............................................................................... 109
Governing Law....................................................................... 109
The Trustee......................................................................... 109
DESCRIPTION OF INDEBTEDNESS........................................................... 109
Credit Facility..................................................................... 109
NORTEL Facility..................................................................... 111
10 1/2% Senior Subordinated Notes Due 2006.......................................... 112
LEGAL MATTERS......................................................................... 112
EXPERTS............................................................................... 112
PLAN OF DISTRIBUTION.................................................................. 113
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................................ F-1
GLOSSARY.............................................................................. G-1
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4
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SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the consolidated
financial statements and the notes thereto appearing elsewhere in this
Prospectus. Statements contained in this Prospectus that are not based on
historical fact are "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The risk factors and
cautionary statements identifying important factors that could cause actual
results, events or developments to differ materially from those in the forward
looking statements are detailed in "Risk Factors" and elsewhere in this
Prospectus. Unless the context otherwise requires, the term "Company" or
"Western Wireless" when used in this Prospectus refers to Western Wireless
Corporation, a Washington corporation which is the successor to a Delaware
corporation pursuant to a reincorporation merger that was effected in May 1996,
and its subsidiaries and predecessors. All share and per share data in this
Prospectus reflect the reclassification in May 1996 of each share of the
Company's outstanding common stock, par value $0.001 per share, into 3.1 shares
of the Company's Class B Common Stock, no par value (the "Class B Common
Stock"), which together with the Company's Class A Common Stock, no par value
(the "Class A Common Stock"), is referred to herein as the "Common Stock." In
addition, all references to the Class B Common Stock prior to the date of the
reclassification refer to the common stock, par value $0.001 per share, of
Western Wireless Corporation. Unless the context otherwise requires, when used
herein with respect to a licensed area, "persons" and "population" are
interchangeable and refer to the aggregate number of persons located in such
licensed area, and "pops" refers to the number of such persons in a licensed
area multiplied by a company's ownership interest in the license for such
licensed area. Persons, population and pops data are estimated for 1996 based
upon 1995 estimates by Equifax Marketing Decision Systems, Inc. ("Equifax")
adjusted by the Company by applying Equifax's growth factors from 1990 to 1995
to the 1990 U.S. Census Bureau population figures, unless otherwise specified.
THE COMPANY
Western Wireless provides wireless communications services in the western
United States. The Company owns an aggregate of 80 cellular and PCS licenses for
a geographic area covering approximately 25.5 million pops and 41% of the
continental United States. In its cellular and PCS markets, the Company served
270,600 subscribers at June 30, 1996.
The Company owns and operates cellular communications systems in 57 Rural
Service Areas ("RSAs") and 16 Metropolitan Statistical Areas ("MSAs") with an
aggregate population of approximately 6.0 million persons. In its cellular
markets, the Company uses the CELLULAR ONE brand name. The Company holds
broadband personal communications services ("PCS") licenses for seven Major
Trading Areas ("MTAs") covering 19.5 million persons-- Honolulu, Salt Lake City,
El Paso/Albuquerque, Portland, Oklahoma City, Des Moines/Quad Cities and Denver.
The Company's PCS markets are operated under the Company's proprietary
VoiceStream brand name. In February 1996, the Company's PCS system in the
Honolulu MTA became the first auction-awarded PCS system to commence commercial
operations. Four of the Company's PCS systems are currently operational
utilizing internationally-proven Global System for Mobile Communications ("GSM")
technology as the network standard. See "Business -- Introduction," "-- Markets
and Systems" and "-- PCS Operations."
Western Wireless Corporation was formed in July 1994 as the result of a
business combination (the "Business Combination") among various companies,
including MARKETS Cellular Limited Partnership d/b/a Pacific Northwest Cellular,
a Delaware limited partnership ("MCLP"), and General Cellular Corporation, a
Delaware corporation ("GCC"). GCC commenced operations in 1989 and MCLP was
formed in 1992. As a result of the Business Combination and a series of related
transactions, Western Wireless Corporation became the owner of all of the issued
and outstanding shares of common stock of GCC and the owner of all of the assets
of MCLP. The
5
<PAGE> 8
Business Combination constituted an acquisition of MCLP by GCC for accounting
purposes. As a result, all financial data relating to the Company herein with
respect to periods after the date of the Business Combination reflect the
combined operations of GCC and MCLP and all such data with respect to prior
periods reflect only the operations of GCC, which, for accounting purposes, is
considered Western Wireless Corporation's predecessor. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
STRATEGY
The Company believes that its combination of cellular and PCS licenses
creates a unique opportunity in the wireless communications industry. The
Company has focused on the acquisition and operation of cellular communications
systems in RSAs and small MSAs in the western United States, which the Company
believes it has acquired at attractive prices. The Company's acquisition of PCS
licenses enables it to significantly expand both its customer base and
geographic coverage and to offer enhanced wireless communications services. The
Company's initial focus with its PCS licenses has been, and will continue to be,
to commence operations in the more densely populated areas. The Company believes
that cellular is the optimum technology for rural, less densely populated areas
and that PCS is the optimum technology for more densely populated urban areas
where analog cellular systems are more expensive to deploy and face potential
capacity constraints. The Company and, prior to the Business Combination, MCLP
entered markets at a relatively low cost, having purchased cellular licenses for
an average of $45.68 per pop and MTA PCS licenses for an average of $10.81 per
pop.
The Company's operating strategy is to (i) achieve a critical
time-to-market advantage by rapidly constructing and commencing operations of
PCS systems in urban areas within its PCS markets; (ii) continue to expand its
operations through increased subscriber growth and usage; (iii) utilize its
centralized management and back office functions to support the combined needs
of its cellular and PCS subscribers, thereby further improving operating
efficiencies and generating greater economies of scale; and (iv) selectively
acquire cellular and PCS properties primarily in contiguous markets. The Company
is implementing its strategy by aggressively building its PCS systems, offering
a wide range of products and services at competitive prices, continually
upgrading the quality of its network, establishing strong brand recognition,
creating a strong sales and marketing program tailored to local markets and
providing a superior level of customer service.
The Company believes the wireless communications industry will continue to
grow due to enhanced service offerings, the emergence of PCS systems, increased
awareness of the productivity, convenience and security benefits associated with
wireless communications services and anticipated declines in service prices. The
Company believes it is well positioned to take advantage of these growth
opportunities as a result of its existing operations and systems infrastructure,
its wide geographic coverage and the experience and expertise of its management
team. See "Business -- Strategy," "-- Cellular Operations," "-- PCS Operations,"
"-- Products and Services" and "-- System Equipment, Development and Expansion."
CELLULAR OPERATIONS
The Company owns and operates high quality cellular systems in 15 western
states and generally owns 100% of each of its cellular licenses. The Company
focuses on RSAs and small MSAs because it perceives such markets, which are less
densely populated, to be less susceptible to competition and to have greater
capacity for future growth than most major markets. Cellular service was
generally introduced later in RSAs and small MSAs than in major markets. As a
result, cellular penetration is currently lower and subscriber growth rates are
significantly higher than in major markets. Although two cellular operators
exist in all markets, the Company's competitor in many of its markets tends to
be smaller and less well capitalized than the large market operators.
6
<PAGE> 9
The Company's cellular markets exhibit positive characteristics for
wireless communications, including a high percentage of business customers with
substantial needs for wireless communications, such as those employed in
agriculture, mining, oil and gas, and populations accustomed to long travel
times. Additionally, the Company's service areas cover over 20,000 highway miles
and the popular destination areas of Yellowstone National Park, Glacier National
Park and Mount Rushmore National Monument, providing attractive sources of
roaming revenues.
In its rural markets, the Company believes that its cellular systems, which
can cover large geographic areas with relatively few cell sites, provide the
optimum cost efficient wireless service technology. In contrast, PCS technology
requires more closely located cell sites to broadcast over extended geographic
areas. Accordingly, PCS service will be less efficient and more expensive to
deploy in rural markets than cellular service, making it likely that PCS
competitors will delay or avoid entry into such markets.
The Company has experienced rapid growth of its cellular operations during
the last three years. The Company's cellular subscriber base grew to 264,200
subscribers at June 30, 1996 from 13,700 subscribers at January 1, 1993. Service
(subscriber and roamer) revenues grew to $135.1 million in 1995 from $18.4
million in 1993 and operating income (loss) from cellular operations before
interest, taxes and depreciation and amortization increased to $28.9 million in
1995 from $0.5 million in 1993. The Company believes these results reflect the
strong demand for wireless services in its markets, the success of its marketing
and acquisition strategy and its management capabilities. In addition, during
the three year period ended December 31, 1995, the average monthly cellular
subscriber revenue per subscriber in the industry declined while the Company's
average monthly cellular subscriber revenue per subscriber increased to $57.25
for 1995 from $49.72 for 1993. During the six months ended June 30, 1996, the
Company's average monthly cellular subscriber revenue per subscriber declined
1.9% compared to the same period in 1995, which the Company believes is
significantly less than the decline in the industry average. See "Risk
Factors -- Seasonality," "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company offers its subscribers high quality cellular service, as well
as custom calling services such as call forwarding, call waiting, conference
calling, voice message storage and retrieval and no-answer transfer. The Company
also acts as a retail distributor of wireless handsets. The Company sells its
products and services primarily through its direct sales force and 137 retail
locations, as well as through a network of independent agents and national
retailers. In addition, the Company recently began providing wireless services
for rural customers in sparsely populated areas where the cost of providing
wired telephone services is relatively high. The Company markets its cellular
services under the CELLULAR ONE brand name, allowing it to enjoy the strength of
a nationally recognized service mark in its cellular markets.
The Company has roaming arrangements with virtually every cellular carrier
in North America and has entered into agreements or letters of intent with a
number of PCS carriers which, when the technology is available, will enable PCS
subscribers of these carriers to roam on the Company's cellular systems. The
Company is also a member of North American Cellular Network ("NACN"), a wireless
network linking cellular operations throughout the United States, Canada, Puerto
Rico and the Virgin Islands. NACN participation allows the Company to offer
convenient access to the Company's subscribers when roaming throughout the
United States and Canada. See "Business -- Strategy," "-- Cellular Operations"
and "-- Products and Services - Cellular."
PCS OPERATIONS
The Company has completed initial construction and commenced commercial
operations of its PCS systems in the Honolulu, Salt Lake City, El
Paso/Albuquerque and Portland MTAs and is constructing the initial phase of its
PCS systems in the Oklahoma City, Des Moines/Quad Cities and Denver MTAs. When
completed, the Company's PCS systems will cover a substantial geographic
7
<PAGE> 10
area in the western United States complementary to the Company's cellular
operations. The Company expects to extend its PCS systems based on economic
factors, customer demand and FCC licensing requirements. PCS service offerings
include all of the services typically provided by cellular systems, as well as
paging, caller identification, text messaging, smart cards, over-the-air
activation and over-the-air subscriber profile management.
The following table sets forth certain information regarding the "A" and
"B" Block MTAs in which the Company operates or intends to operate PCS systems:
<TABLE>
<CAPTION>
MTA POPULATION SYSTEM STATUS
----------------------------------------------- ---------- -----------------------
<S> <C> <C>
Honolulu....................................... 1,215,729 commercial service
Salt Lake City................................. 2,999,636 commercial service
El Paso/Albuquerque............................ 2,387,710 commercial service
Portland....................................... 3,460,182 commercial service
Oklahoma City.................................. 1,945,271 construction
Des Moines/Quad Cities......................... 3,067,795 construction
Denver......................................... 4,411,211 construction
</TABLE>
In addition, the Company holds a 49.9% limited partnership interest in Cook
Inlet Western Wireless PV/SS PCS, L.P. ("Cook Inlet PCS"), which holds "C" Block
PCS licenses in 14 Basic Trading Areas ("BTAs") in five states, covering
approximately 3.4 million persons. These BTAs are contiguous with the Company's
existing licensed areas and will be operated under the VoiceStream brand name.
The Company is currently participating in the FCC's 10 MHz broadband "D"
and "E" Block BTA PCS auction and Cook Inlet PCS is participating in the 10 MHz
"F" Block BTA PCS auction.
The Company believes that being the first to offer PCS services in a market
is a key competitive advantage. The Company's goal is to achieve significant
market penetration by aggressively marketing competitively priced PCS services
under its proprietary VoiceStream brand name, offering certain enhanced services
not currently provided by analog or digital cellular operators and providing
superior customer service. In addition, the Company believes it can become a
low-cost provider of PCS services by taking advantage of the existing business
infrastructure established for its cellular operations, including centralized
management, marketing, billing and customer service functions, and by focusing
on efficient customer acquisition and retention.
The Company uses internationally-proven GSM technology as the network
standard for its PCS systems. GSM is the leading digital wireless standard
worldwide, with approximately 200 systems operating in 100 countries serving
over 21 million subscribers. In the United States, GSM has been chosen by six
other MTA licensees which, together with the Company's MTAs and C Block PCS
licensees who have announced their intent to deploy GSM-based systems, cover
markets containing approximately 200 million persons, representing approximately
75% of the U.S. population. The Company has entered into roaming agreements or
letters of intent with all of the companies in the United States that have
chosen to deploy the GSM standard in their PCS markets, which will provide for
roaming by the Company's PCS subscribers into these carriers' PCS markets, and
vice versa, as such systems are operational. The Company currently has
reciprocal roaming agreements or letters of intent with 28 international
carriers who have chosen to deploy the GSM standard. The Company anticipates
entering into similar agreements with other domestic and international carriers
who deploy the GSM standard. The Company will seek to enter into reciprocal
roaming agreements with cellular carriers in markets where the GSM standard will
not be initially deployed to enable the Company's PCS subscribers to roam in
such markets when dual-mode handsets are available. See "Risk Factors -- Risks
Relating to GSM Technical Standard," "-- Absence of PCS Operating History in the
United States; Handset Availability," "Business -- Markets and Systems,"
" -- PCS Operations" and "-- Products and Services - PCS."
8
<PAGE> 11
FINANCING PLAN
The Company believes that access to capital and financial flexibility are
necessary to successfully implement its strategy. In May 1996, the Company
completed public offerings of its Class A Common Stock and 10 1/2% Senior
Subordinated Notes Due 2006 (the "2006 Notes"), raising net aggregate proceeds
of $233.9 million and $193.0 million, respectively (the "May 1996 Offerings").
The Company has a credit facility (the "Credit Facility") with a consortium of
lenders providing for $750 million of revolving credit and a $200 million term
loan. A subsidiary of the Company also has a $200 million credit facility (the
"NORTEL Facility" and, together with the Credit Facility, the "Senior Secured
Facilities") with Northern Telecom Inc. ("NORTEL"). As of June 30, 1996, $243.8
million was outstanding under the Senior Secured Facilities. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of
Indebtedness."
On October 24, 1996 the Company completed its offering of $200 million
principal amount of the Original Notes (the "Offering") for estimated aggregate
net proceeds to the Company of $194.3 million. The Company believes these
proceeds, in combination with the proceeds from the May 1996 Offerings and the
Senior Secured Facilities, will be sufficient to fund the build-out of its PCS
systems (including related operating losses), the continued growth of its
cellular operations and its debt service requirements through December 31, 1998
and will enable the Company to take advantage of selected wireless acquisition
opportunities (including those that may arise through current or future FCC
auctions). The Company currently anticipates that it will require approximately
$425 million to finance the build-out of its PCS systems from June 30, 1996
through the end of 1998. The Company will also expend additional funds to expand
its cellular operations, fund operating losses, service debt and finance
acquisitions opportunities. To the extent that the build-out of the PCS systems
is faster than expected, the costs are greater than anticipated or the Company
takes advantage of acquisition opportunities, the Company may require additional
funding to implement its business strategy. See "Risk Factors -- High Leverage;
Debt Service; Restrictive Covenants," "-- PCS Build-out and Capital
Expenditures," and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources".
There will be no cash proceeds to the Company from the Exchange Offer.
9
<PAGE> 12
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Company....................... Western Wireless Corporation, a Washington corporation. The
principal offices of the Company are located at 2001 N.W.
Sammammish Road, Issaquah, Washington 98027, and its
telephone number at that address is (206) 313-5200.
The Exchange Offer............ The Company is offering to exchange up to $200,000,000
aggregate principal amount of 10 1/2% Senior Subordinated
Notes Due 2007 (the "Exchange Notes") for up to $200,000,000
aggregate principal amount of their outstanding 10 1/2%
Senior Subordinated Notes Due 2007 that were issued and sold
on October 24, 1996 in a transaction (the "Offering") exempt
from registration under the Securities Act (the "Original
Notes" and, collectively with the Exchange Notes, the
"Notes"). The terms of the Exchange Notes are substantially
identical in all respects (including principal amount,
interest rate, maturity and ranking) to the terms of the
Original Notes for which they may be exchanged pursuant to
the Exchange Offer, except that the Exchange Notes have been
registered under the Securities Act and therefore will not
be subject to certain restrictions on transfer except as
provided herein (see "The Exchange Offer -- Terms of the
Exchange" and "-- Terms and Conditions of the Letter of
Transmittal") and will not be entitled to registration
rights.
Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other
than any holder which is (i) an Affiliate of the Company,
(ii) a broker-dealer who acquired Original Notes directly
from the Company or (iii) a broker-dealer who acquired
Original Notes as a result of market making or other trading
activities) without compliance with the registration and
Prospectus delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders
are not engaged in, and do not intend to engage in, and have
no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes.
Minimum Condition............. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Original Notes being tendered
for exchange.
Expiration Date............... The Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1996 unless extended (the "Expiration
Date").
Exchange Date................. The first date of acceptance for exchange for the Original
Notes will be the first business day following the
Expiration Date.
Withdrawal Rights............. Tenders may be withdrawn at any time prior to the Expiration
Date. Any Original Notes not accepted for any reason will be
returned without expense to the tendering holders thereof as
promptly as practicable after the expiration or termination
of the Exchange Offer.
Procedures for Tendering
Original Notes.............. See "The Exchange Offer -- How to Tender."
</TABLE>
10
<PAGE> 13
<TABLE>
<S> <C>
Federal Income Tax
Consequences................ The exchange of Original Notes for Exchange Notes by holders
will not be a taxable exchange for federal income tax
purposes, and holders should not recognize any taxable gain
or loss or any interest income as a result of such exchange.
See "The Exchange Offer -- Federal Income Tax Consequences".
Effect on Holders of Original
Notes....................... As a result of the making of this Exchange Offer, and upon
acceptance for exchange of all validly tendered Original
Notes pursuant to the terms of this Exchange Offer, the
Company will have fulfilled a covenant contained in the
terms of the Exchange and Registration Rights Agreement (the
"Registration Rights Agreement") dated as of October 24,
1996, among the Company and Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation, Salomon Brothers
Inc and Toronto Dominion Securities (USA) Inc.
(collectively, the "Purchasers") and, accordingly, the
holders of the Original Notes will have no further
registration or other rights under the Registration Rights
Agreement, except that under certain limited circumstances,
the Company shall file with the Commission a shelf
registration statement on an appropriate form under Rule 415
under the Securities Act (the "Shelf Registration
Statement"). See "Description of the Notes -- Registration
Covenant; Exchange Offer". Holders of the Original Notes who
do not tender their Original Notes in the Exchange Offer
will continue to hold such Original Notes and will be
entitled to all the rights and limitations applicable
thereto under the Indenture. All untendered, and tendered
but unaccepted, Original Notes will continue to be subject
to the restrictions on transfer provided for in the Original
Notes and the Indenture. To the extent that Original Notes
are tendered and accepted in the Exchange Offer, the trading
market, if any, for the Original Notes could be adversely
affected. See "Risk Factors -- Consequences of Exchange and
Failure to Exchange".
</TABLE>
TERMS OF THE NOTES
The Exchange Offer applies to $200,000,000 aggregate principal amount of
the Original Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Original Notes except that the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same debt
as the Original Notes and will be entitled to the benefits of the Indenture. See
"Description of the Notes".
<TABLE>
<S> <C>
Exchange Notes................ $200.0 million principal amount of 10 1/2% Senior
Subordinated Notes Due 2007 (the "Exchange Notes").
Principal of, premium, if any, and interest on the Exchange
Notes will be payable in immediately available funds.
</TABLE>
11
<PAGE> 14
<TABLE>
<S> <C>
Interest and Maturity Date.... The Exchange Notes will bear interest from and including
their respective dates of issuance. Holders whose Original
Notes are accepted for exchange will receive accrued
interest thereon to, but not including, the date of issuance
of the Exchange Notes, such interest to be payable with the
first interest payment on the Exchange Notes, but will not
receive any payment in respect of interest on the Original
Notes accrued after the issuance of the Exchange Notes. The
Exchange Notes will mature on February 1, 2007.
Interest Payment Dates........ February 1 and August 1 of each year, commencing February 1,
1997.
Ranking....................... The Exchange Notes will be senior unsecured obligations of
the Company and will be subordinated in right of payment to
the prior payment in full of all Senior Indebtedness and
senior in right of payment to any future subordinated
Indebtedness of the Company. In addition, all existing and
future Indebtedness and other liabilities of the Company's
subsidiaries will be effectively senior in right of payment
to the Exchange Notes. At June 30, 1996, Senior Indebtedness
aggregated approximately $243.8 million. At June 30, 1996,
the total outstanding Indebtedness of the Company's
subsidiaries not eliminated in the Company's consolidated
financial statements was approximately $46.5 million. The
Exchange Notes will rank pari passu with $200.0 million
principal amount of outstanding 2006 Notes. See "Risk
Factors -- Holding Company Structure; Subordination" and
"Description of the Notes -- Subordination."
Optional Redemption........... Prior to February 1, 2002, the outstanding Notes may be
redeemed at the option of the Company in whole or, from time
to time, in part at a redemption price equal to the sum of
(i) the principal amount of the Notes to be redeemed plus
accrued interest to but excluding the redemption date and
(ii) the Make-Whole Amount. On or after February 1, 2002 the
outstanding Notes may be redeemed as a whole or, from time
to time, in part at the option of the Company at the
following redemption prices (expressed as percentages of
principal amount), in each case together with accrued
interest to but excluding the date fixed for redemption, if
redeemed during the 12-month period beginning February 1 of
each of the years indicated: 2002 at 105.25%, 2003 at
103.50%, 2004 at 101.75% and 2005 and thereafter at 100%. In
addition, on or before February 1, 1999, the Company may, at
its option, apply Qualified Capital Stock Proceeds and
Affiliate and Related Person Proceeds to redeem up to $66.0
million in aggregate principal amount of Senior Subordinated
Notes at 110.5% of the stated principal amount thereof,
together with accrued interest. See "Description of the
Notes -- Optional Redemption." In addition, the Company may
be required to offer to repurchase the Notes upon the
occurrence of a Change of Control or upon certain Asset
Dispositions. See "Description of the Notes -- Change of
Control" and "-- Covenants - Limitation on Certain Asset
Dispositions." The Credit Facility prohibits the repayment
of all or any portion of the principal amount of the Notes
prior to the repayment of all indebtedness under the Credit
Facility. See "Description of Indebtedness -- Credit
Facility."
Sinking Fund.................. The Exchange Notes will not be entitled to any sinking fund.
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C>
Change of Control............. Upon a Change of Control, each Holder of Notes will have the
right to have the Company repurchase all or a portion of
such Holder's Notes at a purchase price in cash equal to
101% of the aggregate principal amount of the Notes plus
accrued interest to but excluding the Purchase Date. The
Company will not be able to so repurchase Notes without
obtaining written consents from or repaying the lenders
under the Credit Facility.
Certain Covenants............. The indenture under which the Original Notes were issued and
the Exchange Notes will be issued (the "Indenture") contains
limitations on, among other things, (a) the Incurrence of
additional Indebtedness, (b) the issuance of Preferred Stock
by Restricted Subsidiaries, (c) the making of Restricted
Payments, (d) the Incurrence of certain Liens, (e) certain
Asset Dispositions, (f) dividend and other payment
restrictions affecting Restricted Subsidiaries, (g) the sale
or issuance of a Wholly Owned Restricted Subsidiary's
Capital Stock, (h) transactions with Affiliates and (i)
certain consolidations, mergers and transfers of assets. See
"Description of the Notes -- Covenants."
Use of Proceeds............... There will be no cash proceeds.
</TABLE>
For additional information regarding the Exchange Notes and for definitions
of certain capitalized terms used herein, see "Description of the Notes."
RISK FACTORS
Certain factors should be considered in connection with the Exchange Notes.
See "Risk Factors."
13
<PAGE> 16
SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables set forth certain summary consolidated financial data
for the Company for each of the three years in the period ended December 31,
1995, which was derived from the Company's consolidated financial statements and
notes thereto that have been audited by Arthur Andersen LLP. The table also sets
forth certain unaudited summary consolidated financial data as of June 30, 1996
and for the six months ended June 30, 1996 and 1995. The Company has experienced
rapid growth in its revenues and assets during the periods set forth below,
which rate of growth will not necessarily continue over the next few years. In
addition, the Company has made and expects to make substantial capital
expenditures in connection with its wireless communications systems.
Accordingly, the operating results set forth below will not necessarily be
indicative of future performance.
The summary consolidated financial and operating data set forth below
should be read in conjunction with "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and notes
thereto and other financial and operating information included elsewhere in this
Prospectus. All financial data relating to the Company herein with respect to
periods after the date of the Business Combination reflect the combined
operations of GCC and MCLP and all such data with respect to prior periods
reflect only the operations of GCC, which, for accounting purposes, is
considered Western Wireless Corporation's predecessor. Accordingly, the
financial data of the Company for the periods subsequent to the Business
Combination are not comparable to financial data for prior periods. See Note 12
to the Company's consolidated financial statements for pro forma information
presenting the results of operations of the Company as if the Business
Combination occurred on January 1, 1993, and see the consolidated financial
statements of MCLP included herein for financial information of MCLP prior to
the Business Combination.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Total revenues.............................................. $104,604 $ 60,697 $146,555 $ 63,108 $ 20,734
-------- -------- -------- -------- --------
Operating expenses:
Cost of service........................................... 19,554 12,132 27,686 13,303 4,310
Cost of equipment sales................................... 14,792 8,890 20,705 11,446 3,533
General and administrative................................ 28,409 13,153 31,253 15,226 6,253
Sales and marketing....................................... 32,078 16,411 41,390 18,553 6,101
Depreciation and amortization............................. 33,434 21,900 49,456 25,670 5,399
Provision for restructuring costs......................... 2,478
-------- -------- -------- -------- --------
Total operating expenses................................ 128,267 72,486 170,490 86,676 25,596
-------- -------- --------
Operating loss.............................................. (23,663) (11,789) (23,935) (23,568) (4,862)
Interest and financing expense, net......................... (17,014) (11,329) (25,428) (10,659) (2,242)
Other, net(1)............................................... 507 (6,135) (6,591) 8,267 10,433
-------- -------- -------- -------- --------
Net income (loss)......................................... $(40,170) $(29,253) $(55,954) $(25,960) $ 3,329
======== ======== ======== ======== ========
Net income (loss) per common share before extraordinary
item...................................................... $(0.66) $(0.43) $(0.87) $(0.59) $0.10
Net income (loss) per common share(2)....................... $(0.66) $(0.55) $(0.99) $(0.59) $0.10
======== ======== ======== ======== ========
Weighted average common shares and common equivalent shares
outstanding............................................... 60,925,000 53,574,000 56,470,000 43,949,000 32,253,000
======== ======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents........................................................................ $ 90,729 $ 284,988
Property and equipment, net...................................................................... 296,769 296,769
Licensing costs and other intangible assets, net................................................. 538,816 544,557
Total assets..................................................................................... 979,964 1,179,964
Long-term debt................................................................................... 446,471 646,471
Common stock and paid-in capital................................................................. 568,624 568,624
Total shareholders' equity....................................................................... 443,226 443,226
</TABLE>
- ---------------
(1) Includes an extraordinary loss on early extinguishment of debt of $6.6
million for the six months ended June 30, 1995 and the year ended December
31, 1995.
(2) The Company has never paid dividends on its Common Stock and does not
anticipate paying any dividends in the foreseeable future. The Company's
Senior Secured Facilities, the 2006 Notes Indenture and the Indenture
contain certain restrictions on the Company's ability to declare and pay
dividends on the Common Stock.
(3) Adjusted to give effect to the Offering of the Original Notes on October 24,
1996 and the application of the estimated net proceeds therefrom, as if the
Offering had occurred on June 30, 1996. See "Capitalization."
14
<PAGE> 17
SUMMARY OPERATING DATA
The following table sets forth summary operating data of the Company for
its cellular operations.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------------
1996 1995 1994 1993
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cellular pops(1)...................... 6,041,172 5,764,152 5,240,702 2,190,104
Cellular subscribers.................. 264,200 209,500 112,800 30,000
Penetration level(2).................. 4.4% 3.6% 2.2% 1.4%
Average monthly cellular service
revenue per subscriber(3)........... $ 67.02 $ 73.36 $ 77.79 $ 82.34
Average monthly cellular subscriber
revenue per subscriber(4)........... $ 54.60 $ 57.25 $ 54.35 $ 49.72
Cellular EBITDA (thousands)(5)........ $ 27,969 $ 28,929 $ 2,102 $ 537
Cellular capital expenditures
(thousands)......................... $ 30,772 $ 62,573 $ 47,423 $ 25,113
Cellular cash flows provided by
(used in):
Operating activities............. $ 8,523 $ 3,370 $ (988) $ (255)
Investing activities............. $ (72,076) $ (140,332) $ (70,190) $ (32,535)
Financing activities............. $ 141,794 $ 137,724 $ 70,777 $ 36,212
</TABLE>
- ---------------
(1) Based upon 1995 estimates by Equifax. For 1994 and 1993, the Company has
evenly applied Equifax's growth factors from 1990 to 1995 to the 1990 U.S.
Census Bureau population figures. See "Business -- Markets and Systems."
(2) Determined by dividing the aggregate number of cellular subscribers by
cellular pops.
(3) Cellular service revenues include subscriber, roamer and, beginning in 1996,
other revenues. Average monthly service revenue per subscriber is determined
for each of the periods by dividing cellular service revenues by the average
monthly cellular subscribers, and dividing the result by the number of
months in the period. Average monthly subscribers for the period is computed
by adding the average of monthly subscribers, which is computed by adding
beginning and ending monthly subscribers and dividing by two, and dividing
the result by the number of months in the period.
(4) Determined for each of the periods by dividing cellular subscriber revenues
by the average monthly cellular subscribers for the period, and dividing the
result by the number of months in the period.
(5) EBITDA represents operating income (loss) from operations before interest,
taxes and depreciation and amortization. EBITDA is a measure commonly used
in the industry but is not prepared in accordance with United States
generally accepted accounting principles ("GAAP") and should not be
considered as a measurement of net cash flows from operating activities.
Cellular EBITDA represents EBITDA from cellular operations. In 1994, the
Company recorded a provision for restructuring costs of $2.5 million. EBITDA
before such provision for restructuring costs would have been $4.6 million
in 1994.
15
<PAGE> 18
The following table sets forth summary consolidated operating and financial
data of the Company.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------
1996 1995 1994 1993
--------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
EBITDA(1).................................... $ 9,771 $ 25,521 $ 2,102 $ 537
Ratio of earnings to
fixed charges(2)........................... * * * 2.22
Capital expenditures......................... $ 89,825 $ 79,464 $ 47,423 $ 25,113
Cash interest expense........................ 19,600 21,700 10,900 200
Cash and cash equivalents.................... 90,729 8,572 7,787 8,188
Total debt................................... 446,471 362,487 211,528 60,788
</TABLE>
- ---------------
* Not meaningful
(1) EBITDA represents operating income (loss) from operations before interest,
taxes and depreciation and amortization. EBITDA is a measure commonly used
in the industry but is not prepared in accordance with GAAP and should not
be considered as a measurement of net cash flows from operating activities.
In 1994, the Company recorded a provision for restructuring costs of $2.5
million. EBITDA before such provision for restructuring costs would have
been $4.6 million in 1994.
(2) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings (loss) before extraordinary items, interest and financing expense,
amortization of deferred financing costs and the portion of rents
representative of the interest factor by fixed charges. Fixed charges
consist of the sum of interest and financing expense, amortization of
deferred financing costs, capitalized interest and the portion of rents
representative of the interest factor. The ratio of earnings to fixed
charges is not meaningful for periods that result in a deficit. For the
periods indicated above, earnings were inadequate to cover fixed charges and
the deficiencies of earnings to fixed charges were $42.6 million, $49.7
million and $26.0 million for the six months ended June 30, 1996 and the
years ended December 31, 1995 and 1994, respectively. See "Risk
Factors -- High Leverage; Debt Service; Restrictive Covenants."
16
<PAGE> 19
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Original Notes for the Exchange Notes offered hereby, holders of
Original Notes should consider carefully the following factors, which (other
than "Consequences of Exchange and Failure to Exchange" and "Absence of Public
Market") are generally applicable to the Original Notes as well as the Exchange
Notes:
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Company
does not intend to register the Original Notes under the Securities Act. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. To the extent Original Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for the
Original Notes could be adversely affected. See "The Exchange Offer" and
"Description of the Notes -- Registration Covenant; Exchange Offer."
HIGH LEVERAGE; DEBT SERVICE; RESTRICTIVE COVENANTS
The Company is, and will continue to be, highly leveraged and subject to
significant financial restrictions and limitations. As of June 30, 1996, on an
as adjusted basis after giving effect to the Offering of the Original Notes on
October 24, 1996 and the application of the net proceeds therefrom, the
Company's total indebtedness would have been $646.5 million or approximately
59.3% of its total capitalization. Indebtedness under the Credit Facility and
the NORTEL Facility matures on March 31, 2005 and December 31, 2003,
respectively, and bears interest at variable rates. Substantially all the assets
of the Company are pledged as security for such indebtedness. The $200 million
principal amount of the 2006 Notes bear interest at 10 1/2% and mature on June
1, 2006. See "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of Indebtedness."
For the six months ended June 30, 1996 and the year ended December 31,
1995, the Company had negative ratios of earnings to fixed charges and earnings
coverage deficiencies of approximately $42.6 million and $49.7 million,
respectively. There can be no assurance that the Company will generate
sufficient cash flow from operating activities to meet its debt service and
working capital requirements. In such event, the Company may need to seek
additional financing. There can be no assurance that any such financing or
refinancing could be obtained on terms that are acceptable to the Company. In
the absence of such financing or refinancing, the Company could be materially
limited in its ability to build out its existing cellular and PCS systems or be
forced to dispose of assets in order to make up for any shortfall in the
payments due on its indebtedness under circumstances that might not be favorable
to the realization of the highest price for such assets. Given that a
substantial portion of the Company's assets consists of intangible assets,
principally licenses granted by the FCC, the value of which will depend upon a
variety of factors (including the success of the Company's PCS and cellular
businesses and the wireless communications industry in general), there can be no
assurance that the Company's assets could be sold quickly enough, or for
sufficient amounts, to enable the Company to meet its obligations.
17
<PAGE> 20
The Company intends to continue pursuing opportunities to acquire
additional wireless communications systems that complement its existing systems.
The Company believes the proceeds from the Offering of the Original Notes, in
combination with the proceeds from the May 1996 Offerings and the Senior Secured
Facilities, will be sufficient to fund the build-out of its PCS systems
(including related operating losses), the continued growth of its cellular
operations and its debt service requirements through December 31, 1998, and will
enable the Company to take advantage of selected wireless acquisition
opportunities (including those that may arise through current or future FCC
auctions). At June 30, 1996, the amounts available for borrowings under the
Credit Facility and the NORTEL Facility were $185 million and $33 million,
respectively. To the extent that the build-out of the PCS systems is faster than
expected, the costs are greater than anticipated or the Company takes advantage
of acquisition opportunities, including those that may arise through current or
future FCC auctions, the Company may require additional funding to implement its
business strategy. There can be no assurance that the Company will be able to
obtain such financing on acceptable terms and in adequate amounts to accomplish
its objectives.
The Senior Secured Facilities, the indenture entered into in connection
with the 2006 Notes (the "2006 Notes Indenture") and the Indenture contain, and
any additional financing agreements may contain, certain restrictive covenants.
The Senior Secured Facilities, the 2006 Notes Indenture and the Indenture
require the Company to comply with certain financial and operational performance
covenants, and, while the Company expects to remain in compliance with such
covenants, there can be no assurance to that effect. The restrictions contained
in the Senior Secured Facilities, the 2006 Notes Indenture and the Indenture
affect, and in some cases will significantly limit or prohibit, among other
things, the ability of the Company to incur indebtedness, make prepayments of
certain indebtedness, pay dividends, make investments, create liens, sell assets
and engage in mergers and consolidations. In addition to such covenants, the
Credit Facility requires the Company to maintain certain financial ratios. The
financial ratio covenants in the Credit Facility include, among others, a
limitation on the incurrence of indebtedness based on the ratio of the Company's
indebtedness to operating cash flow (as defined in the Credit Facility) and a
requirement that the Company's ratio of operating cash flow to cash interest
expense be not less than specified levels. The NORTEL Facility contains, among
others, covenants of Western PCS II Corporation, a subsidiary of the Company and
the borrower thereunder, relating to minimum gross revenues and the ratio of
cash coverage (as defined in the NORTEL Facility) to operating cash flow (as
defined in the NORTEL Facility). Each of the 2006 Notes Indenture and the
Indenture contains a limitation, among others, on the incurrence of indebtedness
based on the ratio of the Company's indebtedness to EBITDA. See "Description of
Indebtedness" and "Description of the Notes" for a more detailed description of
the restrictive covenants and other terms of the Senior Secured Facilities, the
2006 Notes Indenture, and the Indenture. An event of default under the Senior
Secured Facilities, the 2006 Notes Indenture, or the Indenture would allow the
acceleration of the maturities of the indebtedness thereunder. In such event, it
is likely that all of the Company's indebtedness would become immediately due
and payable. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," "Description of
the Notes" and "Description of Indebtedness."
LIMITED OPERATING HISTORY; PAST AND FUTURE OPERATING LOSSES AND NEGATIVE CASH
FLOW
Western Wireless Corporation was formed in July 1994 as a result of the
Business Combination among various companies, including MCLP and GCC. The
Business Combination constituted an acquisition of MCLP by GCC for accounting
purposes. As a result, all financial data relating to the Company herein with
respect to periods after the date of the Business Combination reflect the
combined operations of GCC and MCLP and all such data with respect to prior
periods reflect only the operations of GCC, which, for accounting purposes, is
considered Western Wireless Corporation's predecessor. GCC commenced operations
in 1989, and MCLP was formed in 1992. As a result of an inability to service
then-existing debt requirements, GCC filed a voluntary petition for bankruptcy
under Chapter 11 of the United States Bankruptcy Code in October 1991 and,
pursuant
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to a prepackaged plan, emerged from bankruptcy in March 1992. Certain
individuals who currently serve as executive officers of the Company were, at
the time of such filing, executive officers of GCC. As a result of the Business
Combination and a series of related transactions, the Company became the owner
of all of the issued and outstanding shares of common stock of GCC and all of
the assets of MCLP. See "Business -- Introduction," "Management," "Principal
Shareholders" and "Certain Transactions."
The Company sustained operating losses of approximately $23.7 million
(including $20.1 million of losses attributable to the Company's PCS
operations), $23.9 million (including $3.7 million of losses attributable to the
Company's PCS operations), $23.6 million and $4.9 million in the six months
ended June 30, 1996 and the years ended December 31, 1995, 1994 and 1993,
respectively. At June 30, 1996, the Company had an accumulated deficit of $124.3
million. The Company expects to incur significant operating losses and to
generate negative cash flow from operating activities during the next several
years, while it develops and constructs its PCS systems and builds a PCS
subscriber base. There can be no assurance that the Company will achieve or
sustain profitability or positive cash flow from operating activities in the
future or that it will generate sufficient cash flow to service its debt
requirements. See "-- High Leverage; Debt Service; Restrictive Covenants" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
COMPETITION
Competition for subscribers among wireless licensees is based principally
upon the services and enhancements offered, the technical quality of the system,
customer service, system coverage, capacity and price. In the future, the
Company expects to face increased competition from entities providing similar
services using other communications technologies and services. While some of
these technologies and services are currently operational, others are being
developed or may be developed in the future. As the Company enters the PCS
business in new markets, its principal competitors initially will be providers
of cellular service. The Company will face additional competition in these
markets as other providers of PCS services enter the markets. Under current FCC
rules, there may be up to six PCS licenses granted in each geographic area in
addition to the two existing cellular licenses. Also, the FCC has licensed
Specialized Mobile Radio ("SMR") dispatch system operators to construct digital
mobile communications systems on existing SMR frequencies, referred to as
Enhanced Specialized Mobile Radio ("ESMR"), in many cities throughout the United
States, including some of the markets in which the Company operates. ESMR
systems, including those operated by Nextel Communications, Inc., could be
competitive with the Company's cellular and PCS systems. The Company has one
cellular competitor in each of its cellular markets, including CommNet Cellular,
Inc. ("CommNet"), Lincoln Telecommunications Company, Kansas Cellular,
Southwestern Bell Mobile Systems ("Southwestern Bell") and U S WEST Media Group.
("U S WEST"), and there will be up to six PCS licensees in each of its markets.
The Company's principal competitors in its PCS business are PCS PrimeCo L.P.
("PrimeCo"), Sprint Spectrum L.P. ("Sprint Spectrum") and AT&T Wireless
Services, Inc. ("AT&T Wireless"), as well as the two existing cellular providers
in its PCS markets. These cellular competitors include AT&T Wireless, U S WEST
and United States Cellular Corporation ("U.S. Cellular"). The Company also
competes with paging, dispatch and conventional mobile telephone companies,
resellers and landline telephone service providers.
All of such competition may be intense. Given the rapid advances in the
wireless communications industry, there can be no assurance that new
technologies will not evolve that will compete with the Company's products and
services. In addition, a number of the Company's competitors have substantially
greater financial, technical, marketing, sales, manufacturing and distribution
resources than those of the Company and have significantly greater experience
than the Company in testing new or improved communications products and services
and obtaining regulatory approvals. Some competitors are expected to market
other services, such as landline telephone and
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cable services, with their wireless communications service offerings. Several of
the Company's competitors are operating, or planning to operate, through joint
ventures and affiliation arrangements, wireless communications systems that
encompass most of the continental United States. See "-- Absence of PCS
Operating History in the United States; Handset Availability," "-- Risks
Relating to GSM Technical Standard" and "Business -- Competition."
RISKS RELATING TO GSM TECHNICAL STANDARD
When the FCC first licensed cellular systems in the United States, it
specified the technical standards of analog cellular system operation to ensure
nationwide compatibility between all analog cellular carriers. In contrast, the
FCC has not mandated the technology standard for digital cellular or PCS
operations, leaving each licensee free to select among several competing
technologies that have sufficient technological differences to preclude their
interoperability. The Company has chosen the GSM technical standard in its PCS
markets and believes that GSM offers the Company significant advantages over the
other competing technologies. There are, however, certain risks with respect to
the deployment of GSM.
As of the date hereof, six other MTA PCS licensees (Pacific Telesis Mobile
Services Corp., American Portable Telecom, Inc. ("APT"), BellSouth Personal
Communications, Inc., InterCel, Inc., Omnipoint Corporation and American PCS,
L.P. ("APC")) have announced that they intend to deploy GSM-based PCS systems.
The Company, together with the other MTA and BTA PCS licensees who have
announced their intent to deploy GSM-based systems, collectively cover markets
containing approximately 200 million persons, representing approximately 75% of
the U.S. population. PCS licensees in several markets adjacent to the Company's
PCS markets, including California, Minnesota, Missouri and Nevada, have
announced that they intend to use the GSM standard. In order for the Company's
PCS subscribers to roam in other markets, and vice versa, at least one PCS
licensee in the other market must utilize the GSM standard, or the subscribers
must use dual-mode handsets that would permit the subscriber to use the cellular
system in the other market. Dual-mode handsets which would permit such usage are
not currently available. See "-- Absence of PCS Operating History in the United
States; Handset Availability."
The Company's principal PCS competitors have committed to standards other
than GSM and, as a result, without PCS handsets that can access both GSM and
competing systems, there is a risk that customers of the Company's PCS services
may not be able to conveniently use PCS services while roaming in certain
geographic areas outside the Company's PCS markets. PrimeCo and Sprint Spectrum
have publicly announced that they intend to deploy PCS systems based on a Code
Division Multiple Access ("CDMA") standard. AT&T Wireless and Southwestern Bell
have selected the Time Division Multiple Access ("TDMA") standard. It is
anticipated that together, CDMA-based PCS providers, including competitors in
several of the Company's markets, own licenses covering approximately 87% of the
U.S. population (based on 1990 U.S. Census Bureau figures used by the FCC for
auction purposes) and AT&T Wireless and Southwestern Bell, with their TDMA
standard, own PCS licenses which contain approximately 45% of the U.S.
population (based on 1990 U.S. Census Bureau figures used by the FCC for auction
purposes). Licensees in the FCC's completed C Block auction and in the current
D, E & F Block auction of PCS licenses may or may not select GSM technology;
certain purchasers of licenses in the C Block auction have announced their
intention not to utilize the GSM standard in such markets. Accordingly, certain
major metropolitan areas will not be served by GSM-based PCS systems. The
Company's ability to establish a PCS subscriber base and to compete successfully
in the PCS business with those operators offering greater roaming capabilities
may be adversely affected by the fact that the Company's PCS subscribers will
only be able to roam into regions served by GSM-based PCS systems until
dual-mode handsets permitting them to use the existing cellular system become
available. See "Business -- PCS Operations."
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ABSENCE OF PCS OPERATING HISTORY IN THE UNITED STATES; HANDSET AVAILABILITY
PCS systems have no significant operating history in the United States and
there can be no assurance that these businesses will become profitable. In
addition, the extent of potential demand for PCS in the Company's markets cannot
be estimated with any degree of certainty. The inability of the Company to
establish PCS services or to obtain appropriate equipment for the PCS business
could have a material adverse effect on the Company.
Handsets used for GSM-based PCS systems cannot currently be used with
cellular systems, and vice versa. While the Company believes that dual-mode
handsets that allow a user to access both GSM networks and analog cellular
networks will be commercially available in sufficient quantities by the end of
1997, there can be no assurance that such handsets can be successfully
manufactured or that the Company can obtain such handsets at competitive prices.
Such dual-mode handsets are not yet commercially available and are expected to
be larger and more expensive than single-mode handsets. The lack of
interoperability or the comparatively higher cost of such handsets may impede
the Company's ability to retain current cellular subscribers or attract
potential new wireless communications subscribers. See "Business -- PCS
Operations" and "-- System Equipment, Development and Expansion - PCS."
INTELLECTUAL PROPERTY AND BRANDING
The Company currently uses the registered service mark CELLULAR ONE to
market its cellular services. The Company's use of this service mark is governed
by five-year contracts between the Company and Cellular One Group, the owner of
the service mark. Each of these agreements may be renewed at the Company's
option for three additional five-year terms. Under these agreements, the Company
has agreed to meet operating and service quality standards for its cellular
service areas. If these agreements were not renewed upon expiration or if the
Company were to fail to meet the applicable operating or service quality
standards, and therefore were no longer permitted to use the CELLULAR ONE
service mark, the Company's ability to attract new subscribers and retain
existing subscribers could be materially impaired. AT&T Wireless, which had been
the single largest user of the CELLULAR ONE brand name, has reduced its use of
the brand as a primary service mark. In addition, if for some reason beyond the
Company's control the name CELLULAR ONE were to suffer diminished marketing
appeal, the Company's ability both to attract new subscribers and retain
existing subscribers could be materially impaired. In such circumstances or
otherwise, the Company may explore development or acquisition of a new service
mark.
The Company has an application pending to obtain federal trademark
registration for the name "VoiceStream" which the Company uses in all of its PCS
markets. There can be no assurance that such registration will be granted or, if
granted, that it will provide any meaningful benefit to the Company. Competitors
of the Company possess, and others may develop over time, branding with
significantly greater name recognition than that of the Company. A failure by
the Company to maintain existing rights to its current cellular branding, to
successfully develop value in its "VoiceStream" mark or to develop suitable
alternatives thereto would have a material adverse effect on the Company's
ability to market its products and services and could require the Company to
invest significant additional funds to develop such alternatives. See
"Business -- Intellectual Property."
HOLDING COMPANY STRUCTURE; SUBORDINATION
Substantially all of the Company's assets and operations are held by or
conducted through subsidiaries and, to that extent, the Company is effectively a
holding company. The Company relies on dividends, loan repayments and other
intercompany cash flows from its subsidiaries to generate the funds necessary to
meet its debt service obligations, including the payment of principal, premium,
if any, and interest on the Senior Subordinated Notes. The payment of dividends
and the repayment of loans and advances by the Company to its subsidiaries are
subject to statutory,
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contractual and other restrictions, are dependent upon the earnings of such
subsidiaries and are subject to various business considerations. In addition,
the Notes are effectively subordinated to all existing and future indebtedness
and other liabilities of the Company's subsidiaries. As of June 30, 1996, the
total outstanding indebtedness of the Company's subsidiaries not eliminated in
the Company's consolidated financial statements was approximately $46.5 million.
Moreover, claims of creditors of the Company's subsidiaries, including tax
authorities and trade creditors, will generally have a priority claim to the
assets of such subsidiaries over the claims of the Company and the holders of
indebtedness of the Company, including holders of the Notes. See "Description of
the Notes."
PCS BUILD-OUT AND CAPITAL EXPENDITURES
The Company currently operates PCS systems in the Honolulu, Salt Lake City,
El Paso/Albuquerque and Portland MTAs, and is in the construction phase of the
initial build-out of its remaining three MTA PCS systems. The Company's PCS
licenses are subject to a requirement that the Company construct network
facilities that offer coverage to at least one-third of the population in the
relevant MTA by June 2000, five years from the grant of the license (the
"Five-Year Build-out Requirement"), and to at least two-thirds of the population
by June 2005, 10 years from the grant of the license (the "10-Year Build-out
Requirement"). In each of the Honolulu, Salt Lake City, El Paso/Albuquerque and
Portland MTAs, the Company currently has sufficient coverage to satisfy the
Five-Year Build-out Requirement. The Company anticipates that its build-out in
all of its MTA markets, if completed as currently planned by the end of 1998,
will satisfy the 10-Year Build-out Requirement. Should the Company fail to meet
these coverage requirements, it may be subject to forfeiture of the license or
the imposition of fines by the FCC. See "Business -- Governmental Regulation."
The PCS build-out in each MTA is subject to successful completion of the network
design, site and facility acquisitions, the purchase and installation of the
network equipment, network testing and satisfactory accommodation of microwave
users currently using the spectrum. Delays in any of these areas could have a
material adverse effect on the Company's ability to complete the build-out in a
timely manner.
The successful build-out of the Company's PCS systems will depend to a
significant degree upon the Company's ability to lease or acquire appropriate
sites for the location of its base station equipment. The Company has begun the
site selection and acquisition process. The site selection process will require
the continued successful negotiation of use agreements for or acquisitions of
numerous additional sites, and may require the Company to obtain zoning
variances or other governmental or local regulatory approvals, which are beyond
the Company's control. Delays in the site selection process, as well as
construction delays and other factors, could adversely affect the timing of the
commencement of commercial service in the Company's PCS systems. See
"-- Relocation of Fixed Microwave Licensees" and "Business -- Governmental
Regulation."
The Company believes the proceeds from the Offering, in combination with
the proceeds from the May 1996 Offerings and the Senior Secured Facilities, will
be sufficient to fund the build-out of its PCS systems (including related
operating losses), the continued growth of its cellular operations and its debt
service requirements through December 31, 1998, and will enable the Company to
take advantage of selected wireless acquisition opportunities (including those
that may arise through current or future FCC auctions). The build-out of the
Company's PCS systems will require substantial additional funds and the capital
cost of completing the project in any particular MTA and overall could vary
materially from such estimates. If adequate funds are not available from its
existing capital resources, the Company may be required to curtail its service
operations or to obtain additional funds on terms less favorable than those
contained in the Company's current arrangements.
In addition, the implementation of the PCS build-out plan is subject to the
availability from suppliers of the infrastructure equipment and subscriber
equipment the Company plans to use. Accordingly, there are risks associated with
the completion of development, timely manufacture and
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successful implementation of newly developed wireless equipment in the build-out
of the Company's PCS systems. The Company has entered into agreements for the
supply of infrastructure equipment with NORTEL, Nokia Telecommunications Inc.
and Lucent Technologies Inc. In addition, the Company has entered into an
agreement with Nokia Mobile Phones, Inc. (together with its affiliate, Nokia
Telecommunications Inc., "Nokia"), pursuant to which the Company has committed
to purchase PCS and dual-mode handsets totaling approximately $43.7 million
through October 1, 1999. See "-- Absence of PCS Operating History in the United
States; Handset Availability," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Products and Services."
The cost to the Company of PCS handsets is higher than its cost of cellular
handsets. In order to compete effectively with sellers of analog cellular
handsets, the Company is subsidizing the sale of its PCS handsets. There can be
no assurance it will be able to sell such handsets on commercially favorable
terms. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
RELOCATION OF FIXED MICROWAVE LICENSEES
For a period of up to five years after the grant of a PCS license (subject
to extension), a PCS licensee will be required to share spectrum with existing
licensees that operate certain fixed microwave systems, which exist within each
of the Company's MTAs. To secure a sufficient amount of unencumbered spectrum to
operate its PCS systems efficiently, the Company may need to negotiate
agreements to relocate many of these existing licensees. In such places where
relocation is necessary to permit operation of the Company's PCS systems, any
delay in the relocation of such licensees may adversely affect the Company's
ability to commence timely commercial operation of its PCS systems. In an effort
to balance the competing interests of existing microwave users and newly
authorized PCS licensees, the FCC has adopted (i) a transition plan to relocate
such microwave operators to other spectrum blocks and (ii) a cost sharing plan
so that if the relocation of an incumbent benefits more than one PCS licensee,
the benefitting PCS licensees will share the costs of the relocation. This
transition plan allows most microwave users to operate in the PCS spectrum for a
two-year voluntary negotiation period and an additional one-year mandatory
negotiation period. For public safety entities dedicating a majority of their
system communications for police, fire or emergency medical services operations,
the voluntary negotiation period is three years, with a two-year mandatory
negotiation period. Parties unable to reach agreement within these time periods
may refer the matter to the FCC for resolution, but the existing microwave user
is permitted to continue its operations until final FCC resolution of the
matter. The transition and cost sharing plans expire on April 4, 2005, at which
time remaining incumbents in the PCS spectrum will be responsible for their
costs to relocate to alternate spectrum locations. Currently, the FCC is
considering shortening the voluntary negotiation period to one year (two for
public safety entities) and lengthening the mandatory negotiation period to two
years (three for public safety entities) for all Blocks other than A and B.
There can be no assurance that the Company will be successful in reaching timely
agreements with the existing microwave licensees or that any such agreements
will be on terms favorable to the Company. Further, depending on the terms of
such agreements, the Company's ability to operate its PCS systems profitably may
be adversely affected. The Company estimates that to complete its construction
schedule through December 31, 1997 it may be required to relocate approximately
130 microwave links. Through June 30, 1996, the Company has relocated or reached
agreement to relocate 110 microwave links. See "Business -- Governmental
Regulation."
GOVERNMENTAL REGULATION
The licensing, construction, operation, acquisition and sale of cellular
and PCS systems, as well as the number of cellular and other wireless licensees
permitted in each market, are regulated by the FCC. Changes in the regulation of
such activities, such as a decision by the FCC to issue new
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licenses or permit more than two licenses in each market for cellular
communications services, could have a material adverse effect on the Company's
operations. The FCC has a proceeding in progress that could open up other
frequency bands for wireless communications and PCS-like services. In addition,
all cellular licenses in the United States, including the Company's licenses,
were granted for an initial 10-year term and are subject to renewal. Licenses
may be revoked by the FCC at any time for cause. One of the Company's cellular
licenses expired on October 1, 1996, and a timely request for renewal was filed
and is pending before the FCC. Four others expire on October 1, 1997. While the
Company believes that each of its cellular licenses will be renewed based upon
FCC rules establishing a presumption in favor of licensees that have provided
"substantial" service during their past license term and have substantially
complied with their regulatory obligations during the initial license period,
there can be no assurance that all of the Company's cellular licenses will be
renewed.
All PCS licenses are granted for a 10-year period, at the end of which
period the licensee must apply for renewal. Licenses may be revoked by the FCC
at any time for cause. All 30 MHz broadband PCS licenses, including those of the
Company, are subject to the Five-Year Build-out Requirement and the 10-Year
Build-out Requirement. While the Company believes that each of its PCS licenses
will be renewed based upon FCC rules establishing a presumption in favor of
licensees that have provided "substantial" service during the past license term
and have substantially complied with their regulatory obligations during the
initial license period, there can be no assurance that all of the Company's PCS
licenses will be so renewed. See "-- PCS Build-out and Capital Expenditures."
The Company also must obtain a number of approvals, licenses and permits in
the operation of its business, including licenses from the Federal Aviation
Administration (the "FAA") in connection with cellular and PCS towers.
Additionally, the wireless communications industry is subject to certain state
and local governmental regulation. Operating costs are also affected by other
governmental actions that are beyond the Company's control. There is no
assurance that the various federal, state and local agencies responsible for
granting such licenses, approvals and permits will do so or that, once granted,
will not revoke or fail to renew them. The absence of such licenses, approvals
and permits would adversely affect existing operations and could delay
commencement of or prohibit certain business operations proposed by the Company.
See "Business -- Governmental Regulation."
Because the Company has controlling interests in cellular markets that
overlap the Denver MTA, the Company must comply with FCC rules that limit the
aggregate amount of cellular and PCS spectrum that a single entity may own or
control in a given territory. Current rules would require divestiture of certain
cellular or PCS holdings. However, pending rulemakings and judicial or
administrative challenges may result in additional compliance options.
The wireless communications industry also is subject to continually
evolving regulation. There are a number of issues on which regulation has been
or in the future may be suggested, including the effect of wireless
communications equipment on medical equipment and devices, electromagnetic
interference and cancer, as well as interference between types of wireless
systems. As new regulations are promulgated on these subjects or other subjects,
the Company may be required to modify its business plans or operations in order
to comply with any such regulations. There can be no assurance that the Company
will be able to do so in a cost effective manner, if at all. See "-- Radio
Frequency Emission Concerns; Medical Device Interference" and
"Business -- Governmental Regulation."
RADIO FREQUENCY EMISSION CONCERNS; MEDICAL DEVICE INTERFERENCE
Media reports have suggested that certain radio frequency ("RF") 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. Concerns over RF emissions
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may have the effect of discouraging the use of wireless handsets, which could
have an adverse effect upon the Company's business. On August 1, 1996, the FCC
updated the guidelines and methods it uses for evaluating RF emissions from
radio equipment, including wireless handsets. While the update imposes more
restrictive standards on RF emissions from lower power devices such as wireless
handsets, it is believed that all wireless handsets currently marketed by the
Company and in use by the Company's subscribers already comply with the new
proposed standards.
Certain interest groups have requested that the FCC investigate claims that
the GSM technology poses health concerns and causes interference with hearing
aids and other medical devices. The Center for the Study of Electromagnetic
Compatibility at the University of Oklahoma, which was founded in 1994 with
funds from the wireless industry, is studying this issue and recently released
its findings with respect to the first phase of its study. Such phase of the
study, which was designed to examine extreme conditions, found that digital
technologies cause interference with hearing aids in certain instances. In
addition, the Personal Communications Industry Association ("PCIA") announced in
July 1995 that it was undertaking an industry-wide study to gather information
on possible PCS interference with medical devices for all PCS standards.
Currently, PCIA is conducting negotiations between representatives of persons
with disabilities and industry officials to decide on industry-wide standards of
compatibility. There can be no assurance that the findings of such studies will
not have an adverse effect on the Company's business (including its use of GSM
technology) or that such findings will not lead to governmental regulations that
will have an adverse effect on the Company's business. See
"Business -- Governmental Regulation."
FINALITY OF PCS AUCTIONS
All of the MTA PCS licenses, including those of the Company, have been
awarded by the FCC and the holders of the licenses are permitted to construct
their PCS systems and commence operations. The Order granting the licenses is
final and non-appealable. Nevertheless, there are certain unresolved actions
before the FCC and in a federal court challenging the validity of certain
spectrum aggregation limits which affected eligibility for the auction. As a
result of the challenges, although it currently appears unlikely, the Company
could lose its PCS licenses or have adverse conditions imposed on them, and in
such event the loss resulting from any adverse conditions or, in the case of
license revocation, from its costs and expenses in bidding for and obtaining the
licenses and in beginning the site acquisition and build-out for its PCS systems
could have a material adverse effect on the Company. In addition, all licenses
which were the subject of the C Block auction are subject to completion of
acquisition requirements and FCC grant. See "Business -- Governmental
Regulation."
DEPENDENCE UPON KEY PERSONNEL
The Company will be dependent to a large degree on the services of Mr.
Stanton, as Chairman of the Board and Chief Executive Officer, and other current
members of management. The Company and Mr. Stanton have entered into an
employment agreement which provides that Mr. Stanton's employment may be
terminated at any time by the Company, specifies base compensation of $180,000
per year with a targeted annual bonus of 100% of the base compensation, as
determined by the Board of Directors. The Board of Directors may, in its
discretion, increase Mr. Stanton's compensation, either permanently or for a
limited period, if the Board of Directors shall deem it advisable in order to
fairly compensate Mr. Stanton for the value of his services. Severance is
payable under the agreement in the event Mr. Stanton's employment with the
Company is involuntarily terminated for other than Cause (as defined in the
agreement) in an amount equal to any accrued targeted bonus through the date of
termination, 12 months base salary and 12 months annual targeted bonus. The
Company will also make specified insurance benefit payments on behalf of Mr.
Stanton and his dependents for 12 months following involuntary termination. In
addition, in such event unvested stock options become vested in accordance with
a schedule provided in the
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agreement; however, Mr. Stanton currently holds no stock options. In the event
of a voluntary termination or a termination for Cause, no severance is payable
by the Company. In addition, the agreement provides that during the term of the
agreement and for one year following the termination of Mr. Stanton's employment
for any reason, Mr. Stanton may not engage in a business which is substantially
the same as or similar to the business of the Company; provided, that such
prohibition shall not preclude Mr. Stanton's investment in other companies
engaged in the wireless communications business or his ability to serve as a
director of other companies in the wireless communications business, in each
case subject to his fiduciary obligations as a director of the Company.
Loss of the services of Mr. Stanton or other members of management could
have a material adverse effect on the business of the Company and qualified
replacements may be difficult or impossible to find or retain. An event of
default under the Credit Facility would occur if Mr. Stanton (or a suitable
replacement) ceases, for any reason, to be the Chairman of the Company's Board
of Directors. See "Description of Indebtedness" and "Management -- Employment
Agreements."
SEASONALITY
The Company, and the wireless communications industry in general, have
historically experienced significant subscriber growth during the fourth
calendar quarter. Accordingly, during such quarter the Company experiences
greater losses on equipment sales and increases in sales and marketing expenses.
The Company has historically experienced highest usage and revenue per
subscriber during the summer months. The Company expects these trends to
continue. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Seasonality."
ABSENCE OF A PUBLIC MARKET FOR THE NOTES; POSSIBLE VOLATILITY OF NOTE PRICE
The Exchange Notes are new securities for which there is currently no
market. The Company does not intend to apply for listing of the Exchange Notes
on any securities exchange or for the inclusion of the Exchange Notes in any
automated quotation system. Although the Company has been advised by the
Purchasers that, following completion of the Offering, the Purchasers intended
to make a market in the Notes, they are not obligated to do so and any such
market making activities may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Exchange Notes. If a market for the Exchange Notes were to
develop, the Exchange Notes could trade at prices that may be higher or lower
than their initial offering price depending upon many factors, including
prevailing interest rates, the Company's operating results and the markets for
similar securities. Historically, the market for non-investment grade debt has
been subject to disruptions that have caused substantial volatility in the
prices of securities similar to the Exchange Notes. There can be no assurance
that, if a market for the Exchange Notes were to develop, such a market would
not be subject to similar disruptions.
FORWARD-LOOKING STATEMENTS
Statements contained in this Prospectus that are not based on historical
fact, including without limitation statements containing the words "believes,"
"anticipates," "intends," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, events or developments to be materially different from any future
results, events or developments expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions, both nationally and in the regions in which the Company
operates; technology changes; competition; changes in business strategy or
development plans; the high leverage of the Company; the ability to attract and
retain qualified personnel; existing governmental regulations and changes in, or
the failure to comply with, governmental regulations; liability and other claims
asserted against the Company; and other factors referenced in this
26
<PAGE> 29
Prospectus, including without limitation under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." GIVEN THESE UNCERTAINTIES, PROSPECTIVE
INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING
STATEMENTS. The Company disclaims any obligation to update any such factors or
to publicly announce the result of any revisions to any of the forward-looking
statements contained herein to reflect future results, events or developments.
27
<PAGE> 30
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company with respect to the Registration Rights Agreement.
The Original Notes were originally issued and sold on October 24, 1996 (the
"Issue Date"). Such sales were not registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of, and Rule 144A and
Regulation S under, the Securities Act. In connection with the sale of the
Original Notes, the Company agreed to file with the Commission a registration
statement relating to an exchange offer (the "Exchange Offer Registration
Statement") pursuant to which another series of senior subordinated notes of the
Company covered by such registration statement and containing the same terms as
the Original Notes, except as set forth in this Prospectus, would be offered in
exchange for Original Notes tendered at the option of the holders thereof.
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of Original Notes. The terms of the Exchange Notes are
identical in all respects to the terms of the Original Notes for which they may
be exchanged pursuant to this Exchange Offer, except that (i) the Exchange Notes
will generally be freely transferable by holders thereof and (ii) the holders of
the Exchange Notes will not be entitled to registration rights under the
Registration Rights Agreement. See "Description of the Notes -- Registration
Covenant; Exchange Offer." The Exchange Notes will evidence the same debt as the
Original Notes and will be entitled to the benefits of the Indenture. See
"Description of the Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered or accepted for exchange.
Based on their view of interpretations set forth in no-action letters
issued to third parties by the Staff (the "Staff") of the Commission, the
Company believes that Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Original Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any holder which is (i) an Affiliate
of the Company, (ii) a broker-dealer who acquired Original Notes directly from
the Company or (iii) a broker-dealer who acquired Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Each broker-dealer who receives Exchange
Notes pursuant to the Exchange Offer in exchange for Original Notes acquired for
its own account as a result of market-making activities or other trading
activities may be a statutory underwriter and must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging, and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Broker-dealers who acquired Original Notes as a result of
marketing making or other trading activities may use this Prospectus, as
supplemented or amended, in connection with resales of the Exchange Notes. The
Company has agreed that it will make this Prospectus available to any
broker-dealer for use in connection with any such resale for a period ending on
the earlier of the 90th day after the Exchange Offer has been completed or such
time as such broker-dealers no longer own any Registrable Securities (as defined
in the Registration Rights Agreement). Any holder that cannot rely upon such
interpretations must comply with the registration
28
<PAGE> 31
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
Tendering holders of Original Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Original Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Original Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
the Exchange Notes, such interest to be payable with the first interest payment
on the Exchange Notes, but will not receive any payment in respect of interest
on the Original Notes accrued after the issuance of the Exchange Notes.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1996 unless the
Company in its sole discretion extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Company, expires.
The Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to Harris
Trust Company of California (the "Exchange Agent") and by timely public
announcement communicated by no later than 5:00 p.m. on the next business day
following the Expiration Date, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Original Notes previously tendered pursuant
to the Exchange Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Original Notes for any reason,
including if any of the events set forth below under "-- Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Company and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Original Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent in writing and will
either issue a press release or give written notice to the holders of the
Original Notes as promptly as practicable. Unless the Company terminates the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
the Company will exchange the Exchange Notes for the Original Notes on the
Exchange Date.
If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time that
notice of such waiver or amendment is first published, sent or given to holders
of Original Notes in the manner specified above, the Exchange Offer is scheduled
to expire at any time earlier than the expiration of a period ending on the
fifth business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Original Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Original Notes.
HOW TO TENDER
The tender to the Company of Original Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
29
<PAGE> 32
General Procedures. A holder of a Original Note may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile thereof
(all references in this Prospectus to the Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with the
certificate of certificates representing the Original Notes being tendered and
any required signature guarantees (or a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") pursuant to the procedure described
below), to the Exchange Agent at its address set forth on the back cover of this
Prospectus on or prior to the Expiration Date or (ii) complying with the
guaranteed delivery procedures described below.
If tendered Original Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Original Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Original Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Original Notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the note register for the Original Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact such holder promptly and instruct such
holder to tender Original Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
Book-Entry Transfer. The Exchange Agent will make a request to establish
an account with respect to the Original Notes at The Depository Trust Company
(the "Book-Entry Transfer Facility") for purpose of the Exchange Offer within
two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of Original Notes by causing the Book-Entry
Transfer Facility to transfer such Original Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Original Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address specified on the back cover
page of this Prospectus on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Original Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected if
the Exchange Agent has received at its office listed on the back cover hereof on
or prior to the Expiration Date a letter, telegram or facsimile transmission
from an Eligible Institution setting forth the name and address of the tendering
holder, the principal amount of the Original Notes being tendered, the names in
which the Original Notes are registered
30
<PAGE> 33
and, if possible, the certificate numbers of the Original Notes to be tendered,
and stating that the tender is being made thereby and guaranteeing that within
three New York Stock Exchange trading days after the date of execution of such
letter, telegram or facsimile transmission by the Eligible Institution, the
Original Notes, in proper form for transfer, will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Original Notes being
tendered by the above-described method (or a timely Book-Entry Confirmation) are
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), the Company may, at its option, reject the tender.
Copies of a Notice of Guaranteed Delivery which may be used by Eligible
Institutions for the purposes described in this paragraph are available from the
Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Original Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company, the
Exchange Agent nor any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Original Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Original Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
Original Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Original Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes. The Transferor further agrees that acceptance of any
tendered Original Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of
obligations under the Registration Rights Agreement and that the Company shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
31
<PAGE> 34
By tendering Original Notes and executing the Letter of Transmittal, the
Transferor certifies that it is not an Affiliate of the Company within the
meaning of Rule 405 under the Securities Act, that it is not a broker-dealer
that owns Original Notes acquired directly from the Company or any Affiliate of
the Company, it is acquiring the Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no arrangement
with any person to participate in the distribution of such Exchange Notes.
WITHDRAWAL RIGHTS
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus prior to the Expiration
Date. Any such notice of withdrawal must specify the person named in the Letter
of Transmittal as having tendered Original Notes to be withdrawn, the
certificate numbers of Original Notes to be withdrawn, the principal amount of
Original Notes to be withdrawn, a statement that such holder is withdrawing his
election to have such Original Notes exchanged, and the name of the registered
holder of such Original Notes, and must be signed by the holder in the same
manner as the original signature on the Letter of Transmittal (including any
required signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the Original Notes being withdrawn. The Exchange Agent will return
the properly withdrawn Original Notes promptly following receipt of notice of
withdrawal. All questions as to the validity of notices of withdrawal, including
time of receipt, will be determined by the Company, and such determination will
be final and binding on all parties.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted for
exchange validly tendered Original Notes when, as and if the Company has given
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Original
Notes for the purposes of receiving Exchange Notes from the Company and causing
the Original Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of Exchange Notes to
be issued in exchange for accepted Original Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Original Notes. Original Notes
not accepted for exchange by the Company will be returned without expense to the
tendering holders (or in the case of Original Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the procedures described above, such non-exchanged Original Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) promptly following the Expiration Date or, if the Company terminates
the Exchange Offer prior to the Expiration Date, promptly after the Exchange
Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Original Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement, unless otherwise required by applicable
law or regulation, by making a release to the Dow Jones News Service) or, at
their option, modify or otherwise amend the Exchange Offer, if (a) there shall
be threatened, instituted or pending any action or proceeding before, or any
injunction, order or decree shall have been issued
32
<PAGE> 35
by, any court or governmental agency or other governmental regulatory or
administrative agency or commission, (i) seeking to restrain or prohibit the
making or consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, (ii) assessing or seeking any damages as a
result thereof, or (iii) resulting in a material delay in the ability of the
Company to accept for exchange or exchange some or all of the Original Notes
pursuant to the Exchange Offer; (b) any statute, rule, regulation, order or
injunction shall be sought, proposed, introduced, enacted, promulgated or deemed
applicable to the Exchange Offer or any of the transactions contemplated by the
Exchange Offer by any government or governmental authority, domestic or foreign,
or any action shall have been taken, proposed or threatened, by any government,
governmental authority, agency or court, domestic or foreign, that in the sole
judgment of the Company might directly or indirectly result in any of the
consequences referred to in clauses (a)(i) or (ii) above or, in the sole
judgment of the Company, might result in the holders of Exchange Notes having
obligations with respect to resales and transfers of Exchange Notes which are
greater than those described in the interpretations of the Commission referred
to on the cover page of this Prospectus, or would otherwise make it inadvisable
to proceed with the Exchange Offer; or (c) a material adverse change shall have
occurred in the business, condition (financial or otherwise), operations, or
prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in their sole discretion. The
failure by the Company at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right, and each right will be deemed an
ongoing right which may be asserted at any time or from time to time. In
addition, the Company has reserved the right, notwithstanding the satisfaction
of each of the foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
non-fulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Original Notes
tendered and no Exchange Notes will be issued in exchange for any such Original
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Exchange Offer Registration Statement of which this Prospectus
constitutes a part, or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
EXCHANGE AGENT
Harris Trust Company of California has been appointed as the Exchange Agent
for the Exchange Offer. Letters of Transmittal must be addressed to the Exchange
Agent at its address set forth on the back cover page of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting and legal fees, will be paid by
the Company and are estimated at approximately $200,000.
33
<PAGE> 36
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Original Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Original
Notes in such jurisdiction. In any jurisdiction the securities laws or blue sky
laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
FEDERAL INCOME TAX CONSEQUENCES
Based upon the opinion of Preston Gates & Ellis, counsel to the Company,
the material federal income tax consequences of participating in the Exchange
Offer are that the exchange for Exchange Notes by holders of Original Notes will
not be a taxable exchange for federal income tax purposes, and such holders will
not recognize any taxable gain or loss or any interest income as a result of
such exchange. Such opinion is based on Treasury Regulation Section 1.1001-3.
OTHER
Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to accept the Exchange Offer and tender their
Original Notes. Holders of the Original Notes are urged to consult their
financial and tax advisors in making their own decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Notes pursuant to the terms of this Exchange Offer,
the Company will have fulfilled a covenant contained in the terms of the
Registration Rights Agreement. Holders of the Original Notes who do not tender
their certificates in the Exchange Offer will continue to hold such certificates
and will be entitled to all the rights, and subject to all the limitations
applicable thereto, under the Indenture, such holders will have no further
rights to registration of Original Notes under the Registration Rights
Agreement. See "Description of the Notes -- Registration Covenant; Exchange
Offer." All untendered Original Notes will continue to be subject to the
restriction on transfer set forth in the Indenture. To the extent that Original
Notes are tendered and accepted in the Exchange Offer, the trading market, if
any, for the Original Notes could be adversely affected. See "Risk Factors --
Consequences of Failure to Exchange."
The Company may in the future seek to acquire untendered Original Notes in
the open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company has no present plan to acquire any
Original Notes which are not tendered in the Exchange Offer.
34
<PAGE> 37
THE COMPANY
Western Wireless provides wireless communications services in the western
United States. The Company owns an aggregate of 80 cellular and PCS licenses for
a geographic area covering approximately 25.5 million pops and 41% of the
continental United States. In its cellular and PCS markets, the Company served
270,600 subscribers at June 30, 1996.
The Company owns and operates cellular communications systems in 57 RSAs
and 16 MSAs with an aggregate population of approximately 6.0 million persons.
In its cellular markets, the Company uses the CELLULAR ONE brand name. The
Company holds broadband PCS licenses for seven MTAs covering 19.5 million
persons -- Honolulu, Salt Lake City, El Paso/Albuquerque, Portland, Oklahoma
City, Des Moines/Quad Cities and Denver. The Company's PCS markets are operated
under the Company's proprietary VoiceStream brand name. In February 1996, the
Company's PCS system in the Honolulu MTA became the first auction-awarded PCS
system to commence commercial operations in the United States. Four of the
Company's PCS systems are currently operational utilizing internationally-proven
GSM technology as the network standard. See "Business -- Introduction,"
"-- Markets and Systems" and "-- PCS Operations."
The wireless communications industry is in a period of tremendous growth in
the United States. Since its introduction in 1983, commercial cellular telephone
service has grown dramatically and now dominates the wireless communications
market. The Company has experienced rapid growth of its cellular operations,
having increased its cellular subscriber base to 264,200 at June 30, 1996 from
13,700 at January 1, 1993. Service revenues grew to $135.1 million in 1995 from
$18.4 million in 1993. The Company believes the wireless communications market
will continue to grow due to enhanced service offerings, the emergence of PCS
systems, increased awareness of the productivity, convenience and security
benefits associated with wireless communications services and anticipated
declines in pricing for its services. The Company believes it is well positioned
to take advantage of these growth opportunities as a result of its existing
operations and systems infrastructure, wide geographic coverage area and the
experience and expertise of its management team. See "Business" and
"Management."
The Company is a Washington corporation which is the successor to a
Delaware corporation incorporated in January 1994. The Company's principal
executive offices are located at 2001 N.W. Sammamish Road, Issaquah, Washington
98027, and its telephone number is (206) 313-5200.
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
35
<PAGE> 38
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1996, and as adjusted to give effect to the Offering of the Original Notes
on October 24, 1996 as if the Offering had occurred on June 30, 1996 and the
application of the net proceeds therefrom.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents......................................... $ 90,729 $ 284,988
========= =========
Long-term debt:
Credit Facility:
Revolver.....................................................
Term......................................................... $ 200,000 $ 200,000
NORTEL Facility................................................. 43,800 43,800
10 1/2% Senior Subordinated Notes Due 2006...................... 200,000 200,000
10 1/2% Senior Subordinated Notes Due 2007...................... 200,000
Other........................................................... 2,671 2,671
--------- ---------
Total long-term debt......................................... 446,471 646,471
--------- ---------
Shareholders' equity(1):
Preferred Stock, no par value, 50,000,000 shares authorized; no
shares issued and outstanding................................
Common Stock, no par value, 300,000,000 shares authorized
Class A, 12,734,190 shares issued and outstanding and as
adjusted and Class B, 56,661,721 shares issued and
outstanding and as adjusted................................. 568,624 568,624
Deferred compensation........................................... (1,104) (1,104)
Deficit......................................................... (124,294) (124,294)
--------- ---------
Total shareholders' equity................................... 443,226 443,226
--------- ---------
Total capitalization.............................................. $ 889,697 $ 1,089,697
========= =========
</TABLE>
- ---------------
(1) Does not include (i) 3,630,260 shares of Class B Common Stock and 42,500
shares of Class A Common Stock issuable upon exercise of outstanding
options, (ii) 2,178,478 shares of Class A Common Stock reserved for issuance
pursuant to future option grants under the Company's stock option plan,
(iii) up to 372,441 shares of Class B Common Stock issuable upon exercise of
exchange rights exercisable no sooner than 2001 issued to the Company's
partners in Cook Inlet PCS or (iv) 8,860 shares of Class A Common Stock
(based on the fair market value of the stock of Western Wireless
International Corporation on the date hereof) issuable under the Horwitz
Agreement (as defined in "Certain Transactions"). See "Certain Transactions"
and "Description of Capital Stock."
36
<PAGE> 39
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected consolidated financial and
operating data for the Company as of and for each of the three years in the
period ended December 31, 1995, which was derived from the Company's
consolidated financial statements and notes thereto that have been audited by
Arthur Andersen LLP, independent public accountants. The table also sets forth
certain unaudited selected consolidated financial and operating data for the
Company as of June 30, 1996 and for the six months ended June 30, 1996 and 1995,
as of and for the nine months ended December 31, 1992, as of and for the three
months ended March 31, 1992 and as of and for the year ended December 31, 1991.
The information as of June 30, 1996 and for the six months ended June 30, 1996
and 1995 is unaudited but in the opinion of the Company reflects all adjustments
necessary for the fair presentation of the Company's financial position and
results of operations for such periods, and may not be indicative of the results
of operations for a full year. MCLP, a predecessor of the Company, was not
formed until October 1992. In March 1992, GCC reorganized under Chapter 11 of
the U.S. Bankruptcy Code and, as part of the reorganization, GCC adopted
fresh-start reporting in conformity with procedures specified by the American
Institute of Certified Public Accountants Statement of Position 90-7.
Accordingly, the financial data of the Company prepared as of March 31, 1992 and
for subsequent periods are stated on a basis different from, and are not
comparable to, financial data for prior dates and periods. All financial data
relating to the Company herein with respect to periods after the date of the
Business Combination reflect the combined operations of GCC and MCLP and all
such data with respect to prior periods reflect only the operations of GCC,
which, for accounting purposes, is considered Western Wireless Corporation's
predecessor. Accordingly, the financial data of the Company for periods
subsequent to the Business Combination are not comparable to financial data for
prior periods. All the data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and notes thereto. See Note 12
to the Company's consolidated financial statements for pro forma information
presenting the results of operations of the Company as if the Business
Combination occurred on January 1, 1993, and see the consolidated financial
statements of MCLP included herein for financial information of MCLP prior to
the Business Combination.
<TABLE>
<CAPTION>
SIX MONTHS NINE THREE
ENDED MONTHS MONTHS YEAR
JUNE 30, YEAR ENDED DECEMBER 31, ENDED ENDED ENDED
----------------------- ---------------------------------- DECEMBER 31, MARCH 31, DECEMBER 31,
1996 1995 1995 1994 1993 1992 1992 1991
--------- --------- -------- -------- -------- ------------ --------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
Subscriber revenues..... $ 79,151 $ 43,551 $105,430 $ 38,838 $ 11,105 $ 4,861 $ 1,072 $ 3,392
Roamer revenues......... 15,871 11,967 29,660 16,746 7,285 4,468 881 2,760
Equipment sales and
other revenue......... 9,582 5,179 11,465 7,524 2,344 1,208 262 883
-------- -------- -------- -------- -------- ------- ------- --------
Total revenues........ 104,604 60,697 146,555 63,108 20,734 10,537 2,215 7,035
-------- -------- -------- -------- -------- ------- ------- --------
Operating expenses:
Cost of service......... 19,554 12,132 27,686 13,303 4,310 2,730 655 2,840
Cost of equipment
sales................. 14,792 8,890 20,705 11,446 3,533 1,818 400 1,113
General and
administrative........ 28,409 13,153 31,253 15,226 6,253 5,048 1,156 5,226
Sales and marketing..... 32,078 16,411 41,390 18,553 6,101 3,074 812 2,948
Depreciation and
amortization.......... 33,434 21,900 49,456 25,670 5,399 3,746 2,787 12,276
Provision for
restructuring costs... 2,478 3,137
-------- -------- -------- -------- -------- ------- ------- --------
Total operating
expenses............ 128,267 72,486 170,490 86,676 25,596 16,416 5,810 27,540
-------- -------- -------- -------- -------- ------- ------- --------
Operating loss............ (23,663 ) (11,789 ) (23,935) (23,568) (4,862) (5,879) (3,595) (20,505)
-------- -------- -------- -------- -------- ------- ------- --------
Other income (expense):
Interest and financing
expense, net.......... (17,014 ) (11,329 ) (25,428) (10,659) (2,242) (1,666) (169) (8,273)
Gain (loss) on
dispositions, net..... (255 ) (8 ) (573) 6,202 10,102 1,876 4,024 (14,404)
Other, net.............. 762 518 627 2,065 331 130 (189) (1,116)
-------- -------- -------- -------- -------- ------- ------- --------
Income (loss) before
extraordinary items..... (40,170 ) (22,608 ) (49,309) (25,960) 3,329 (5,539) 71 (44,298)
Extraordinary items....... (6,645 ) (6,645) 63,569
-------- -------- -------- -------- -------- ------- ------- --------
Net income (loss)..... $(40,170 ) $(29,253 ) $(55,954) $(25,960) $ 3,329 $ (5,539) $63,640 $(44,298)
======== ======== ======== ======== ======== ======= ======= ========
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
SIX MONTHS NINE THREE
ENDED MONTHS MONTHS YEAR
JUNE 30, YEAR ENDED DECEMBER 31, ENDED ENDED ENDED
------------------------- ---------------------------------------- DECEMBER 31, MARCH 31, DECEMBER 31,
1996 1995 1995 1994 1993 1992 1992 1991
---------- ---------- ---------- ---------- ---------- ------------ --------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Share data:
Income (loss)
per common
share before
extraordinary
item.......... $ (0.66) $ (0.43) $ (0.87) $ (0.59) $ 0.10 $ (0.22) * *
Per common share
effect of
extraordinary
item.......... (0.12) (0.12) * *
-------- -------- -------- -------- -------- ------- ------- --------
Net income
(loss) per
common
share....... $ (0.66) $ (0.55) $ (0.99) $ (0.59) $ 0.10 $ (0.22) * *
======== ======== ======== ======== ======== ======= ======= ========
Weighted average
common shares
and common
equivalent
shares
outstanding... 60,925,000 53,574,000 56,470,000 43,949,000 32,253,000 25,665,000 * *
======== ======== ======== ======== ======== ======= ======= ========
</TABLE>
- ---------------
* Not meaningful
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------------------------------- MARCH 31, DECEMBER 31,
1996 1995 1994 1993 1992 1992 1991
---------- ---------- ---------- ---------- ------------ ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEETS DATA:
Current assets..................... $ 138,197 $ 37,508 $ 36,769 $ 14,686 $ 8,098 $ 4,685 $ 2,469
Property and equipment, net........ 296,769 193,692 120,648 48,591 27,528 20,984 23,076
Licensing costs and other
intangible assets, net........... 538,816 417,971 211,309 86,270 43,873 41,941 11,945
Other assets....................... 6,182 9,857 1,468 6,219 5,522 2,083 8,133
-------- -------- -------- -------- -------- --------- --------
Total assets................... $ 979,964 $ 659,028 $ 370,194 $ 155,766 $ 85,021 $ 69,693 $ 45,623
======== ======== ======== ======== ======== ========= ========
Current liabilities................ $ 90,267 $ 55,936 $ 39,214 $ 16,447 $ 5,806 $ 5,373 $ 19,580
Long-term debt, net of current
portion.......................... 446,471 362,487 200,587 53,430 14,893 20,086 85,460
Minority interests in equity of
consolidated subsidiary.......... 3,376
Shareholders' equity
(deficiency)..................... 443,226 240,605 127,017 85,889 64,322 44,234 (59,417)
-------- -------- -------- -------- -------- --------- --------
Total liabilities and
shareholders' equity......... $ 979,964 $ 659,028 $ 370,194 $ 155,766 $ 85,021 $ 69,693 $ 45,623
======== ======== ======== ======== ======== ========= ========
OTHER DATA:
Cellular pops(1)................... 6,041,172 5,764,152 5,240,702 2,190,104 1,749,999 1,579,051 1,712,519
Ending cellular subscribers........ 264,200 209,500 112,800 30,000 13,700 8,300 7,700
EBITDA(2).......................... $ 9,771 $ 25,521 $ 2,102 $ 537 $ (2,133) $ (808) $ (8,229)
Ratio of earnings to fixed
charges(3)....................... * * * 2.22 * 1.33 *
CASH FLOWS PROVIDED BY (USED IN):
Operating activities............. $ (20,551) $ (745) $ (988) $ (255) $ (1,490) $ (2,376) $ (11,284)
Investing activities............. $ (203,295) $ (293,579) $ (70,190) $ (32,535) $ (13,159) $ 12,953 $ (7,412)
Financing activities............. $ 306,003 $ 295,109 $ 70,777 $ 36,212 $ 16,552 $ (8,131) $ 18,397
</TABLE>
- ---------------
* Not meaningful
(1) Based upon 1995 estimates by Equifax for 1995. For periods between 1990 and
1995, the Company has evenly applied Equifax's growth factors from 1990 to
1995 to the 1990 U.S. Census Bureau population figures. See
"Business -- Markets and Systems."
(2) EBITDA represents operating income (loss) from operations before interest,
taxes and depreciation and amortization. EBITDA is a measure commonly used
in the industry but is not prepared in accordance with GAAP and should not
be considered as a measurement of net cash flows from operating activities.
In 1994 and 1991, the Company recorded provisions for restructuring costs of
$2.5 million and $3.1 million, respectively. EBITDA before such provisions
for restructuring costs would have been $4.6 million and $5.1 million in
1994 and 1991, respectively.
(3) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings (loss) before extraordinary items, interest and financing expense,
amortization of deferred financing costs and the portion of rents
representative of the interest factor by fixed charges. Fixed charges
consist of the sum of interest and financing expense, amortization of
deferred financing costs, capitalized interest and the portion of rents
representative of the interest factor. The ratio of earnings to fixed
charges is not meaningful for periods that result in a deficit. For the
periods indicated above, earnings were inadequate to cover fixed charges and
the deficiency of earnings to fixed charges was $42.6 million for the six
months ended June 30, 1996 and $49.7 million and $26.0 million for the years
ended December 31, 1995 and 1994, respectively, and $5.5 million for the
nine months ended December 31, 1992 and $44.3 million for the year ended
December 31, 1991. See "Risk Factors -- High Leverage; Debt Service;
Restrictive Covenants."
38
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and notes thereto and other
financial information included elsewhere in this Prospectus.
OVERVIEW
The Company provides wireless communications services in the western United
States through the ownership and operation of cellular communications systems in
73 RSAs and MSAs. The Company has acquired broadband PCS licenses in seven MTAs.
During 1996, the Company commenced commercial operations in four of its PCS
MTAs. A partnership in which the Company holds a 49.9% limited partnership
interest has acquired broadband PCS licenses in 14 BTAs.
Western Wireless Corporation was formed in July 1994 as the result of the
Business Combination among various companies, including MCLP and GCC. GCC
commenced operations in 1989 and MCLP was formed in 1992. As a result of the
Business Combination and a series of related transactions, Western Wireless
Corporation became the owner of all of the issued and outstanding shares of
common stock of GCC and the owner of all of the assets of MCLP. The Business
Combination constituted an acquisition of MCLP by GCC for accounting purposes.
As a result, all financial data relating to the Company herein with respect to
periods after the date of the Business Combination reflects the combined
operations of GCC and MCLP and all such data with respect to prior periods
reflects only the operations of GCC, which, for accounting purposes, is
considered Western Wireless Corporation's predecessor. Accordingly, the
financial data of the Company for periods subsequent to the Business Combination
are not comparable to financial data for prior periods. See Note 12 to the
Company's consolidated financial statements for pro forma information presenting
the results of operations of the Company as if the Business Combination occurred
on January 1, 1993, and see the consolidated financial statements of MCLP
included herein for financial information of MCLP prior to the Business
Combination.
The Company has operated the cellular systems in its markets, on average,
for over three years and has experienced rapid growth during such periods. The
Company's cellular subscribers and penetration were 264,200 and 4.4%,
respectively, at June 30, 1996 compared to 13,700 and 0.8%, respectively, at
January 1, 1993. The Company intends to continue to increase its total number of
subscribers in its cellular markets, but expects the rate of growth in
subscriber penetration to slow.
The Company's revenues primarily consist of subscriber revenues (including
access charges and usage charges), roamer revenues (fees charged for providing
services to subscribers of other cellular communications systems when such
subscribers, or "roamers," place or receive a phone call within one of the
Company's service areas) and equipment sales. The majority of the Company's
revenues are derived from subscriber revenues. The Company had no revenues from
its paging or PCS systems prior to February 1, 1996 and February 29, 1996,
respectively. Revenues from paging systems, which are included in other revenue,
are expected to account for less than 3% of the Company's total revenues in
1996. The Company expects to continue to sell cellular and PCS handsets below
cost and regards these losses as a cost of building its subscriber base.
Average monthly subscriber revenue per subscriber from its cellular
operations increased to $57.25 in 1995 compared to $49.72 in 1993. The Company
believes its generally favorable average monthly subscriber revenue per
subscriber reflects its efforts to expand its geographic coverage and focus
subscribers on higher-end rate plans, and reflects the positive characteristics
for wireless communications in RSAs and small MSAs. The Company expects that the
average monthly subscriber revenue per subscriber from its cellular operations
may decline due to a number of factors, including the addition of new
subscribers which may have lower usage rates, potential price decreases and
increased competition.
39
<PAGE> 42
Cost of service consists of the cost of providing wireless service to
subscribers, primarily including costs to access local exchange and long
distance carrier facilities and maintain the Company's wireless network. General
and administrative expenses include the costs associated with billing a
subscriber and the administrative cost associated with maintaining subscribers,
including customer service, accounting and other centralized functions. General
and administrative expenses also include provisions for unbillable fraudulent
roaming charges and subscriber bad debt. Sales and marketing costs include costs
associated with acquiring a subscriber, including direct and indirect sales
commissions, salaries, all costs of sales offices and retail locations,
advertising and promotional expenses. Depreciation and amortization includes
primarily depreciation expense associated with the Company's property and
equipment in service and amortization associated with its wireless licenses for
operational markets. The Company amortizes licensing costs associated with PCS
systems once they become operational.
Certain headquarter costs, including customer service, accounting and other
centralized functions, are incurred on behalf of all of the Company's
operations. These costs are allocated to those operations in a manner which
reflects management's judgment as to the nature of the activity causing those
costs to be incurred.
Cellular EBITDA was $28.9 million in 1995 compared to $0.5 million in 1993.
However, the Company expects a decline in consolidated EBITDA as it develops,
constructs and operates its PCS systems and seeks aggressively to build its PCS
subscriber base. To the extent that the time to complete the PCS build-out is
faster or the costs are greater than expected, operating losses will increase
and consolidated EBITDA may be negative for some periods. The Company has
experienced rapid growth in its revenues and assets during the periods set forth
below, which rates of growth will not necessarily continue over the next few
years. The Company has made and expects to make substantial capital expenditures
in connection with the expansion of its wireless communications systems. The
Company's results of operations for the periods described herein will not be
indicative of future performance.
EBITDA represents operating income (loss) from operations before interest,
taxes and depreciation and amortization. EBITDA is a measure commonly used in
the industry but is not prepared in accordance with GAAP and should not be
considered as a measurement of net cash flows from operating activities.
Cellular EBITDA represents EBITDA from the Company's cellular operations.
In the comparisons that follow, the Company has separately set forth
certain information relating to cellular operations (including paging) and PCS
operations. The Company believes that this is appropriate because its cellular
systems have been operating for a number of years while its PCS systems had not
commenced commercial operations until 1996, although the Company incurred
start-up costs beginning in the third quarter of 1995 in connection with such
operations.
40
<PAGE> 43
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
The Company had 264,200 cellular subscribers at June 30, 1996. The 26.1%
increase in subscribers during the six months ended June 30, 1996 results
primarily from a net increase of 50,000 subscribers generated through the
Company's distribution channels. At June 30, 1995, the Company had 154,000
cellular subscribers representing a net increase of 35,500 or 31.4% from
December 31, 1994. The Company had 6,400 PCS subscribers at June 30, 1996.
REVENUES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------
1996 1995
------------------- -------
CELLULAR PCS CELLULAR
-------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Subscriber revenues......................................... $ 78,297 $ 854 $43,551
Roamer revenues............................................. 15,871 11,967
Equipment sales............................................. 5,999 1,633 5,179
Other revenues(1)........................................... 1,950
-------- ------ -------
Total revenues.................................... $102,117 $2,487 $60,697
========= ====== ========
</TABLE>
- ---------------
(1) Primarily revenues from paging services.
Cellular subscriber revenues increased to $78.3 million for the six months
ended June 30, 1996, from $43.6 million for the six months ended June 30, 1995.
This $34.7 million or 79.8% increase is primarily due to continued growth in the
number of subscribers added through the Company's distribution channels during
the twelve months ended June 30, 1996. Average monthly cellular subscriber
revenue per subscriber was $54.60 for the six months ended June 30, 1996,
compared to $55.63 for the six months ended June 30, 1995. Whereas the Company
has experienced relatively stable average monthly cellular subscriber revenue
per subscriber, the industry in general has experienced consistent declines for
a number of years. The 1.9% decline during the six month period ended June 30,
1996 may reflect the beginning of a downward trend in the Company's average
monthly cellular subscriber revenue per subscriber.
PCS subscriber revenues for the six months ended June 30, 1996, were $0.9
million. Average monthly PCS subscriber revenue per subscriber was $61.00 for
the six months ended June 30, 1996. As the Company's PCS operations only began
generating revenue during 1996, these results are not necessarily representative
of future operations.
Roamer revenues were $15.9 million for the six months ended June 30, 1996,
compared to $12.0 million for the six months ended June 30, 1995, an increase of
$3.9 million or 32.6%. Growth in the Company's roamer revenue generally reflects
increases in the Company's geographic coverage and the general subscriber growth
in the industry. Roamer revenues as a percentage of total cellular revenues
declined to 15.5% for the six months ended June 30, 1996, from 19.7% for the six
months ended June 30, 1995, as a result of the 79.8% growth in subscriber
revenues, which exceeded the 32.6% increase in roamer revenues. While the
Company expects total roamer revenues to continue to increase, it expects its
roamer revenues as a percentage of total revenues to continue to decline. This
trend should continue based upon the above mentioned factors and from the
effects of the decline in reciprocal per minute roamer rates charged by carriers
in the industry.
41
<PAGE> 44
OPERATING EXPENSES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------
1996 1995
-------------------- -------
CELLULAR(1) PCS CELLULAR
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost of service............................................ $ 17,977 $ 1,577 $12,132
Cost of equipment sales.................................... 11,552 3,240 8,890
General and administrative................................. 20,802 7,607 13,153
Sales and marketing........................................ 23,817 8,261 16,411
Depreciation and amortization.............................. 31,549 1,885 21,900
-------- ------- -------
Total operating expenses......................... $105,697 $22,570 $72,486
========= ======== ========
</TABLE>
- ---------------
(1) Includes expenses attributable to paging services.
The comparisons below only relate to the Company's cellular operations
(which include paging operations for 1996).
Cost of service increased to $18.0 million for the six months ended June
30, 1996, from $12.1 million for the six months ended June 30, 1995. This
increase is primarily attributable to the increased number of subscribers which
resulted in increased costs to access local exchange and long distance carrier
facilities and maintain the Company's expanding wireless network. While cost of
service increased $5.9 million or 48.2%, it decreased as a percentage of service
revenues to 18.7% for the six months ended June 30, 1996, from 21.9% for the six
months ended June 30, 1995, which is due primarily to efficiencies gained from
the growing subscriber base. Service revenues include subscriber, roamer and
other revenues.
General and administrative costs increased to $20.8 million, which includes
a one-time charge of $0.5 million for deferred compensation expense, for the six
months ended June 30, 1996 from $13.2 million for the six months ended June 30,
1995, an increase of $7.6 million or 58.2%. This increase is primarily
attributable to the increase in costs associated with supporting the increased
subscriber base. The increase in general and administrative costs exclusive of
the one-time charge was $7.2 million or 54.7% over the six months ended June 30,
1995. Exclusive of the one-time charge, these costs continue to decline as a
percentage of service revenues to 21.2% for the six months ended June 30, 1996,
from 23.7% for the six months ended June 30, 1995, primarily due to improved
efficiency and as a result of continuing economies of scale.
Sales and marketing costs increased to $23.8 million for the six months
ended June 30, 1996, from $16.4 million for the six months ended June 30, 1995,
primarily due to net subscriber additions. Sales and marketing costs per net
subscriber added increased to $476 for the six months ended June 30, 1996, from
$460 for the six months ended June 30, 1995. Including the losses on equipment
sales, the costs per net subscriber added increased to $587 for the six months
ended June 30, 1996, from $564 for the six months ended June 30, 1995.
Depreciation expense increased to $19.8 million for the six months ended
June 30, 1996, from $13.7 million for the six months ended June 30, 1995. This
increase of $6.1 million or 44.5%, is attributable to the continuing expansion
of the Company's cellular systems. Amortization expense increased to $11.7
million for the six months ended June 30, 1996, from $8.2 million for the six
months ended June 30, 1995. This $3.5 million or 42.7%, increase is primarily
attributable to an increase in gross cellular licensing costs and other
intangible assets.
The majority of the PCS operating expenses of $22.6 million for the six
months ended June 30, 1996 consist of start-up costs in the non-operating PCS
MTAs of the Company. Accordingly, the operating expenses for PCS are not
representative of future operations.
42
<PAGE> 45
OPERATING LOSS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------
1996 1995
------------------------ --------
CELLULAR(1) PCS CELLULAR
----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating loss.......................................... $(3,580) $(20,083) $(11,789)
========= ========= =========
</TABLE>
- ---------------
(1) Includes paging operations.
Total operating loss increased to $23.7 million for the six months ended
June 30, 1996, from $11.8 million for the six months ended June 30, 1995,
primarily as a result of the $20.1 million operating loss attributable to PCS
operations. Cellular operating loss improved to $3.6 million for six months
ended June 30, 1996, from $11.8 million for the six months ended June 30, 1995,
due to increased revenues, which exceeded increases in operating expenses.
OTHER INCOME (EXPENSE)
Interest and financing expense increased to $17.0 million for the six
months ended June 30, 1996, from $11.3 million for the six months ended June 30,
1995. The increase of $5.7 million or 50.2%, is primarily attributable to an
increase in long-term debt, which increased to $446.5 million at June 30, 1996,
from $287.8 million at June 30, 1995, to fund the Company's expansion, partially
offset by a decrease in the weighted average interest rate to 8.5% for the six
months ended June 30, 1996, from 9.2% for the six months ended June 30, 1995.
The Company anticipates interest and financing expense to continue to increase
due to the issuance of its 2006 Notes which were only outstanding for one month
during the six months ended June 30, 1996 and the Senior Subordinated Notes
offered hereby.
EBITDA
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------
1996 1995
------------------------ --------
CELLULAR(1) PCS CELLULAR
----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
EBITDA.................................................... $27,969 $(18,198) $ 10,111
========= ========= ========
</TABLE>
- ---------------
(1) Includes paging operations.
Total EBITDA decreased to $9.8 million for the six months ended June 30,
1996, from $10.1 million for the six months ended June 30, 1995, as a result of
increased cellular EBITDA offset by the $(18.2) million EBITDA attributable to
PCS operations. Cellular EBITDA increased 177% to $28.0 million for the six
months ended June 30, 1996, from $10.1 million for the six months ended June 30,
1995, primarily as a result of increased revenues due to the increased
subscriber base and the related cost efficiencies. As a result, cellular
operating margin (cellular EBITDA as a percentage of cellular service revenues)
increased to 29.1% for the six months ended June 30, 1996, from 18.2% for the
six months ended June 30, 1995. EBITDA is a measure commonly used in the
industry but is not prepared in accordance with GAAP and should not be
considered as a measurement of net cash flows from operating activities.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The Company had 209,500 cellular subscribers at December 31, 1995, an
increase of 96,700 or 85.7% during 1995. At December 31, 1994, the Company had
112,800 cellular subscribers, an increase of 82,800 or 276% during 1994. In 1995
and 1994, the net number of subscribers added through system acquisitions was
approximately 3,300 and 37,500 (including 29,000 through the acquisition of
MCLP), respectively. Excluding such acquired subscribers, the percentage of such
43
<PAGE> 46
net subscriber additions through independent agents and retailers was 35% in
1995, which reflects the Company's efforts to further expand distribution
channels.
REVENUES
All revenues below are from cellular operations. The Company commenced
paging operations and PCS commercial operations in February 1996 and therefore
had no PCS or paging revenues in prior years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Subscriber revenues............................................. $105,430 $ 38,838
Roamer revenues................................................. 29,660 16,746
Equipment sales................................................. 11,465 7,524
-------- --------
Total revenues................................................ $146,555 $ 63,108
========= ========
</TABLE>
Subscriber revenues increased to $105.4 million in 1995 from $38.8 million
in 1994. This $66.6 million or 172% increase is due primarily to the 85.7%
growth in the number of subscribers (including as a result of the Business
Combination). Average monthly cellular subscriber revenue per subscriber was
$57.25 in 1995, compared to $54.35 in 1994. This $2.90 or 5.3% increase is a
result of the Company's efforts to expand its geographical coverage and focus
subscribers on higher-end rate plans, and reflects the positive characteristics
for wireless communications services in RSAs and small MSAs.
Roamer revenues were $29.7 million in 1995 compared to $16.7 million in
1994, an increase of $13.0 million or 77.8%. Growth in the Company's roamer
revenues generally reflects increases in the Company's geographical coverage
(including as a result of the Business Combination) and market penetration
levels in adjacent markets and the cellular industry as a whole. Roamer revenues
as a percentage of total revenues declined to 20.3% in 1995 from 26.5% in 1994,
as a result of the 172% increase in subscriber revenues which exceeded the 77.8%
increase in roamer revenues.
Equipment sales, which consist primarily of handset sales, increased to
$11.5 million in 1995 from $7.5 million in 1994. This $4.0 million or 53.3%
increase is primarily due to the increase in net subscriber additions (including
as a result of the Business Combination), partially offset by a decrease in the
average handset sales price. The Company anticipates continued growth in
equipment sales as a result of increases in net cellular subscriber additions
and the commencement of commercial operations of its PCS systems.
OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
------------------- --------
CELLULAR PCS CELLULAR
-------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost of service............................................ $ 27,686 $ 13,303
Cost of equipment sales.................................... 20,705 11,446
General and administrative................................. 28,184 $3,069 15,226
Sales and marketing........................................ 41,051 339 18,553
Depreciation and amortization.............................. 49,187 269 25,670
Provision for restructuring costs.......................... 2,478
-------- ------ --------
Total operating expenses................................. $166,813 $3,677 $ 86,676
======== ====== ========
</TABLE>
Operating expenses in 1995 include $3.7 million of costs relating to the
start-up of PCS commercial operations.
44
<PAGE> 47
The comparisons below refer only to the Company's cellular operations.
Cost of service increased to $27.7 million in 1995 from $13.3 million in
1994, primarily as a result of the 85.7% increase in the number of subscribers
(including as a result of the Business Combination), which resulted in increased
costs to access local exchange and long distance carrier facilities and to
maintain the Company's wireless network. While this represents a $14.4 million
or 108% increase for the year, it represents a decrease as a percentage of
service revenues to 20.5% in 1995 from 23.9% in 1994, which is primarily due to
efficiencies gained from the growing subscriber base.
General and administrative costs increased to $28.2 million in 1995 from
$15.2 million in 1994, an increase of $13.0 million or 85.5%, which is primarily
attributable to the increase in the costs associated with supporting the
increased subscriber base (including as a result of the Business Combination).
However, these costs continued to decline as a percentage of service revenues to
20.9% in 1995 from 27.3% in 1994, primarily attributable to improved efficiency.
While the Company has not incurred material fraud or bad debt expenses to date
and continues to develop and invest in measures to minimize such expenses, there
can be no assurance that such expenses will not increase in the future in the
aggregate or as a percentage of total revenues.
Sales and marketing costs increased to $41.1 million in 1995 from $18.6
million in 1994 primarily due to net subscriber additions (including as a result
of the Business Combination), an increase in the Company's use of indirect sales
channels and an increase in churn (subscriber base attrition). For these
reasons, sales and marketing costs per net subscriber added increased to $446 in
1995 from $411 in 1994. Including the losses on equipment sales, the costs per
net subscriber added increased to $546 in 1995 from $497 in 1994.
Depreciation expense was $30.1 million in 1995 compared to $17.0 million in
1994. This $13.1 million or 77.1% increase is attributable to the expansion of
the Company's cellular systems (including as a result of the Business
Combination). Amortization expense increased to $19.1 million in 1995 from $8.7
million in 1994. This $10.4 million or 120% increase is attributable to an
increase in gross cellular licensing costs and other intangible assets to $300.5
million at December 31, 1995 from $223.0 million at December 31, 1994.
Provision for restructuring costs of $2.5 million in 1994 consists of costs
relating to the Business Combination, which primarily relates to the elimination
of duplicative headquarters and other facilities.
OPERATING LOSS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994
-------------------- ------------
CELLULAR PCS CELLULAR
-------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating loss......................................... $(20,258) $(3,677) $(23,568)
</TABLE>
Total operating loss increased to $23.9 million in 1995 from $23.6 million
in 1994 as a result of the $3.7 million operating loss attributable to PCS
operations offset by the improved cellular operating loss. Cellular operating
loss decreased to $20.3 million in 1995 from $23.6 million in 1994. Cellular
operating loss in 1994 included a one-time provision for restructuring costs of
$2.5 million.
OTHER INCOME (EXPENSE); EXTRAORDINARY LOSS; NET OPERATING LOSS
CARRYFORWARDS
Interest and financing expense increased to $25.4 million in 1995 from
$10.7 million in 1994. The $14.7 million or 137% increase is primarily
attributable to an increase in borrowings to $362.5 million at December 31, 1995
from $211.5 million at December 31, 1994, to fund the Company's expansion and
capital expenditures. The weighted average interest rate was 9.2% in 1995 and
1994.
45
<PAGE> 48
The $6.2 million gain in 1994 on dispositions represents gains associated
with the exchange or sale of certain cellular systems. Such gains are
nonrecurring.
Extraordinary loss on early extinguishment of debt of $6.6 million in 1995
represents the charge for the unamortized portion of financing costs incurred in
connection with the refinancing of the Company's then outstanding credit
facility.
The Company had available at December 31, 1995 net operating loss
carryforwards ("NOLs") of approximately $94 million which will expire in the
years 2002 through 2010. The Company may be limited in its ability to use these
carryforwards in any one year due to ownership changes that preceded the
Business Combination. Approximately $17 million of such NOLs are subject to such
limitations, which under current rules will result in an annual limit of $2.8
million. Any amount of NOLs subject to such limitation that the Company is not
able to use in any one year may be used in subsequent years prior to the
expiration thereof. There is currently no limitation on the remaining $77
million. Therefore, in the opinion of management, all NOLs will be utilized
prior to their expiration. See Note 10 of notes to the Company's consolidated
financial statements.
EBITDA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994
-------------------- --------
CELLULAR PCS CELLULAR
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
EBITDA....................................................... $ 28,929 $(3,408) $ 2,102
</TABLE>
EBITDA improved to $25.5 million for the year ended December 31, 1995 from
$2.1 million for the year end December 31, 1994, as a result of increased
cellular EBITDA offset by the negative $3.4 million EBITDA attributable to PCS
operations. Cellular EBITDA increased to $28.9 million in 1995 from $2.1 million
in 1994, primarily as a result of the increased subscriber base and the related
cost efficiencies (including as a result of the Business Combination). As a
result, cellular operating margin (cellular EBITDA as a percentage of cellular
service revenues) increased to 21.4% in 1995 from 3.8% in 1994. EBITDA is a
measure commonly used in the industry but is not prepared in accordance with
GAAP and should not be considered as a measurement of net cash flows from
operating activities. In 1994, the Company recorded a provision for
restructuring costs of $2.5 million. EBITDA before provision for restructuring
costs would have been $4.6 million in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
The Company had 112,800 cellular subscribers at December 31, 1994 an
increase of 82,800 or 276% during 1994. At December 31, 1993, the Company had
30,000 subscribers, an increase of 16,300 or 119% during 1993. In 1994 and 1993,
the number of net subscribers added through system acquisitions was
approximately 37,500 (including 29,000 through the acquisition of MCLP) and
2,600, respectively.
REVENUES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Subscriber revenues............................................. $ 38,838 $ 11,105
Roamer revenues................................................. 16,746 7,285
Equipment sales................................................. 7,524 2,344
------- -------
Total revenues........................................ $ 63,108 $ 20,734
======= =======
</TABLE>
Subscriber revenues increased to $38.8 million in 1994 from $11.1 million
in 1993. This $27.7 million or 250% increase is primarily due to the 276% growth
in the number of subscribers (including as a result of the Business
Combination). Average monthly cellular subscriber revenue per subscriber was
$54.35 in 1994, compared to $49.72 in 1993. This $4.63 or 9.3% increase is a
result
46
<PAGE> 49
of the Company's efforts to expand its geographical coverage and focus
subscribers on higher-end rate plans, and reflects the positive characteristics
for wireless communications services in RSAs and MSAs.
Roamer revenues were $16.7 million in 1994 compared to $7.3 million in
1993, an increase of $9.4 million or 129%. Growth in the Company's roamer
revenues generally reflects increases in the Company's geographical coverage
(including as a result of the Business Combination) and market penetration
levels in adjacent markets and the cellular industry as a whole. Roamer revenues
as a percentage of total revenues declined to 26.5% in 1994 from 35.3% in 1993
as a result of the 250% increase in subscriber revenues, which exceeded the 129%
increase in roamer revenues.
Equipment sales revenues increased to $7.5 million in 1994 from $2.3
million in 1993. This $5.2 million or 226% increase is primarily due to the
increase in net subscriber additions (including as a result of the Business
Combination).
OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cost of service.................................................. $13,303 $ 4,310
Cost of equipment sales.......................................... 11,446 3,533
General and administrative....................................... 15,226 6,253
Sales and marketing.............................................. 18,553 6,101
Depreciation and amortization.................................... 25,670 5,399
Provision for restructuring costs................................ 2,478
------- -------
Total operating expenses............................... $86,676 $25,596
======= =======
</TABLE>
Cost of service increased to $13.3 million in 1994 from $4.3 million in
1993 primarily as a result of the 276% increase in the number of subscribers
(including as a result of the Business Combination), which resulted in increased
costs to access local exchange and long distance carrier facilities and to
maintain the Company's wireless network. This represents a $9.0 million or 209%
increase for the year, and 23.9% and 23.4% of service revenues for 1994 and
1993, respectively.
General and administrative costs increased to $15.2 million in 1994 from
$6.3 million in 1993, an increase of $8.9 million or 141%, which is primarily
attributable to the increase in the costs associated with supporting the
increased subscriber base (including as a result of the Business Combination).
However, these costs declined as a percentage of service revenues to 27.3% in
1994 from 34.2% in 1993, primarily attributable to improved efficiency.
Sales and marketing costs increased to $18.6 million in 1994 from $6.1
million in 1993 primarily due to net subscriber additions (including as a result
of the Business Combination). Sales and marketing costs per net subscriber added
were $411 in 1994 and $445 in 1993. Including the losses on equipment sales, the
costs per net subscriber added were $497 in 1994 and $533 in 1993. The decrease
in costs per net subscriber added from 1993 to 1994 is a result of the
efficiencies gained during 1994 from the ability to spread certain fixed costs
associated with the Company's retail stores and advertising over a larger number
of net subscriber additions.
Depreciation expense increased to $17.0 million in 1994 from $4.1 million
in 1993. This $12.9 million or 315% increase is attributable to the expansion of
the Company's cellular systems (including as a result of the Business
Combination). Amortization expense increased to $8.7 million in 1994 from $1.3
million in 1993. This $7.4 million or 569% increase is attributable to an
increase in gross cellular licensing costs and other intangible assets
(including as a result of the Business Combination) to $223.0 million at
December 31, 1994 from $88.2 million at December 31, 1993.
Provision for restructuring costs of $2.5 million in 1994 consists of costs
relating to the Business Combination, which primarily relates to the elimination
of duplicative headquarters and other facilities.
47
<PAGE> 50
OPERATING LOSS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Operating loss.................................................. $(23,568) $(4,862)
</TABLE>
Operating loss increased to $23.6 million in 1994 from $4.9 million in
1993. Operating loss in 1994 included a one-time provision for restructuring
costs of $2.5 million.
OTHER INCOME (EXPENSE)
Interest and financing expense increased to $10.7 million in 1994 from $2.2
million in 1993. This $8.5 million or 386% increase is primarily attributable to
an increase in borrowings to $211.5 million at December 31, 1994 from $60.8
million at December 31, 1993 to fund the Company's expansion and capital
expenditures, partially offset by a decrease in the weighted average interest
rate to 9.2% in 1994 from 9.4% in 1993.
The $6.2 million gain in 1994 on dispositions represents gains associated
with the exchange or sale of certain cellular systems. The $10.1 million gain in
1993 is attributable to the sale of certain cellular systems and minority
interests. Such gains are nonrecurring.
EBITDA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1994 1993
------ ----
(IN THOUSANDS)
<S> <C> <C>
EBITDA............................................................... $2,102 $537
</TABLE>
EBITDA increased to $2.1 million in 1994 from $0.5 million in 1993,
primarily as a result of increased subscriber base and the related cost
efficiencies. EBITDA is a measure commonly used in the industry but is not
prepared in accordance with GAAP and should not be considered as a measurement
of net cash flows from operating activities. In 1994, the Company recorded a
provision for restructuring costs of $2.5 million. EBITDA before such provision
for restructuring costs would have been $4.6 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes the proceeds from the Offering of $200 million
principal amount Original Notes completed on October 24, 1996, in combination
with the proceeds from the May 1996 Offerings and the Senior Secured Facilities,
will be sufficient to fund the build-out of its PCS systems (including related
operating losses), the continued growth of its cellular operations and its debt
service requirements through December 31, 1998, and will enable the Company to
take advantage of selected wireless acquisition opportunities (including those
that may arise through current or future FCC auctions). The Company currently
anticipates that it will require approximately $425 million to finance the
build-out of its PCS systems from June 30, 1996 through the end of 1998. The
Company will also expend additional funds to expand its cellular operations,
fund operating losses, service debt and finance acquisition opportunities. To
the extent that the build-out of the PCS systems is faster than expected, the
costs are greater than anticipated or the Company takes advantage of acquisition
opportunities, the Company may require additional funding to implement its
business strategy. See "Risk Factors -- High Leverage; Debt Service; Restrictive
Covenants," and "-- PCS Build-out and Capital Expenditures."
The amount of the Company's outstanding long-term debt increased to $446.5
million at June 30, 1996 from $53.4 million at December 31, 1993. In addition to
the $200.0 million principal amount of the 2006 Notes, at June 30, 1996 $200
million and $43.8 million were outstanding under the Credit Facility and the
NORTEL Facility, respectively, and the amounts available for borrowing under the
Credit Facility and the NORTEL Facility were $185 million and $33 million,
respectively. Indebtedness under the Credit Facility and the NORTEL Facility
matures on March 31, 2005 and
48
<PAGE> 51
December 31, 2003, respectively, and bears interest at variable rates.
Substantially all the assets of the Company are pledged as security for such
indebtedness. See "Description of Indebtedness."
The Company uses various financial instruments as part of its overall
strategy to manage the Company's exposure to market risks associated with
interest rate fluctuations. The Company has only limited involvement with these
financial instruments, and does not use them for trading purposes. Interest rate
swaps allow the Company to raise long-term borrowings at variable rates and swap
them into fixed rates for shorter durations. This enables the Company to
separate interest rate management from debt funding decisions. Interest rate cap
agreements are used to reduce the potential impact of increases in interest
rates on borrowings based upon variable interest rates. These transactions do
not subject the Company to risk of loss because gains and losses on these
contracts are offset against losses and gains on the underlying liabilities. No
collateral is held in relation to the Company's financial instruments.
At June 30, 1996, the Company had entered into interest rate caps and swaps
with a total notional amount of $205 million. Such caps and swaps expire between
August 1997 and March 1999. The amount of net unrealized loss attributable to
changing interest rates at June 30, 1996 was immaterial.
The NORTEL Facility finances the purchase of PCS switching and transmission
system equipment pursuant to a PCS Project and Supply Agreement that commits the
Company to purchase $200 million in equipment prior to June 30, 2000. Also as
part of its capital expenditure plan and in order to ensure adequate supply of
certain inventory requirements, the Company has entered into two agreements with
Nokia under which the Company has committed to purchase (i) a minimum number of
PCS and dual-mode handsets totaling approximately $43.7 million through October
1, 1999 and (ii) a minimum of $50 million of wireless communications equipment
and services for the Company's PCS systems prior to December 31, 1998.
Additionally, the Company has entered into an agreement with Lucent Technologies
Inc. to purchase at least $50 million of cellular products and services prior to
December 31, 2000, of which at least $17 million must be purchased by December
31, 1996.
Net cash used in operating activities was $20.6 million for the six months
ended June 30, 1996. Adjustments to the $40.2 million net loss for such period
to reconcile to net cash used in operating activities consisted primarily of
$34.0 million of depreciation and amortization. Other adjustments included
changes in operating assets and liabilities, net of effects from consolidating
acquired interests, consisting primarily of a $4.9 million increase in accounts
receivable primarily as a result of the increased subscriber base, an increase
of $11.0 million in inventories primarily as a result of the purchase of PCS
handsets for sale in the Honolulu, Salt Lake City, El Paso/Albuquerque and
Portland MTAs, and an increase of $3.2 million in prepaid expenses and other
current assets primarily as a result of prepaid costs for the Honolulu MTA. Net
cash used in operating activities was $0.7 million in 1995. Adjustments to the
$56.0 million net loss for 1995 to reconcile to net cash used in operating
activities consisted primarily of $49.5 million of depreciation and amortization
and $6.6 million with respect to the extraordinary loss on early extinguishment
of debt. Other adjustments included changes in operating assets and liabilities,
net of effects from consolidating acquired interests, consisting primarily of an
increase of $5.7 million in accounts receivable primarily as a result of the
increase in the subscriber base, and a $6.4 million increase in accrued
liabilities primarily as a result of accrued payroll and interest. Net cash used
in operating activities was $1.0 million and $0.3 million in 1994 and 1993,
respectively.
Net cash used in investing activities was $203.3 million for the six months
ended June 30, 1996. Investing activities for such period consisted primarily of
cellular capital expenditures, which used cash of $30.7 million, PCS capital
expenditures, which used cash of $59.1 million, the purchase of wireless
licenses, which used cash of $77.3 million, and the acquisition of wireless
properties, which used cash of $40.1 million. Net cash used in investing
activities was $293.6 million in 1995, consisting primarily of cellular capital
expenditures, which used cash of $62.6 million, PCS capital expenditures, which
used cash of $16.9 million, the purchase of PCS wireless licenses, which used
49
<PAGE> 52
cash of $137.8 million, and the acquisition of wireless properties, which used
cash of $60.7 million. Net cash used in investing activities was $70.2 million
and $32.5 million in 1994 and 1993, respectively.
Net cash provided by financing activities was $306.0 million for the six
months ended June 30, 1996. Financing activities for such period consisted
primarily of additions to long-term debt (including the issuance of $200 million
aggregate principal amount of the 2006 Notes), which provided cash of $71.1
million net of $465.0 million in repayments and $12.7 million in fees, and
proceeds from the issuance of Common Stock which provided cash of $234.9
million, net of expenses. Net cash provided by financing activities was $295.1
million in 1995, consisting primarily of proceeds from issuance of Common Stock,
which provided cash of $143.1 million, and additions to long-term debt, net of
$277.0 million in repayments and fees, which provided cash of $148.2 million.
Net cash provided by financing activities was $70.8 million and $36.2 million in
1994 and 1993, respectively.
The Company anticipates that it will expend approximately $50 million
during the remainder of 1996 for cellular system and capacity expansion, new
market build-out and centralized infrastructure improvements. In addition, the
development, construction and operation of the Company's PCS systems will
require substantial capital expenditures over the next several years, which the
Company expects will result in significant operating losses in both its PCS and
consolidated operations. The Company currently anticipates that the funds
required to complete the build-out of its seven PCS MTAs from June 30, 1996
through December 31, 1998 will total approximately $425 million. The build-out
costs include microwave relocation, site acquisition and transmission and
switching equipment. The build-outs are designed to cover approximately 80% of
the population within the Company's seven PCS MTAs, which satisfies the 10-Year
Build-out Requirement. The Company may be required to make expenditures sooner
than anticipated or in greater amounts than expected based on a number of
variables, including increased subscriber growth, increased losses resulting
from equipment sales and increased construction costs associated with expanding
coverage areas. In addition, delays in network design, site and facility
acquisitions, construction or the purchase and installation of network equipment
and other factors may increase the total cost of such expenditures. See "Risk
Factors -- PCS Build-out and Capital Expenditures."
The Company holds a 49.9% limited partnership interest in Cook Inlet PCS,
an entity which is the licensee for 13 BTAs won in the C Block auction and is
the high bidder for an additional BTA in the C Block reauction. As a result of
the successful bids of Cook Inlet PCS in the C Block auction, the Company was
obligated to fund up to approximately $4.0 million of the license acquisition
costs of Cook Inlet PCS. Cook Inlet PCS is subject to the Five Year Build-out
Requirement and will therefore require significant additional amounts to
complete the build-out of its PCS systems. The potential sources of such
additional amounts include vendor loans, loans or capital contributions by the
partners of Cook Inlet PCS or other third party financing. There are no current
agreements or plans with respect thereto. In the ordinary course of its
business, the Company continuously reviews potential acquisition opportunities
and has entered into various joint development agreements with respect to
international interests. Any such prospective acquisition would be financed with
proceeds from the Offering, borrowings under the Senior Secured Facilities or
additional financings.
SEASONALITY
The Company, and the wireless communications industry in general, have
historically experienced significant subscriber growth during the fourth
calendar quarter. Accordingly, during such quarter the Company experiences
greater losses on equipment sales and increases in sales and marketing expenses.
The Company has historically experienced highest usage and revenue per
subscriber during the summer months. The Company expects these trends to
continue.
50
<PAGE> 53
BUSINESS
INTRODUCTION
Western Wireless provides wireless communications services in the western
United States. The Company owns an aggregate of 80 cellular and PCS licenses for
a geographic area covering approximately 25.5 million pops and 41% of the
continental United States. In its cellular and PCS markets, the Company served
270,600 subscribers at June 30,1996.
The Company owns and operates cellular communications systems in 57 Rural
Service Areas and 16 Metropolitan Statistical Areas with an aggregate population
of approximately 6.0 million persons. In its cellular markets, the Company uses
the CELLULAR ONE brand name. The Company holds broadband personal communications
services licenses for seven Major Trading Areas covering 19.5 million
persons-- Honolulu, Salt Lake City, El Paso/Albuquerque, Portland, Oklahoma
City, Des Moines/Quad Cities and Denver. The Company's PCS markets are operated
under the Company's proprietary VoiceStream brand name. In February 1996, the
Company's PCS system in the Honolulu MTA became the first auction-awarded PCS
system to commence commercial operations. Four of the Company's PCS systems are
currently operational utilizing internationally-proven GSM technology as the
network standard. See "Business -- Introduction," "-- Markets and Systems" and
"-- PCS Operations."
In addition, the Company is engaged in activities complementary to its
principal wireless communications business. In 1995, the Company began pursuing
licenses for wireless services in markets outside the United States. The Company
has joined partnerships which have made wireless license applications in foreign
countries. The Company is a partner in a partnership that has an interest in a
joint venture which has obtained the GSM cellular license in Latvia. In
addition, since their acquisition in February 1996, the Company has operated
paging systems in eight states and currently serves approximately 27,000
customers. The Company has reached reciprocal development or reseller agreements
for paging services with AT&T Wireless, AirTouch Paging, Paging Network Inc.
("PageNet"), MobileMedia Corporation ("MobileMedia") and others.
Western Wireless Corporation was formed in July 1994 as the result of the
Business Combination among various companies, including MCLP and GCC. GCC
commenced operations in 1989 and MCLP was formed in 1992. As a result of the
Business Combination and a series of related transactions, Western Wireless
Corporation became the owner of all of the issued and outstanding shares of
common stock of GCC and the owner of all of the assets of MCLP. The Business
Combination constituted an acquisition of MCLP by GCC for accounting purposes.
As a result, all financial data relating to the Company herein with respect to
periods after the date of the Business Combination reflect the combined
operations of GCC and MCLP and all such data with respect to prior periods
reflect only the operations of GCC, which, for accounting purposes, is
considered Western Wireless Corporation's predecessor. Since the Business
Combination, Western Wireless Corporation has successfully integrated the
management and operations of GCC and MCLP and raised significant equity capital
to acquire PCS licenses in additional territories in the western United States
and thereby extend its coverage area for the provision of wireless
communications services.
THE WIRELESS COMMUNICATIONS INDUSTRY
OVERVIEW
Wireless communications systems use a variety of radio frequencies to
transmit voice and data. Broadly defined, the wireless communications industry
includes one-way radio applications, such as paging or beeper services, and
two-way radio applications, such as cellular telephone, PCS and ESMR networks.
Historically, each application has been licensed and operates in a distinct
radio frequency block.
51
<PAGE> 54
Since its introduction in 1983, cellular service has grown dramatically and
now dominates the wireless communications market. As of June 30, 1996, according
to CTIA there were over 38.2 million cellular subscribers in the United States,
representing a penetration rate of 14.5% and a growth rate of 35.4% from June
30, 1995. The following chart illustrates the annual growth in United States
cellular subscribers through December 31, 1995.
U.S. CELLULAR SUBSCRIBERS
<TABLE>
<CAPTION>
YEAR MILLIONS OF SUBSCRIBERS
<S> <C>
1984 .5
1985 1
1986 1.5
1987 2
1988 2.5
1989 4.5
1990 6
1991 7.5
1992 12.5
1993 17
1994 25
1995 33.8
</TABLE>
Source: Cellular Telecommunications Industry Association ("CTIA")
The following table sets forth certain domestic cellular industry
statistics derived from the Data Survey Results published semi-annually by CTIA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
CELLULAR INDUSTRY STATISTICS
Total Service Revenues
(in billions).......................... $ 5.8 $ 7.8 $10.9 $14.2 $19.0
Ending Cellular Subscribers
(in millions).......................... 7.6 11.0 16.0 24.1 33.8
Subscriber Growth........................ 43.0% 46.0% 45.1% 50.8% 40.0%
Average Monthly Service Revenue per
Subscriber............................. $74.10 $70.13 $67.13 $59.08 $54.90
Average Monthly Subscriber Revenue per
Subscriber............................. $64.96 $61.40 $58.74 $51.48 $47.59
Ending Penetration....................... 3.0% 4.4% 6.2% 9.4% 13.0%
</TABLE>
These statistics represent results for the industry as a whole. Average
Monthly Service Revenue per Subscriber reflects per subscriber revenue including
roaming revenue, and Average Monthly Subscriber Revenue per Subscriber reflects
per subscriber revenue excluding roaming revenue. In general, rural markets,
where the Company concentrates its cellular operations, were licensed later by
the FCC than urban markets and, consequently, have a shorter operating history.
The Company has operated the cellular systems in its markets, on average, for
approximately three years. As a result, while the Company's cellular subscriber
base is growing more rapidly than the industry average, the Company's level of
penetration is lower than the overall industry average.
In the wireless communications industry, there are two principal services
licensed by the FCC for transmitting voice and data signals, "cellular services"
and "personal communications services." Cellular service is the predominant form
of wireless voice communications service currently
52
<PAGE> 55
available. The FCC has made available for cellular service a portion of the
radio spectrum from 830-870 MHz. Cellular service is capable of providing high
quality, high capacity service to and from mobile, portable and stationary
telephones. Cellular handsets are affordable and easy to use and offer important
benefits to both business and residential consumers. Fully equipped, multi-cell
cellular systems are capable of handling thousands of calls at any given time
and thus are capable of providing service to hundreds of thousands of
subscribers in a given market. See "-- Products and Services."
Cellular systems are primarily analog based systems, although digital
technology has been introduced in certain markets. Analog technology currently
has several limitations, including lack of privacy and limited capacity. Digital
systems convert voice or data signals into a stream of digits that is compressed
before transmission, enabling a single radio channel to carry multiple
simultaneous signal transmissions. This enhanced capacity, along with
improvements in digital signaling, allows digital-based wireless technologies to
offer new and enhanced services, such as greater call privacy, and robust data
transmission features, such as "mobile office" applications (including
facsimile, electronic mail and wireless connections to computer/data networks,
including the Internet). See "-- Operation of Wireless Communications Systems."
PCS is a term commonly used in the United States to describe a portion of
radio spectrum (1850-1990 MHz). PCS spectrum was auctioned by the FCC beginning
with the A and B Blocks, which were auctioned by the FCC in late 1994 and 1995.
In late 1995 and 1996 the C Block was auctioned (and certain BTAs were
reauctioned following the defaults of participants) and the FCC is currently
conducting simultaneous auctions of the D, E and F Blocks. This portion of radio
spectrum is to be used by PCS licensees to provide wireless communications
services. PCS will initially compete directly with existing cellular telephone,
paging and specialized mobile radio services. PCS will also include features
which are not generally offered by cellular providers, such as data
transmissions to and from portable computers, advanced paging services and
facsimile services. The Company believes that PCS providers will be the first
direct wireless competitors to cellular providers. In addition, PCS providers
may offer mass market wireless local loop applications in competition with wired
local communications services. See "-- Governmental Regulation" for a discussion
of the FCC auction process and allocation of wireless licenses.
OPERATION OF WIRELESS COMMUNICATIONS SYSTEMS
Wireless communications system service areas, whether cellular or PCS, are
divided into multiple cells. Due to the frequencies in which they operate,
cellular cells generally have a wider transmission radius than PCS cells. In
both cellular and PCS systems, each cell contains a transmitter, a receiver and
signaling equipment (the "Cell Site"). The Cell Site is connected by microwave
or landline telephone lines to a switch that uses computers to control the
operation of the cellular communications system for the entire service area. The
system controls the transfer of calls from cell to cell as a subscriber's
handset travels, coordinates calls to and from handsets, allocates calls among
the cells within the system and connects calls to the local landline telephone
system or to a long distance telephone carrier. Wireless communications
providers establish interconnection agreements with local exchange carriers and
interexchange carriers, thereby integrating their system with the existing
landline communications system.
Because the signal strength of a transmission between a handset and a Cell
Site declines as the handset moves away from the Cell Site, the switching office
and the Cell 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 Cell Site where the signal strength is
stronger. If a handset leaves the service area of a cellular or PCS system, the
call is disconnected unless there is a technical connection with the adjacent
system.
Analog cellular handsets are functionally compatible with cellular systems
in all markets within the United States. As a result, analog cellular handsets
may be used wherever a subscriber is located, as long as a cellular system is
operational in the area. Cellular system operators normally
53
<PAGE> 56
agree to provide service to subscribers from other cellular systems who are
temporarily located in or traveling through their service areas. Agreements
among system operators provide that the carrier that normally provides services
to the roaming subscriber pays the serving carrier at rates prescribed by the
serving carrier.
While PCS and cellular systems utilize similar technologies and hardware,
they operate on different frequencies and may use different technical and
network standards. As a result, as discussed further below, it initially will
not be possible for users of one type of system to "roam" on a different type of
system outside of their service area, or to hand off calls from one type of
system to another. This is also true for PCS subscribers seeking to roam in a
PCS service area served by operators using different technical standards.
PCS systems are expected to operate under one of three principal digital
signal transmission technologies, or standards, that have been proposed by
various operators and vendors for use in PCS systems: GSM, CDMA or TDMA. GSM and
TDMA are both "time division-based" standards but are incompatible with each
other and with CDMA. Accordingly, a subscriber of a system that utilizes GSM
technology will be unable to use a GSM handset when traveling in an area not
served by GSM-based PCS operators, unless the subscriber carries a dual-mode
handset that permits the subscriber to use the analog cellular system in that
area. Such dual-mode handsets are not yet commercially available and may be
larger and more expensive than single-mode handsets.
Each of the three principal PCS signaling standards has been adopted by at
least two MTA licensees and offers certain advantages and disadvantages. GSM is
the leading digital wireless technology in the world, with approximately 200
systems operating in 100 countries serving over 21 million subscribers.
GSM-based systems also offer features and services not currently offered by
cellular systems or immediately contemplated by other PCS digital standards,
including private call transmission. An additional benefit associated with GSM
technology is its use of an open system architecture that will allow operators
to purchase network equipment from a variety of vendors that share standard
interfaces for operation. This open architecture provides significant
flexibility by the operator in vendor cost leveraging, and provisioning of
features, products and services.
The CDMA standard is expected to be the most widely adopted PCS technology
in the United States. Proponents of CDMA claim that CDMA-based systems will
require fewer Cell Sites and offer greater capacity, call quality and hand-off
advantages. CDMA-based PCS systems are expected initially to offer the same
features and services offered by CDMA-based cellular systems. CDMA will
initially use a closed system architecture that will limit PCS operators'
choices of equipment vendors.
The TDMA-based PCS standard is an "up-banded" version of the time
division-based digital cellular standard currently in limited use by cellular
operators in the United States. The TDMA-based PCS standard will initially use a
closed system architecture that will also limit PCS operators' choices of
equipment vendors.
54
<PAGE> 57
MARKETS AND SYSTEMS
The Company holds or has the rights to acquire FCC licenses to provide
wireless communications services in 80 separate markets. Within such markets,
the Company's PCS pops total approximately 19.5 million and the Company's
cellular pops total approximately 6.0 million. The Company's PCS MTAs and
cellular markets are summarized in the following table:
<TABLE>
<CAPTION>
OWNERSHIP THE COMPANY'S
PCS MTAS(1) POPULATION(2) PERCENTAGE POPS(2)
- ----------------------------------------------------------------- ------------- ---------- -------------
<S> <C> <C> <C>
Honolulu......................................................... 1,215,729 100 1,215,729
Salt Lake City................................................... 2,999,636 100 2,999,636
El Paso/Albuquerque.............................................. 2,387,710 100 2,387,710
Portland......................................................... 3,460,182 100 3,460,182
Oklahoma City.................................................... 1,945,271 100 1,945,271
Des Moines/Quad Cities(3)........................................ 3,067,795 100 3,067,795
Denver........................................................... 4,411,211 100 4,411,211
------------- -------------
PCS MTA TOTAL................................................ 19,487,534 19,487,534
============== ===============
CELLULAR MARKETS(4)
- -----------------------------------------------------------------
California
Mono (CA-6)...................................................... 29,414 100 29,414
------------- -------------
California Total............................................. 29,414 29,414
------------- -------------
Colorado
Pueblo........................................................... 126,699 100 126,699
Elbert (CO-5).................................................... 27,412 100 27,412
Saguache (CO-7).................................................. 45,783 100 45,783
Kiowa (CO-8)..................................................... 44,195 100 44,195
Costilla (CO-9).................................................. 27,322 100 27,322
------------- -------------
Colorado Total............................................... 271,411 271,411
------------- -------------
Idaho
Idaho (ID-2)..................................................... 71,146 100 71,146
------------- -------------
Idaho Total.................................................. 71,146 71,146
------------- -------------
Iowa
Sioux City....................................................... 118,475 100 118,475
Monona (IA-8).................................................... 53,834 100 53,834
------------- -------------
Iowa Total................................................... 172,309 172,309
------------- -------------
Kansas
Jewell (KS-3).................................................... 50,801 100 50,801
Marshall (KS-4).................................................. 143,546 100 143,546
Ellsworth (KS-8)................................................. 128,226 100 128,226
Morris (KS-9).................................................... 56,851 100 56,851
Franklin (KS-10)................................................. 106,245 100 106,245
Reno (KS-14)..................................................... 170,241 100 170,241
------------- -------------
Kansas Total................................................. 655,910 655,910
------------- -------------
Minnesota
Kittson (MN-1)................................................... 49,803 100 49,803
Lake of the Woods (MN-2-A1)...................................... 25,465 100 25,465
------------- -------------
Minnesota Total.............................................. 75,268 75,268
------------- -------------
Missouri
Bates (MO-9)..................................................... 74,562 100 74,562
------------- -------------
Missouri Total............................................... 74,562 74,562
------------- -------------
</TABLE>
55
<PAGE> 58
<TABLE>
<CAPTION>
OWNERSHIP THE COMPANY'S
CELLULAR MARKETS(4) POPULATION(2) PERCENTAGE POPS(2)
- ----------------------------------------------------------------- ------------- ---------- -------------
<S> <C> <C> <C>
Montana
Billings......................................................... 129,956 97 126,409
Great Falls...................................................... 81,964 100 81,964
Lincoln (MT-1)................................................... 147,957 100 147,957
Toole (MT-2)..................................................... 38,721 100 38,721
Daniels (MT-4)................................................... 39,463 100 39,463
Mineral (MT-5)................................................... 191,414 100 191,414
Deer Lodge (MT-6)................................................ 64,805 100 64,805
Fergus (MT-7).................................................... 28,746 100 28,746
Beaverhead (MT-8)................................................ 93,272 100 93,272
Carbon (MT-9).................................................... 33,758 100 33,758
Prairie (MT-10).................................................. 20,098 100 20,098
------------- -------------
Montana Total................................................ 870,154 866,607
------------- -------------
Nebraska
Lincoln.......................................................... 230,041 100 230,041
Cherry (NE-2).................................................... 30,507 100 30,507
Knox (NE-3)...................................................... 113,417 100 113,417
Grant (NE-4)..................................................... 35,202 100 35,202
Keith (NE-6)..................................................... 107,775 100 107,775
Hall (NE-7)...................................................... 89,955 100 89,955
Chase (NE-8)..................................................... 56,156 100 56,156
Adams (NE-9)..................................................... 79,860 100 79,860
Cass (NE-10)..................................................... 84,216 100 84,216
------------- -------------
Nebraska Total............................................... 827,129 827,129
------------- -------------
Nevada
Humboldt (NV-1).................................................. 44,192 100 44,192
Lander (NV-2).................................................... 56,427 100 56,427
Mineral (NV-4)................................................... 29,596 100 29,596
White Pine (NV-5)................................................ 14,682 100 14,682
------------- -------------
Nevada Total................................................. 144,897 144,897
------------- -------------
New Mexico
Lincoln (NM-6)................................................... 238,401 100 238,401
------------- -------------
New Mexico Total............................................. 238,401 238,401
------------- -------------
North Dakota
Bismarck......................................................... 88,606 99 88,285
Fargo............................................................ 164,624 100 164,624
Grand Forks...................................................... 104,665 100 104,665
Divide (ND-1).................................................... 101,607 100 101,607
Bottineau (ND-2)................................................. 58,295 100 58,295
McKenzie (ND-4).................................................. 62,449 100 62,449
Kidder (ND-5).................................................... 48,112 100 48,112
------------- -------------
North Dakota Total........................................... 628,358 628,037
------------- -------------
</TABLE>
56
<PAGE> 59
<TABLE>
<CAPTION>
OWNERSHIP THE COMPANY'S
CELLULAR MARKETS(4) POPULATION(2) PERCENTAGE POPS(2)
- ----------------------------------------------------------------- ------------- ---------- -------------
<S> <C> <C> <C>
South Dakota
Rapid City....................................................... 115,071 100 115,071
Sioux Falls...................................................... 137,655 99 135,893
Harding (SD-1)................................................... 35,904 100 35,904
Corson (SD-2).................................................... 22,089 100 22,089
McPherson (SD-3)................................................. 52,595 100 52,595
Marshall (SD-4).................................................. 65,623 100 65,623
Custer (SD-5).................................................... 24,590 100 24,590
Haakon (SD-6).................................................... 38,432 100 38,432
Sully (SD-7)..................................................... 66,118 100 66,118
Kingsbury (SD-8)................................................. 72,547 100 72,547
Harrison (SD-9).................................................. 92,266 100 92,266
------------- -------------
South Dakota Total........................................... 722,890 721,128
------------- -------------
Texas
Abilene.......................................................... 153,207 100 153,207
Lubbock.......................................................... 231,851 100 231,851
Midland.......................................................... 121,145 96 115,706
Odessa........................................................... 130,339 96 125,013
San Angelo....................................................... 106,078 100 106,078
Parmer (TX-3).................................................... 148,641 100 148,641
Gaines (TX-8).................................................... 139,672 100 139,672
Hudspeth (TX-12)................................................. 25,316 100 25,316
Reeves (TX-13)................................................... 31,761 100 31,761
Loving (TX-14)................................................... 48,959 100 48,959
------------- -------------
Texas Total.................................................. 1,136,969 1,126,204
------------- -------------
Wyoming
Casper........................................................... 63,120 100 63,120
Sheridan (WY-2).................................................. 75,629 100 75,629
------------- -------------
Wyoming Total................................................ 138,749 138,749
------------- -------------
CELLULAR TOTAL............................................... 6,057,567 6,041,172
============== ===============
PCS MTA AND CELLULAR TOTAL................................... 25,545,101 25,528,706
============== ===============
</TABLE>
- ---------------
(1) See "Risk Factors -- Finality of PCS Auctions."
(2) Estimated 1996 populations are based on 1995 estimates by Equifax adjusted
by the Company by a growth factor based upon Equifax's growth factors from
1990 to 1995.
(3) "Quad Cities" refers to the cities of Moline and Rock Island, Illinois, and
Bettendorf and Davenport, Iowa.
(4) Excludes three markets containing a population of 369,316 in which the
Company operates under an Interim Operating Authority ("IOA"). See
"-- Products and Services."
STRATEGY
The Company believes that its combination of cellular and PCS licenses
creates a unique opportunity in the wireless communications industry. The
Company has focused on the acquisition and operation of cellular communications
systems in RSAs and small MSAs in the western United States, which the Company
believes it has acquired at attractive prices. The Company's recent acquisition
of PCS licenses enables it to significantly expand both its customer base and
geographic coverage and to offer enhanced wireless communications services. The
Company's initial focus with its PCS licenses has been, and will continue to be,
to commence operations in the more densely populated areas within its MTAs. The
Company believes that cellular is the optimum technology for rural, less densely
populated areas and that PCS is the optimum technology for more densely
populated urban areas where analog cellular systems are more expensive to deploy
and face potential capacity constraints. The Company and, prior to the Business
Combination, MCLP has entered markets at a relatively low cost, having purchased
cellular licenses for an average of $45.68 per pop and MTA PCS licenses for an
average of $10.81 per pop.
57
<PAGE> 60
The Company's operating strategy is to (i) achieve a critical
time-to-market advantage by rapidly constructing and commencing operations of
PCS systems in urban areas within its PCS markets; (ii) continue to expand its
operations through increased subscriber growth and usage; (iii) utilize its
centralized management and back office functions to support the combined needs
of its cellular and PCS subscribers, thereby further improving operating
efficiencies and generating greater economies of scale; and (iv) selectively
acquire cellular and PCS properties primarily in contiguous markets. The Company
is implementing its strategy by aggressively building its PCS systems, offering
a wide range of products and services at competitive prices, continually
upgrading the quality of its network, establishing strong brand recognition,
creating a strong sales and marketing program tailored to local markets and
providing a superior level of customer service.
The Company believes the wireless communications industry will continue to
grow due to enhanced service offerings, the emergence of PCS systems, increased
awareness of the productivity, convenience and security benefits associated with
wireless communications services and anticipated declines in pricing for its
services. The Company believes it is well positioned to take advantage of these
growth opportunities as a result of its existing operations and systems
infrastructure, its wide geographic coverage and the experience and expertise of
its management team.
CELLULAR OPERATIONS
The Company operates rapidly growing high quality cellular systems in 73
RSAs and small MSAs, and generally owns 100% of each of its cellular licenses.
The Company has focused on operating and expanding its cellular business in RSAs
and small MSAs in the States of Texas, Montana, Nebraska, South Dakota, Kansas,
North Dakota, Colorado, New Mexico, Iowa, Wyoming, Nevada, Minnesota, Missouri,
Idaho and California. In these rural and small urban markets, the Company
believes that its cellular systems, which cover large open geographic areas with
relatively few Cell Sites, incorporate the optimum cost efficient technology.
The Company believes, based on its observations and experience, that there
are several inherent attributes of RSAs and small MSAs that make these markets
attractive:
- Less Developed Markets -- Since the rural and small urban markets were
developed later than major markets, cellular penetration is presently
lower and subscriber growth rates are significantly higher than in the
more established markets.
- Subscriber Base -- The small urban and rural market population base
contains a high percentage of business customers with substantial needs
for wireless communications, such as those employed in agriculture,
mining, oil and gas, and populations accustomed to long travel times.
Additionally, the Company's service areas cover over 20,000 highway miles
and the popular destination areas of Yellowstone National Park, Glacier
National Park and Mount Rushmore National Monument, providing attractive
sources of roaming revenues.
- Attractive Physical Characteristics -- The Company's cellular systems
have the ability to cover on average a much larger geographic area per
Cell Site than is possible in urban markets. Although the initial per pop
capital expenditures are higher in rural markets, the incremental cost of
expanding capacity is lower. By carefully managing its Cell Site
placement, the Company has been able to achieve coverage of over 93% of
the population in its licensed cellular markets.
- Less Intense Competitive Environment -- Although two cellular operators
exist in all markets, the Company's competitor in many of its markets
tends to be smaller and less well capitalized than the large market
operators.
- Less Vulnerable to PCS Competition -- In the future, the Company believes
that PCS will present less competition in small urban and rural markets
than in large urban markets. The MTA licenses, which include multiple
MSAs and the surrounding geographic areas, require
58
<PAGE> 61
the licensees to build one-third coverage of the population of the MTA
within five years of the initial license grant and two-thirds within ten
years. It is likely that licensees will initially construct in the more
densely populated urban areas, providing service to the surrounding
population later, if at all. In addition, in rural markets, PCS requires
more closely located Cell Sites to broadcast over extended geographic
areas and will be less efficient and more expensive to deploy than
cellular service, making it likely that PCS competitors will delay or
avoid entry into such markets.
The Company has experienced rapid growth in subscribers and revenues in its
cellular markets. In addition, monthly subscriber revenue per subscriber in 1995
averaged $57.25 versus a CTIA average of $47.59, reflecting the attractiveness
of the Company's markets and the success of its marketing strategy.
The Company's cellular strategy is to expand its subscriber base through
increased market penetration with an emphasis on retail sales, continue to
introduce competitive wireless service as new technologies and products enter
its cellular markets, continue to provide superior customer service and product
features tailored to its customers' needs at competitive prices and reduce costs
through improved efficiency. See "-- Products and Services" and "-- Marketing,
Sales and Customer Service."
PCS OPERATIONS
The Company has completed initial construction and commenced commercial
operations of its PCS systems in the Honolulu, Salt Lake City, El
Paso/Albuquerque and Portland MTAs and is constructing the initial phase of its
PCS systems in the Oklahoma City, Des Moines/Quad Cities and Denver MTAs. The
Company presently intends to have commenced commercial operations in each of its
MTAs by the end of the first quarter of 1997. When completed, the Company's PCS
systems will cover a substantial geographic area in the western United States
complementary to the Company's cellular operations. After the initial build-out,
the Company expects to extend its PCS systems based on economic factors,
customer demand and FCC licensing requirements. The Company believes its PCS
service offerings are broader than those currently offered by cellular systems
in the Company's PCS markets. PCS service offerings initially include all of the
services typically provided by cellular systems, as well as paging, caller
identification, text messaging, smart cards, voice mail, over-the-air activation
and over-the-air subscriber profile management.
The Company believes that being the first to offer PCS services in a market
is a key competitive advantage. The Company's goal is to achieve significant
market penetration by aggressively marketing competitively priced PCS services
under its proprietary VoiceStream brand name, offering enhanced services not
generally provided by cellular operators and providing superior customer
service. In addition, the Company believes it can become a low-cost provider of
PCS services by taking advantage of the existing business infrastructure
established for its cellular operations, including centralized management,
marketing, billing and customer service functions, and by focusing on efficient
customer acquisition and retention. See " -- Products and Services."
The Company believes that PCS technology is better suited to urban areas
than rural areas and may have cost advantages relative to cellular technology in
urban areas. PCS Cell Sites operate at a higher frequency and lower power than
cellular Cell Sites and, therefore, typically have a smaller coverage area.
Unlike in rural areas, wireless systems in urban areas require substantial
frequency "reuse" to provide high capacity. The coverage advantage that cellular
frequencies and analog technology enjoy in rural areas is not present in urban
areas because analog cellular technology does not provide efficient frequency
reuse. As a result, the higher frequency, lower power, digital PCS systems are
therefore likely to provide greater capacity in urban areas. In addition,
individual PCS Cell Sites are less expensive than cellular Cell Sites.
The Company has selected GSM as the digital standard for its PCS system
because the Company believes it has significant advantages over the other
competing digital standards,
59
<PAGE> 62
including five years of proven operability in Europe and Asia, enhanced features
not presently available with other standards and an open system architecture
that will allow the Company to choose from a variety of equipment options and
providers. GSM is the leading digital wireless standard in the world, with
approximately 200 systems serving over 21 million customers in 100 countries.
The Company believes that deployment of GSM facilitates the Company's
first-to-market efforts, thereby achieving a key element of its strategy. The
GSM digital standard also has been chosen by six other MTA PCS licensees and
several BTA PCS licensees to date. Together, these PCS licensees and Western
Wireless cover PCS markets containing approximately 200 million persons,
representing 75% of the population in the United States.
The Company has entered into roaming agreements or letters of intent with
all of the MTA licensees which have chosen to deploy the GSM standard in their
PCS markets in the United States that will provide for roaming by the Company's
PCS subscribers into these carriers' PCS markets, and vice versa, when such
systems are operational. The Company also has reciprocal roaming agreements or
letters of intent with 28 international carriers who have chosen to deploy the
GSM standard. The Company anticipates entering into similar agreements with
other domestic and international carriers who deploy the GSM standard and with
other cellular carriers. See "Risk Factors -- Risks Relating to GSM Technical
Standard" and "Business -- System Equipment, Development and Expansion -- PCS."
The FCC has divided the United States and its possessions and territories
into PCS markets made up of 51 MTAs and 493 BTAs. There are two MTA Blocks (A
and B) which consist of 30 MHz of spectrum and four BTA Blocks, one of which
consists of 30 MHz of spectrum (C) and three of which consist of 10 MHz of
spectrum (D, E and F). Each MTA consists of at least two BTAs. The FCC has
already completed the auction of the A and B Block licenses. The PCS license
auction process also includes auctions for issuance of broadband BTA licenses,
the first of which was for the C Block licenses (the "C Block auction"), which
was recently concluded. Certain markets won by defaulting bidders were
reauctioned (this reauction was also recently concluded), and the FCC may
reauction remaining markets won by defaulting bidders. In the C Block auction,
30 MHz licenses for the 493 BTAs were sold. Such C Block licenses were reserved
for "entrepreneurs." Generally, an "entrepreneur" is an applicant that has gross
revenues of less than $125 million in each of the last two years and total
assets of less than $500 million at the time the initial application to
participate in the auction was filed. Each eligible C Block applicant may pay
90% of the purchase price of each license that it purchases in installments over
ten years. The FCC has also established bidding credits and more favorable
installment payment plans for applicants qualifying as "small businesses."
Generally, a small business is an entity that has average annual gross revenues
that are not more than $40 million for the preceding three years. In addition,
there are specific preferences affecting C Block awards given to indian tribes
or Alaska Regional or Village Corporations organized pursuant to the Alaska
Native Claims Settlement Act, or entities controlled by such tribes or
corporations. The FCC is currently conducting the broadband PCS auction for the
10 MHz D, E and F Block BTAs. Eligibility for the F Block is limited to
"entrepreneurs," and the FCC has established categories of bidding credits and
more favorable installment payment plans for applicants qualifying as "small
businesses" and "very small businesses." Generally, a very small business is an
entity that has average annual gross revenues that are not more than $15 million
for the preceding three years.
The Company holds a 49.9% limited partnership interest in Cook Inlet PCS,
an entity ultimately controlled by Cook Inlet Region, Inc., an Alaska Native
Regional Corporation. Cook Inlet PCS participated in the C Block auction and
also qualifies for the additional benefits available to a small business.
Participation in Cook Inlet PCS allows the Company to participate as a minority
owner of, and technical services provider to, the PCS businesses established by
Cook Inlet PCS using licenses purchased by Cook Inlet PCS in such auction. The
Company's obligation was to fund approximately 5% (up to approximately $4.0
million) of the total price of any licenses purchased by Cook Inlet PCS and to
provide technical services to Cook Inlet PCS with respect to constructing and
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<PAGE> 63
operating its wireless communications businesses. Cook Inlet PCS is currently
participating in the FCC's F Block auction. See "The Company," "-- Governmental
Regulation - Licensing of PCS Systems" and "Certain Transactions."
Cook Inlet PCS acquired BTA PCS licenses in the FCC's C Block auction for
the following states:
<TABLE>
<CAPTION>
THE COMPANY'S
OWNERSHIP THE COMPANY'S
STATE(1) POPULATION(2) PERCENTAGE POPS(2)
--------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Kansas (1 BTA)............................... 60,473 49.90 30,176
Minnesota (1 BTA)............................ 96,495 49.90 48,151
Oklahoma (3 BTAs)............................ 1,108,337 49.90 553,060
Texas (2 BTAs)............................... 365,008 49.90 182,139
Washington (7 BTAs).......................... 1,728,830 49.90 862,686
------------- -------------
3,359,143 1,676,212
============== ===============
</TABLE>
- ---------------
(1) See "Risk Factors -- Finality of PCS Auctions."
(2) Estimated 1996 populations are based on 1995 estimates by Equifax adjusted
by the Company by a growth factor based on Equifax's growth factors from
1990 to 1995.
The Company is currently participating in the FCC's 10 MHz D and E Block
BTA PCS auctions and Cook Inlet PCS is participating in the 10 MHz F Block BTA
PCS auction.
PRODUCTS AND SERVICES
The Company provides a variety of wireless products and services designed
to match a range of needs for business and personal use.
CELLULAR
The Company offers its subscribers high quality cellular communications, as
well as several custom calling services, such as call forwarding, call waiting,
conference calling, voice message storage and retrieval and no-answer transfer.
In addition, all subscribers can access local government emergency services from
their cellular handsets (with no air time charge) by dialing 911. Customers also
may subscribe to a voice messaging system, which allows callers to record
messages for subscribers who are not available to take calls or who have left
the service area. The subscriber can later retrieve the messages from any
telephone, including a cellular handset. The Company will continue to evaluate
new products and services that may be complementary to its wireless operations.
The Company has designed several pricing options to meet the varied needs of its
customer base. Most options consist of a fixed monthly charge (with varying
allotments of included minutes, in some cases), plus additional variable charges
per minute of use. A high volume caller might find an option with a higher
monthly access charge and low per-minute charges to be most advantageous. Lower
volume users might choose a different package, featuring a lower access fee and
higher per-minute charges. In addition, in most cases the Company separately
charges for its custom calling features.
The Company provides extended regional and national service to cellular
subscribers in its markets, thereby allowing them to make and receive calls
while in other cellular service areas without dialing special access codes,
through its membership in NACN and other regional networking arrangements. This
service distinguishes the Company's service and call delivery features from
those of some of its competitors. NACN is the largest wireless telephone network
system in the world, linking non-wireline cellular operators throughout the
United States, Canada, Puerto Rico and the Virgin Islands. See "-- Governmental
Regulation." NACN connects key areas across North America so that customers can
use their cellular handsets to place and receive calls in these areas as easily
as they do in their home areas. Through NACN, customers receive calls
automatically as
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they roam in more than 2,200 cities. By dialing subscribers' cellular numbers,
the caller can reach subscribers without knowing their location or having to
dial additional roaming access numbers. In addition, special services such as
call forwarding and call waiting automatically follow the subscribers as they
travel. The Company also has special roaming arrangements with certain cellular
carriers in areas adjacent to the Company's markets that provide the Company's
customers attractive rates when roaming in these surrounding areas.
In addition to service in its cellular markets, the Company offers cellular
service under Interim Operating Authorities ("IOAs") from the FCC in three
markets containing 369,316 persons which are contiguous to the Company's
existing markets. The holder of an IOA is designated to provide service to a
market in which the FCC has not granted a cellular license due to pending
litigation. The Company currently is seeking to acquire the cellular licenses in
those markets in which it offers cellular services under an IOA. While it is
unclear how long the Company will be able to provide such service under its
IOAs, the Company has been able to provide such service at a low cost and
believes that its existing cellular customers benefit from the additional market
coverage.
The Company provides replacement wireless services for rural customers in
sparsely populated areas where the cost of providing wired telephone services is
relatively high. In addition, fixed cellular service can be particularly useful
for providing temporary service to locations that cannot rapidly be wired for
service through the landline areas. Fixed cellular applications are also
currently being used to replace existing landline facilities for remote
monitoring of various alarm devices.
PCS
The Company is currently operating PCS systems in the Honolulu, Salt Lake
City, El Paso/Albuquerque and Portland MTAs and will offer PCS services in its
three other MTAs using the GSM standard. The Company currently offers several
distinct services and features in its operational MTAs, including:
- Enhanced Features -- The Company's PCS systems offer caller
identification, call hold, voice mail, numeric paging, as well as custom
calling features such as call waiting, conference calling and call
forwarding.
- Messaging and Wireless Data Transmission -- Digital networks offer voice
and data communications, including text messaging, through a single
handset. The Company believes that, as data transmission services
develop, a number of uses for such services will emerge, including short
message or alphanumeric paging service, mobile office applications (e.g.,
facsimile, electronic mail and connecting notebook computers with
computer/data networks), access to stock quote services, transmission of
text, connections of wireless point-of-sale terminals to host computers,
monitoring of alarm systems, automation of meter reading and monitoring
of status and inventory levels of vending machines.
- Call Security and Privacy -- Sophisticated encryption algorithms provide
increased call security, encouraging users to make private, business and
personal calls with significantly lower risk of eavesdropping than on
analog-based systems.
- Smart Card -- "Smart" cards, programmed with the user's billing
information and a specified service package, allow subscribers to obtain
PCS connectivity automatically, simply by inserting their smart cards
into compatible PCS handsets. With roaming agreements between the local
providers and the Company in place, smart cards also enable subscribers
to roam wherever GSM is deployed by using their smart cards with handsets
compatible with the system.
- Over-the-Air Activation and Over-the Air Subscriber Profile
Management -- The Company is able to transmit changes in the subscriber's
feature package, including mobile number assignment and personal
directory numbers, directly to the subscriber's handset. This
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eliminates the need to manually program the handset and simplifies the
activation process for both the sales agent and the subscriber.
- Extended Battery Performance -- Digital handsets are capable of entering
into a "sleep" mode when not in use, significantly extending the
handset's battery performance. In addition, because the Company's PCS
systems utilize tightly spaced, low power transmitters, less power is
required to transmit calls, thereby further extending battery
performance.
The Company currently offers a number of rate plans in its MTA PCS markets
which vary the level of the monthly fixed fee for a certain amount of usage and
the cost of incremental usage. The Company's PCS offerings include additional
features beyond those generally offered by cellular competitors that the Company
believes, when combined with its rate plans, should create significant customer
appeal for its PCS systems.
The Company believes that its subscribers will be able to roam in
substantial portions of the United States, either on other GSM-based PCS systems
operated by current licensees or licensees that acquire PCS licenses in FCC
auctions or by using dual-mode handsets that, when available, also can be used
on existing cellular systems. The Company believes that dual-mode handsets will
be commercially available in sufficient quantities by the end of 1997 and has
entered into an agreement with Nokia to acquire dual-mode handsets. The
Company's ability to establish a PCS subscriber base and to compete successfully
in the PCS business with those operators offering greater roaming capabilities
may be adversely affected by the fact that the Company's PCS subscribers will
only be able to roam into regions served by GSM-based PCS systems until dual-
mode handsets permitting them to use the existing cellular system become
available. See "Risk Factors -- Risks Relating to GSM Technical Standard" and
"-- Absence of PCS Operating History in the United States; Handset
Availability."
OTHER PRODUCTS AND SERVICES
Paging. Since the acquisition of its paging business in February 1996, the
Company has provided paging services in Washington, Oregon, Idaho, Montana,
Nebraska, South Dakota, North Dakota and Wyoming, and currently serves
approximately 27,000 customers. The Company markets paging services as a package
with its voice services. Revenues from paging are expected to account for less
than 3% of the Company's total revenues in 1996. The Company has construction
permits from the FCC to expand its paging services in states in which the
Company currently operates and has applications pending before the FCC to expand
its paging services into Nevada. The Company has reached reciprocal development
or reseller agreements for paging services with AT&T Wireless, AirTouch Paging,
PageNet, MobileMedia and others. See "Certain Transactions."
International. In 1995, the Company began pursuing licenses for wireless
services in markets outside the United States. The Company has joined
partnerships which have made wireless license applications. The Company is a
partner in a partnership that has an interest in a joint venture which has
obtained the GSM cellular license in Latvia and is a partner in a limited
liability corporation that has an interest in an entity which has obtained the
GSM cellular license in the country of Georgia. Generally, the Company intends
to work with experienced international operators and local companies and
individuals and own a minority interest in the venture. The Company currently
has joint development agreements or letters of intent with an affiliate of
Metromedia International Group Inc. in Eastern Europe and Matrix
Telecommunications Limited in Indonesia. The Company may commit capital and
other resources to such ventures from time to time as it deems appropriate and
as permitted by the Senior Secured Facilities, the 10 1/2% Notes Indenture and
the Indenture. See "Description of Indebtedness."
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MARKETING, SALES AND CUSTOMER SERVICE
The Company's sales and marketing strategy is to generate continued net
subscriber growth and increased subscriber revenues. In addition, the Company
targets a customer base which it believes is likely to generate higher monthly
service revenues, while attempting to achieve a low cost of adding new
subscribers. The Company markets its services under nationally recognized and
proprietary brand names, and sells its products and services through a
combination of direct and indirect distribution channels with a well-trained
Company sales force.
MARKETING
The Company markets its cellular products and services in all markets
principally under the name CELLULAR ONE. CELLULAR ONE, the first national brand
name in the cellular industry, is currently utilized by a national coalition of
507 cellular licensees in the 50 states with a combined estimated population of
over 183 million. The national advertising campaign conducted by the Cellular
One Group enhances the Company's advertising exposure at a fraction of the cost
of what could be achieved by the Company alone. The Company also obtains
substantial marketing benefits from the name recognition associated with this
widely used service mark, both with existing subscribers traveling outside the
Company's service areas and with potential new subscribers moving into the
Company's markets. If the name CELLULAR ONE were to suffer diminished marketing
appeal, the Company, in such circumstances or otherwise, may explore development
or acquisition of a new service mark. AT&T Wireless, which has been the single
largest user of the CELLULAR ONE brand name, has reduced its use of the brand
name as a primary service mark. See "Risk Factors -- Intellectual Property and
Branding."
The Company markets its PCS products and services under its proprietary
VoiceStream brand name. The Company commenced offering its PCS products and
services in its MTA PCS market with newspaper, radio and television
advertisements. The Company's objective is to develop brand recognition of
VoiceStream through substantial advertising and direct marketing in each of its
PCS markets.
In marketing its PCS services, the Company intends to emphasize the
enhanced features, privacy and competitive pricing of such services. Initially,
the Company intends to concentrate its PCS marketing efforts primarily on large
communications-intensive corporate and trade accounts, which would benefit from
integrated mobile voice, messaging and wireless data transmission capabilities,
and subscribers with substantial needs for wireless communications who would
benefit from enhanced features and services.
SALES
The Company sells its products and services through a combination of direct
and indirect channels. The Company operates 137 local sales offices (which also
serve as retail sales locations) and utilizes a direct sales force of over 750
persons based out of these offices, who are trained to educate new customers on
the features of its products. The Company's training programs provide its sales
employees with an in-depth understanding of the Company's system, products and
services so that they, in turn, can provide extensive information to prospective
customers. Sales commissions generally are linked both to subscriber revenue and
subscriber retention, as well as activation levels.
The Company believes that its local sales offices provide the physical
presence in local markets necessary to position the Company as a quality local
service provider, and give the Company greater control over both its costs and
the sales process. The Company also utilizes indirect sales through an extensive
network of national and local merchant and specialty retailers, including Wal-
Mart, Best Buy and Radio Shack. The Company uses both product discounts and
commissions as a means of compensating its independent sales agents. The Company
intends to continue to use a combination of direct and indirect sales channels,
with the mix depending on the demographics of each particular market.
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In addition, the Company acts as a retail distributor of handsets and
maintains inventories of handsets. Although subscribers generally are
responsible for purchasing or otherwise obtaining their own handsets, the
Company offers discounts on the price of handsets to its subscribers. The
Company operates 137 local sales offices in the U.S., including 96 under the
CELLULAR ONE brand name, 14 under the Phones-To-Go brand name and 27 under the
VoiceStream brand name. The Company negotiates volume discounts for the purchase
of handsets. To respond to competition and in accordance with general industry
practice, the Company has historically sold handsets below cost. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CUSTOMER SERVICE
Excellent customer service is an essential element of the Company's
operating philosophy. The Company is committed to attracting and retaining
subscribers by providing consistently superior customer service. At its
headquarters in Issaquah, Washington, the Company maintains a highly
sophisticated monitoring and control system, a staff of customer service
personnel and a well-trained technical staff to handle both routine and complex
questions as they arise, 24 hours a day, 365 days a year.
The Company implements credit check procedures at the time of sale and
continuously monitors customer churn. The Company believes that it helps manage
its churn rate through an outreach program implemented through its sales force
and customer service personnel. This program not only enhances subscriber
loyalty, but also increases add-on sales and customer referrals. The outreach
program allows the sales staff to check customer satisfaction, as well as to
offer additional calling features, such as voice mail, call waiting and call
forwarding.
To ensure superior service, the Company engages a third-party marketing
research firm to perform customer satisfaction surveys.
SYSTEM EQUIPMENT, DEVELOPMENT AND EXPANSION
CELLULAR
The Company selects equipment that it believes provides reliable and high
quality performance characteristics. The Company generally employs Cell Site and
switching equipment manufactured by Lucent Technologies Inc. ("Lucent") and
NORTEL. The system design incorporates the use of carefully selected sites to
maximize the system coverage in rural areas. Because it operates clusters of
contiguous markets, the Company has designed systems using higher-power sites.
This type of system design requires fewer Cell Sites and therefore lower capital
expenditures, maintenance costs and operating expenses. In many of its MSAs, the
Company employs lower power, lower elevation sites. In a few densely populated
areas, the Company sectorizes and directionalizes its Cell Sites to provide
additional capacity. Most Lucent and NORTEL Cell Sites operated by the Company
have been built to accommodate digital equipment.
The Company develops or builds out its cellular service areas by adding
channels to existing Cell Sites and by building new Cell Sites for the purpose
of increasing capacity and improving coverage in direct response to actual or
projected subscriber demand. Projections involve a traffic analysis of usage by
existing subscribers and an estimation of the number of additional subscribers
in each such area. The Company has historically met such demand through a
combination of augmenting channel capacity in existing Cell Sites and building
new Cell Sites. The Company's cellular systems cover over 93% of the population
in its markets and its systems are not currently capacity constrained. Cell Site
expansion to increase geographic coverage is expected to enable the Company to
continue to add subscribers, enhance use of its systems by existing subscribers,
increase roamer traffic due to the larger geographic area covered by the
cellular network and further enhance the overall efficiency of the network. The
Company believes that such increased cellular coverage will have a positive
impact on market penetration and subscriber usage.
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The Company employs a large staff of technicians who are experienced and
trained in operating cellular systems and who will be trained to handle the PCS
systems. Currently, technicians are responsible for installing system equipment
and performing preventative maintenance and repairs. Standards for preventative
maintenance are determined and reviewed centrally by the engineering operations
staff. All Company systems are designed with built-in redundancy on critical
parts, thereby reducing the risk of service interruptions. Back-up battery
systems, and in some cases generators, exist at all Cell Sites and switching
locations. In addition, sites have fire, power and intrusion alarm systems which
have call-out systems and are monitored centrally. Through the use of
sophisticated monitoring equipment, technicians at the Company's service center
are able to remotely monitor the technical performance of all of the Company's
service areas.
PCS
The Company has selected the GSM standard for use in its PCS markets, and
has entered into supply agreements with NORTEL and Nokia to provide system
equipment and PCS and dual-mode handsets. See "Risk Factors -- Risks Relating to
GSM Technical Standard" and "-- Products and Services." The Company's system
design incorporates the use of lower power, lower elevation sites in densely
populated areas.
In order for the Company's subscribers to roam into other PCS markets (and
vice versa), at least one PCS licensee in the other market must utilize the same
digital standard. As of the date hereof, six other MTA PCS licensees and a
number of BTA PCS licensees have announced that they intend to deploy GSM-based
PCS systems. Together, these PCS licensees and the Company hold licenses for
markets containing approximately 200 million persons, representing approximately
75% of the U.S. population. PCS operators in several markets adjacent to the
Company's PCS markets, including California, Minnesota, Nevada and Missouri,
have announced publicly that they intend to use the GSM standard. PrimeCo and
Sprint Spectrum have publicly announced that they intend to deploy PCS systems
based on a CDMA standard. AT&T Wireless and Southwestern Bell have selected a
TDMA standard. It is anticipated that together, CDMA-based PCS providers,
including competitors in several of the Company's markets, will own licenses
covering approximately 87% of the U.S. population (based on 1990 U.S. Census
Bureau figures used by the FCC for auction purposes) and AT&T Wireless and
Southwestern Bell, with their TDMA standard, own PCS licenses which cover
approximately 45% of the U.S. population (based on 1990 U.S. Census Bureau
figures used by the FCC for auction purposes). In order for the Company's PCS
subscribers to roam in other markets, and vice versa, at least one PCS licensee
in the other market must utilize the GSM standard, or the subscribers must use
dual-mode handsets that would permit the subscriber to use the cellular system
in the other market. See "Risk Factors -- Risks Relating to GSM Technical
Standard."
The successful implementation of the PCS systems will be dependent, to a
significant degree, upon the Company's ability to lease or acquire sites for the
location of its base station equipment. The site selection process will require
the negotiation of lease or acquisition agreements for hundreds of sites for the
entire PCS systems, and will likely require the Company to obtain zoning
variances or other governmental approvals or permits. The Company has leased
over 730 sites in its seven MTAs. A complete engineering analysis as to the
usability of all of these sites has not been conducted. The Company expects that
the site acquisition process will continue throughout the build-out of the PCS
systems. See "Risk Factors -- PCS Build-out and Capital Expenditures." In
addition to site selection, the implementation of the Company's PCS systems will
involve construction, base station and equipment installation and systems
testing and may require that the Company relocate existing licensees operating
fixed microwave systems. See "Risk Factors -- Relocation of Fixed Microwave
Licensees."
The Company believes that its PCS systems will not experience any spectrum
capacity constraints in the foreseeable future and that it will not be necessary
to expand the system's capacity until after the build-out has been completed.
System capacity can be expanded by installing additional transmitters at the
existing sites and by adding additional base stations. Additional capacity
typically will be added in increments that parallel demand and at substantially
less than the
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proportionate cost of the initial system. The Company believes the cost of this
additional capacity will be highly competitive with the cellular industry's cost
of adding capacity for additional subscribers.
COMPETITION
The competition in the wireless communications industry is intense.
Competition for subscribers among wireless licensees is based principally upon
the services and features offered, the technical quality of the wireless system,
customer service, system coverage, capacity and price. Such competition may
increase to the extent that licenses are transferred from smaller, stand-alone
operators to large, better capitalized and more experienced wireless
communications operators who may be able to offer subscribers certain network
advantages similar to those offered by the Company.
The Company has one cellular competitor in each of its cellular markets
including CommNet, Lincoln Telecommunications Company, Kansas Cellular,
Southwestern Bell and U S WEST, and there will be up to six PCS licensees in
each of its markets. The Company's principal competitors in its PCS business are
PrimeCo, Sprint Spectrum and AT&T Wireless, as well as the two existing cellular
providers in its PCS markets. The Company also competes with paging, dispatch
and conventional mobile telephone companies, resellers and landline telephone
service providers. Potential users of cellular systems may, however, 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. In the future, cellular service may also
compete more directly with traditional landline telephone service providers. See
"Risk Factors -- Competition."
The Company's PCS business will directly compete in each market with up to
five other PCS providers, including Sprint Spectrum, AT&T Wireless and PrimeCo.
The Company will also compete with existing cellular service providers in its
PCS markets, many of which have been operational for a number of years and have
significantly greater financial and technical resources than those available to
the Company and who may upgrade their systems to provide comparable services in
competition with the Company's PCS systems. These cellular competitors include
AT&T Wireless, U S WEST and U.S. Cellular.
The FCC requires all cellular, broadband PCS and certain SMR system
operators to provide service to "resellers." However, with respect to broadband
PCS licensees, the resale rule sunsets five years after the last group of
initial licenses for currently alloted PCS spectrum is awarded. A reseller
provides wireless service to customers but does not hold an FCC license or own
facilities. Instead, the reseller buys blocks of wireless telephone numbers and
capacity from a licensed carrier and resells service through its own
distribution network to the public. Thus, a reseller is both a customer of a
wireless licensee's services and also a competitor of that licensee. Several
small resellers currently operate in competition with the Company's systems.
The cost to the Company of PCS handsets initially will be higher than its
cost of cellular handsets. In order to compete effectively with sellers of
analog cellular handsets, the Company subsidizes the sale of its PCS handsets to
a greater extent than cellular handsets.
In the future, in its cellular and PCS markets the Company expects to face
increased competition from entities providing other communications technologies
and services. While some of these technologies and services are currently
operational, others are being developed or may be developed in the future. See
"Risk Factors -- Competition."
The FCC has licensed SMR dispatch system operators to construct digital
mobile communications systems on existing SMR frequencies, referred to as ESMR,
in many areas throughout the United States, including most of the areas in which
the Company operates. When constructed,
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ESMR systems could be competitive with the Company's wireless service. As a
result of advances in digital technology, ESMR operators have begun to design
and deploy digital mobile networks that increase the frequency capacity of ESMR
systems to a level that may be competitive with that of wireless systems. A
limited number of ESMR operators have recently begun offering short messaging,
data services and interconnected voice telephony services on a limited basis.
Several ESMR licensees have recently announced their intention to merge into one
company and plan to build and operate digital mobile networks in most major
United States markets.
The FCC has also allocated radio channels to a satellite system in which
transmissions from mobile units to satellites may augment or replace
transmissions to cellular or PCS cell sites. Several companies have announced
plans to design, construct, deploy and operate satellite-based
telecommunications systems worldwide. American Mobile Satellite Corporation has
designed a geosynchronous earth orbit satellite system for communications
services. That satellite has recently begun providing voice services. Several
low earth orbit ("LEO") satellite systems have been proposed that would use
multiple satellites to provide worldwide coverage. The first LEO system is
proposed for service in 1998. In addition, others have applied to the FCC for
licenses to operate satellite communications and video transmission systems in
the 28 GHz Ka band. The Company does not currently view such systems as direct
competitors.
Continuing technological advances in communications and FCC policies that
encourage the development of new spectrum-based technologies may result in new
technologies that compete with cellular and PCS systems. In addition, the
Omnibus Budget Reconciliation Act of 1993 requires, among other things, the
allocation to commercial use of a portion of 200 MHz of the spectrum currently
reserved for government use. It is possible that some portion of the spectrum
that is reallocated will be used to create new land-mobile services or to expand
existing land-mobile services.
GOVERNMENTAL REGULATION
The FCC regulates the licensing, construction, operation, acquisition and
sale of cellular and PCS systems in the United States pursuant to the
Communications Act of 1934, as amended from time to time, and the rules,
regulations and policies promulgated by the FCC thereunder (the "Communications
Act").
LICENSING OF CELLULAR COMMUNICATIONS SYSTEMS
A cellular communications system operates under a protected geographic
service area license granted by the FCC for a particular market on one of two
frequency blocks allocated for cellular service. One license for each market was
initially awarded to a company or group that was affiliated with a local
landline telephone carrier in such market and is called the wireline or "B" band
license and the other license is called the non-wireline or "A" band license.
Following notice of completion of construction, a cellular operator obtains
initial operating authority. Cellular authorizations are issued generally for a
10-year term beginning on the date of the grant of the initial construction
permit. Under FCC rules, the authorized service area of a cellular provider in
each of its markets is referred to as the Cellular Geographic Service Area or
CGSA. A cellular licensee has the exclusive right to serve the entire area that
falls within the licensee's MSA or RSA for a period of five years after grant of
the licensee's construction permit. At the end of the five-year period, however,
the licensee's exclusive CGSA rights become limited to the area actually served
by the licensee as of that time, as determined pursuant to a formula adopted by
the FCC. After the five-year period any entity may apply to serve portions of
the MSA or RSA not being served by the licensee. The five-year exclusivity
period has expired for most licensees and parties have filed unserved area
applications, including some in the Company's markets.
Near the conclusion of the 10-year license term, licensees must file
applications for renewal of licenses to obtain authority to renew their license.
The FCC has adopted specific standards to apply
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to cellular renewals, under which standard the FCC will award a renewal
expectancy to a cellular licensee that (i) has provided substantial service
during its past license term and (ii) has substantially complied with applicable
FCC rules and policies and the Communications Act. Violations of the
Communications Act or the FCC's rules could result in license revocations,
forfeitures or fines.
Cellular radio service providers also must satisfy a variety of FCC
requirements relating to technical and reporting matters. One such requirement
is the coordination of proposed frequency usage with adjacent cellular users,
permittees and licensees in order to avoid electrical interference between
adjacent systems. In addition, the height and power of base station transmitting
facilities and the type of signals they emit must fall within specified
parameters. The FCC has also provided guidelines respecting cellular service
resale practices and the terms under which certain ancillary services may be
provided through cellular facilities.
Cellular and PCS systems are subject to certain FAA regulations respecting
the location, lighting and construction of transmitter towers and antennae and
may be subject to regulation under the National Environmental Policy Act and the
environmental regulations of the FCC. State or local zoning and land use
regulations also apply to the Company's activities. The Company uses common
carrier point to point microwave facilities to connect Cell Sites and to link
them to the main switching office. These facilities are separately licensed by
the FCC and are subject to regulation as to technical parameters and service.
The Communications Act preempts state and local regulation of the entry of,
or the rates charged by, any provider of commercial mobile radio service
("CMRS") or any private mobile radio service ("PMRS"), which includes cellular
(and PCS) service. Notwithstanding such preemption, a state may petition the FCC
for authority to regulate the rates for any CMRS, and California, Hawaii and
Wyoming, where the Company provides service, have done so. However, the State of
Wyoming withdrew its petition on its own motion, and the FCC denied the
California and Hawaii petitions, as well as a California petition for
reconsideration.
TRANSFERS AND ASSIGNMENTS OF CELLULAR LICENSES
The Communications Act and FCC rules require the FCC's prior approval of
the assignment or transfer of control of a construction permit or license for a
cellular system. Subject to FCC approval, a license or permit may be transferred
from a nonwireline entity to a wireline entity, or vice versa. Non-controlling
interests in an entity that holds a cellular license or cellular system
generally may be bought or sold without prior FCC approval. Any acquisition or
sale by the Company of cellular interests may also require the prior approval of
the Federal Trade Commission and the Department of Justice, if over a certain
size, as well as any state or local regulatory authorities having competent
jurisdiction.
In addition, the FCC's rules prohibit the alienation of any ownership
interest in an RSA application, or an entity holding such an application, prior
to the grant of a construction permit. For unserved cellular areas, no change of
control may take place until after the FCC has granted both a construction
permit and a license and the licensee has provided service to the public for at
least one year. These restrictions affect the ability of prospective purchasers,
including the Company, to enter into agreements for RSA and unserved area
acquisitions prior to the lapse of the applicable transfer restriction periods.
The restriction on sale of interests in RSA and unserved area applications and
on agreements for such sales should not have a greater effect on the Company
than on any other prospective buyer.
LICENSING OF PCS SYSTEMS
In order to increase competition in wireless communications, promote
improved quality and service and make available the widest possible range of
wireless services, federal legislation was enacted directing the FCC to allocate
radio frequency spectrum for PCS by competitive bidding. A
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PCS system operates under a protected geographic service area license granted by
the FCC for a particular market on one of six frequency blocks allocated for
broadband PCS service. The FCC has divided the United States and its possessions
and territories into PCS markets made up of 493 BTAs and 51 MTAs. Each MTA
consists of at least two BTAs. As many as six licensees will compete in each PCS
service area. The FCC has allocated 120 MHz of radio spectrum in the 2 GHz band
for licensed broadband PCS services. The FCC divided the 120 MHz of spectrum
into six individual blocks, each of which is allocated to serve either MTAs or
BTAs. The spectrum allocation includes two 30 MHz blocks (A and B Blocks)
licensed for each of the 51 MTAs, one 30 MHz block (C Block) licensed for each
of the 493 BTAs, and three 10 MHz blocks (D, E and F Blocks) licensed for each
of the 493 BTAs. A PCS license will be awarded for each MTA or BTA in every
block, for a total of more than 2,000 licenses.
Under the FCC's current rules specifying spectrum aggregation limits
affecting broadband PCS licensees, no entity may hold licenses for more than 45
MHz of PCS, cellular and SMR services regulated as CMRS where there is
significant overlap in any geographic area (significant overlap will occur when
at least ten percent of the population of the PCS licensed service area is
within the CGSA(s) and/or SMR service area(s)).
The Company owns cellular licenses serving markets that are wholly or
partially within the Denver MTA, resulting in the Company exceeding the FCC's
current 45 MHz CMRS cross-ownership restriction described above. The Company has
a period of time after acquisition of the Denver MTA in which to comply with
this ownership restriction. In the event that this restriction is imposed, the
Company will be obligated to divest sufficient portions of its PCS market or its
cellular holdings to come into compliance with the rules. The Company does not
believe such restriction or any actions the Company is required to take to
comply therewith will have a material adverse effect on the Company.
When mutually exclusive applications (i.e., two or more applications
competing for the same service in the same geographic area) are filed for the
same MTA or BTA, those licenses will be awarded pursuant to auctions. The FCC
has adopted comprehensive rules that outline the bidding process, describe the
bidding application and payment process, establish penalties for certain bid
withdrawals, default or disqualification, establish regulatory safeguards,
reserve two of the six frequency blocks (the C and F Blocks) for "entrepreneurs"
and small businesses and in the case of one of the blocks (the F Block) provide
certain additional preferences for very small businesses. Winning C Block
bidders may pay 90% of the purchase price of their licenses in installments over
ten years, and winning F Block bidders may pay 80% of the purchase price of
their licenses in installments over ten years.
The FCC has already completed the auction of the A and B Block licenses,
and the winning bidders' licenses were granted on June 23, 1995. All of the MTA
PCS licenses, including those of the Company, have been awarded by the FCC, and
the licensees are permitted to construct and operate their PCS systems.
Furthermore, no appeals of the FCC Order granting these licenses are pending,
and, accordingly, the Order granting the licenses is final and non-appealable.
Nevertheless, there are certain unresolved actions before the FCC and in federal
court challenging certain FCC rules that applied to the A and B Block auction.
Specifically, on November 9, 1995, the United States Court of Appeals for the
Sixth Circuit rendered its decision in Cincinnati Bell Telephone Company, Inc.
v. FCC, 69 F.3d 752, holding that the FCC's cellular eligibility restriction and
the twenty percent bright line cellular attribution standard were arbitrary and
remanding the rules to the FCC for further proceedings. In response to the
Court's order, the FCC issued a Report and Order on June 24, 1996 eliminating
the cellular/PCS cross-ownership rule and the PCS spectrum cap rule but
maintaining the 45 MHz cap on CMRS spectrum (including cellular, broadband PCS
and included SMR). Appeals challenging this Report and Order are currently being
held in abeyance by the U.S. Court of Appeals for the Sixth Circuit pending
resolution of two outstanding petitions for reconsideration of the Report and
Order by the FCC. These developments raise a possibility that all of the
broadband PCS auctions conducted to date could be invalidated, including the A
and B Block auction. As a result of the challenges, although it currently
appears unlikely, the Company could lose its PCS
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licenses or have adverse conditions imposed on them, and in such event the loss
resulting from any adverse conditions or, in the case of license revocation,
from its costs and expenses in bidding for and obtaining the licenses and in
beginning the site acquisition and build-out for its PCS systems could have a
material adverse effect on the Company. See "Risk Factors -- Facility of PCS
Auctions."
The auction of C Block licenses commenced on December 18, 1995 and was
completed on May 6, 1996. The winning bidders' licenses were granted on
September 17, 1996, subject to petitions to deny or reconsideration by the FCC
on its own motion, with the exception of those licenses of winning bidders who
failed to submit the required first installment of their down payments. The FCC
conducted a reauction of those licenses, which was recently concluded. Cook
Inlet PCS, in which the Company holds a 49.9% non-controlling interest, has
received the initial grant of its licenses for 13 BTAs from the C Block auction,
and was the high bidder for a 14th BTA in the C Block reauction. Additionally,
nine companies defaulted in their payment of the required second installment of
their down payments for C Block licenses, and the FCC may reauction those
licenses. As described above, on November 9, 1995, the U.S. Court of Appeals for
the Sixth Circuit held that the FCC had not adequately justified certain FCC
rules relating to the eligibility of cellular licensees and investors to hold,
or invest in the holders of, PCS licenses, which rules applied in the C Block
auction and reauction as well as the A and B Block auction. Ensuing court and
administrative challenges were made to the FCC's June 24, 1996 Report and Order
reexamining the cellular eligibility rules and certain other PCS rules. The
Company cannot predict the outcome of these proceedings or their impact on the C
Block auction or the PCS licensing and regulatory scheme generally.
All PCS licenses will be granted for a 10-year period, at the end of which
they must be renewed. The FCC has adopted specific standards to apply to PCS
renewals, under which the FCC will award a renewal expectancy to a PCS licensee
that (i) has provided substantial service during its past license term and (ii)
has substantially complied with applicable FCC rules and policies and the
Communications Act. All 30 MHz broadband PCS licensees, including the Company,
must construct facilities that offer coverage to one-third of the population of
their service area within five years of their initial license grants and to
two-thirds of the population within ten years. Licensees that fail to meet the
coverage requirements may be subject to forfeiture of the license. FCC rules
restrict the voluntary assignments or transfers of control of C and F Block
licenses. During the first five years of the license term, assignments or
transfers affecting control are permitted only to assignees or transferees that
meet the eligibility criteria for participation in the entrepreneur block
auction at the time the application for assignment or transfer of control is
filed, or if the proposed assignee or transferee holds other licenses for C and
F Blocks and, at the time of receipt of such licenses, met the same eligibility
criteria. Any transfers or assignments during the entire 10 year initial license
term are subject to unjust enrichment penalties, i.e., forfeiture of any bidding
credits and acceleration of any installment payment plans should the assignee or
transferee not qualify for the same benefits. In the case of the C and F Blocks,
the FCC will conduct random audits to ensure that licensees are in compliance
with the FCC's eligibility rules. Violations of the Communications Act or the
FCC's rules could result in license revocations, forfeitures or fines.
For a period of up to five years after the grant of a PCS license (subject
to extension), a PCS licensee will be required to share spectrum with existing
licensees that operate certain fixed microwave systems within its license area.
To secure a sufficient amount of unencumbered spectrum to operate its PCS
systems efficiently and with adequate population coverage, the Company will need
to relocate many of these incumbent licensees. In an effort to balance the
competing interests of existing microwave users and newly authorized PCS
licensees, the FCC has adopted (i) a transition plan to relocate such microwave
operators to other spectrum blocks and (ii) a cost sharing plan so that if the
relocation of an incumbent benefits more than one PCS licensee, the benefitting
PCS licensees will share the cost of the relocation. This transition plan allows
most microwave users to operate in the PCS spectrum for a two-year voluntary
negotiation period and an additional one-year mandatory negotiation period. For
public safety entities dedicating
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a majority of their system communications for police, fire or emergency medical
services operations, the voluntary negotiation period is three years, with an
additional two year mandatory negotiation period. The FCC is considering
shortening the voluntary negotiation period by one year and lengthening the
mandatory negotiation period by one year for PCS licensees in the C, D, E and F
Blocks. Parties unable to reach agreement within these time periods may refer
the matter to the FCC for resolution, but the incumbent microwave user is
permitted to continue its operations until final FCC resolution of the matter.
The transition and cost sharing plans expire on April 4, 2005, at which time
remaining incumbents in the PCS spectrum will be responsible for their costs to
relocate to alternate spectrum locations. The Company has already reached
agreements with some of the microwave incumbents affecting the Company's PCS
systems; however, there can be no assurance that the Company will be successful
in reaching timely agreements with the remaining existing microwave licensees
needed to construct and operate its PCS systems or that any such agreements will
be on terms favorable to the Company. The Company may also be required to
contribute to the costs of relocation under agreements reached by other PCS
licensees if such relocation benefits the Company's license areas. See "Risk
Factors -- Relocation of Fixed Microwave Licensees" and "-- Finality of PCS
Auctions."
TRANSFERS AND ASSIGNMENTS OF PCS LICENSES
The Communications Act and FCC rules require the FCC's prior approval of
the assignment or transfer of control of a license for a PCS system. In
addition, the FCC has established transfer disclosure requirements that require
licensees who transfer control of or assign a PCS license within the first three
years of their license term to file associated contracts for sale, option
agreements, management agreements or other documents disclosing the total
consideration that the licensee would receive in return for the transfer or
assignment of its license. Non-controlling interests in an entity that holds a
PCS license or PCS system generally may be bought or sold without FCC approval.
Any acquisition or sale by the Company of PCS interests may also require the
prior approval of the Federal Trade Commission and the Department of Justice if
over a certain size, as well as state or local regulatory authorities having
competent jurisdiction.
FOREIGN OWNERSHIP
Under existing law, no more than 20% of an FCC licensee's capital stock may
be owned, directly or indirectly, or voted by non-U.S. citizens or their
representatives, by a foreign government or its representatives or by a foreign
corporation. Because the Company itself does not hold any FCC license but
instead controls other companies which themselves hold the licenses (which is
the current and intended structure), up to 25% of the Company's capital stock
may be owned or voted by non-U.S. citizens or their representatives, by a
foreign government or its representatives or by a foreign corporation. Alien
ownership above the 25% level may be allowed should the FCC find such higher
levels not inconsistent with the public interest. If foreign ownership of the
Company were to exceed the 25% level, the FCC could revoke the Company's FCC
licenses, although the Company could seek a declaratory ruling from the FCC
allowing the foreign ownership or take other actions to reduce the Company's
foreign ownership percentage in order to avoid the loss of its licenses. The
Company has no knowledge of any present foreign ownership in violation of these
restrictions.
TELECOMMUNICATIONS ACT OF 1996 AND OTHER RECENT DEVELOPMENTS
On February 8, 1996, the Telecommunications Act of 1996 (the
"Telecommunications Act") was signed into law, substantially revising the
regulation of communications. The goal of the Telecommunications Act is to
enhance competition and remove barriers to market entry, while deregulating the
communications industry to the greatest extent possible. To this end, local and
long-distance communications providers will, for the first time, be able to
compete in the other's market, and telephone and cable companies will likewise
be able to compete. To facilitate the entry of new carriers into existing
markets, the Telecommunications Act imposes certain interconnection and equal
access requirements on incumbent carriers. Additionally, all communications
carriers providing interstate communications services must contribute to the
federal universal service
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support mechanisms that the FCC will establish. The Company cannot predict the
outcome of the FCC's rulemaking proceedings to promulgate regulations to
implement the new law or the effect of the new regulations on cellular service
or PCS, and there can be no assurance that such regulations will not adversely
affect the Company's business or financial condition. A discussion of some
recent administrative developments follows.
At present, cellular providers, other than the regional Bell operating
companies, have the option of using only one designated long distance carrier.
The Telecommunications Act codifies the policy that CMRS providers will not be
required to provide equal access to long distance carriers. The FCC, however,
may require CMRS carriers to offer unblocked access (i.e., implemented by the
subscriber's use of a carrier identification code or other mechanisms at the
time of placing a call) to the long distance provider of a subscriber's choice.
The FCC has terminated its inquiry into the imposition of equal access
requirements on CMRS providers.
On July 26, 1996, the FCC released a Report and Order establishing
timetables for making emergency 911 services available by cellular, PCS and
other mobile service providers, including "enhanced 911" services that provide
the caller's telephone number, location and other useful information. By late
1997, cellular and PCS providers must be able to process and transmit 911 calls
(without call validation), including those from callers with speech or hearing
disabilities. Assuming a cost recovery mechanism is in place, by mid-1998 such
providers must have completed actions enabling them to relay a caller's
automatic number identification and cell site, and by 2001 they must be able to
identify the location of a 911 caller within 125 meters in 67% of all cases.
State actions incompatible with the FCC rules are subject to preemption.
On August 1, 1996, the FCC released a Report and Order expanding the
flexibility of cellular, PCS and other CMRS providers to provide fixed as well
as mobile services. Such fixed services include, but need not be limited to,
"wireless local loop" services, e.g., to apartment and office buildings, and
wireless backup to PBXs and local area networks, to be used in the event of
interruptions due to weather or other emergencies. The FCC has not yet decided
whether such fixed services should be subjected to universal service
obligations, or how they should be regulated, but it has proposed a presumption
that they be regulated as CMRS services.
On August 8, 1996, the FCC released its order implementing the
interconnection provisions of the Telecommunications Act of 1996. The FCC's
decision is lengthy and complex and is subject to petitions for reconsideration
and judicial review (as described below), and its precise impact is difficult to
predict with certainty. However, the FCC's order concludes that CMRS providers
are entitled to reciprocal compensation arrangements with local exchange
carriers ("LECs") and prohibits LECs from charging CMRS providers for
terminating LEC-originated traffic. The FCC's decision gives it broad authority
to regulate on the intrastate level, but states may impose additional
procompetitive rules beyond the minimum federal guidelines. Under these
guidelines, states must set arbitrated rates for interconnection and access to
unbundled elements based upon the LECs' long run incremental costs, plus a
reasonable share of forward-looking joint and common costs. In lieu of such
cost-based rates, the FCC has also established for use by states a benchmark
range of 0.2-0.4 cents per minute for end office termination pending further
cost-based studies, and subject to a possible "true-up" payment later. The FCC
has also permitted states to impose "bill and keep" arrangements, under which
CMRS providers would make no payments for LEC termination of calls where LECs
and CMRS providers have symmetrical termination costs and roughly balanced
traffic flows. However, the FCC has found no evidence that these conditions
presently exist. The relationship of these charges to the payment of access
charges and universal service contributions has not yet been resolved by the
FCC. LECs and state regulators filed appeals of the interconnection order, which
have been consolidated in the U.S. Court of Appeals for the Eighth Circuit. The
Court has stayed the effective date of certain of the rules until after the
court can act on the numerous appeals challenging the FCC's order. Oral
arguments are scheduled for January 1997.
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The FCC has determined that the availability of roaming for PCS networks is
important to the development of a national and competitive wireless voice
telecommunications system. Therefore, on August 15, 1996 the FCC released an
order and a request for comments concerning "automatic" versus "manual" roaming.
Currently, the FCC requires "manual" roaming, which requires cellular, PCS and
certain SMR carriers to provide service to any individual roamer whose handset
is technically capable of accessing their network. "Manual" roaming requires the
individual, prior to each phone call, to establish a relationship with the
system on which the individual wishes to carry the roaming call by giving a
credit card number to the carrier providing service. "Automatic" roaming allows
a subscriber to roam without taking any action other than turning on the
telephone. This requires a contractual agreement between the home and
"roamed-on" carriers. The Company cannot predict the outcome of the FCC's
rulemaking or its effect upon the Company.
The FCC recently adopted rules on telephone number portability which will
enable subscribers to migrate their landline and cellular telephone numbers to a
PCS carrier and from a PCS carrier to another service provider.
INTELLECTUAL PROPERTY
CELLULAR ONE is a service mark registered with the United States Patent and
Trademark Office. The service mark is owned by Cellular One Group, a Delaware
general partnership comprised of Cellular One Marketing, Inc., a subsidiary of
Southwestern Bell Mobile Systems, together with Cellular One Development, Inc.,
a subsidiary of AT&T and Vanguard Cellular Systems, Inc. The Company uses the
CELLULAR ONE service mark to identify and promote its cellular telephone service
pursuant to licensing agreements with Cellular One Group. In 1995, the Company
paid approximately $115,000 and $100,000, respectively, in licensing and
advertising fees under these agreements. The licensing agreements require the
Company to provide high-quality cellular telephone service to its customers, and
to maintain a certain minimum overall customer satisfaction rating in surveys
commissioned by Cellular One Group. The licensing agreements that the Company
has entered into are for original five-year terms expiring on various dates.
Assuming compliance by the Company with the provisions of the agreements, each
of these agreements may be renewed at the Company's option for three additional
five-year terms.
Western Wireless is a service mark owned by the Company registered with the
United States Patent and Trademark Office. The Company has applications pending
to obtain federal trademark protection of the mark "VoiceStream," and various
derivatives thereof. "Telewaves(R)," a service mark owned by one of the
Company's subsidiaries, is registered with the United States Patent and
Trademark Office and is the service mark under which the Company provides its
paging services.
EMPLOYEES AND LABOR RELATIONS
The Company considers its labor relations to be good and, to the Company's
knowledge, none of its employees is covered by a collective bargaining
agreement. As of August 31, 1996, the Company employed a total of 2,035 people
in the following areas:
<TABLE>
<CAPTION>
NUMBER OF
CATEGORY EMPLOYEES
------------------------------------------------------------------------- ---------
<S> <C>
Sales and marketing...................................................... 1,164
Engineering.............................................................. 301
General and administration, including customer service................... 570
</TABLE>
PROPERTIES
In addition to the direct and attributable interests in cellular, PCS and
paging licenses and other similar assets discussed in this Prospectus, the
Company leases its principal executive offices (consisting of approximately
78,000 square feet) located in Issaquah, Washington. The Company
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and its subsidiaries and affiliates lease and own locations for inventory
storage, microwave, cell site and switching equipment and sales and
administrative offices.
LEGAL PROCEEDINGS
There are no material, pending legal proceedings to which the Company or
any of its subsidiaries or affiliates is a party or of which any of their
property is subject which, if adversely decided, would have a material adverse
effect on the Company. For discussion of certain legal proceedings relating to
FCC license grants, see "Risk Factors -- Governmental Regulation,"
"-- Finality of PCS Auctions" and "-- Governmental Regulation."
ORGANIZATION
The Company conducts its operations through a number of direct and indirect
subsidiaries and affiliates. The Company holds its FCC licenses and conducts all
operations through wholly-owned subsidiaries. Five of the Company's MSAs have
minority ownership interests held by non-affiliated third parties. The total
ownership of such minority interest holders in such subsidiaries and affiliates
ranges from less than one percent to approximately eight percent. An indirect
wholly-owned subsidiary of the Company is the 49.9% limited partner of Cook
Inlet PCS. See "Risk Factors -- Holding Company Structure; Subordination,"
"-- Governmental Regulation" and "Certain Transactions."
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL
The names, ages and positions of the executive officers and directors of
the Company are listed below along with their business experience during the
past five years. The business address of all officers of the Company is 2001 NW
Sammamish Road, Issaquah, Washington 98027. All of these individuals are
citizens of the United States. The Company's Board of Directors currently
consists of six directors and one board seat that is vacant. Directors are
elected at the annual meeting of shareholders to serve until they resign or are
removed, or are otherwise disqualified to serve, or until their successors are
elected and qualified. Executive officers of the Company are appointed at the
Board's first meeting after each annual meeting of shareholders. No family
relationships exist among any of the directors or executive officers of the
Company, except for Mr. Stanton and Ms. Gillespie, who are married to each
other. See "-- Board of Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------------- --- -------------------------------
<S> <C> <C>
John W. Stanton.................................... 41 Chairman, Director and Chief
Executive Officer
Donald Guthrie..................................... 41 Vice Chairman
Robert R. Stapleton................................ 38 President
Mikal J. Thomsen................................... 40 Chief Operating Officer
Theresa E. Gillespie............................... 43 Chief Financial Officer
Alan R. Bender..................................... 41 Secretary, Senior Vice
President and General Counsel
Cregg B. Baumbaugh................................. 40 Senior Vice President --
Corporate Development
Timothy R. Wong.................................... 41 Vice President -- Engineering
Robert P. Dotson................................... 36 Vice President -- Marketing
Bradley J. Horwitz................................. 40 Vice President -- International
Nastashia Stoneman Press........................... 35 Principal Accounting Officer
David A. Bayer..................................... 57 Director
John L. Bunce, Jr.................................. 38 Director
Mitchell R. Cohen.................................. 32 Director
Jonathan M. Nelson................................. 40 Director
Terence M. O'Toole................................. 38 Director
</TABLE>
John W. Stanton has been a director, Chairman of the Board and Chief
Executive Officer of the Company since its formation in July 1994. Mr. Stanton
has been Chief Executive Officer of GCC since March 1992, and was Chairman of
the Board of GCC from March 1992 to December 1995. Mr. Stanton has served as
Chairman of the Board and Chief Executive Officer of PN Cellular, Inc. ("PN
Cellular"), the former General Partner of MCLP since its formation in October
1992. Mr. Stanton served as a director of McCaw Cellular Communications, Inc.
("McCaw") from 1986 to 1994, and as a director of LIN Broadcasting Corporation
("LIN Broadcasting") from 1990 to 1994, during which time it was a publicly
traded company. From 1983 to 1991, Mr. Stanton served in various capacities with
McCaw, serving as Vice-Chairman of the Board of McCaw from 1988 to September
1991 and as Chief Operating Officer of McCaw from 1985 to 1988. Mr. Stanton is
also a member of the Board of Directors of each of Interpoint, Inc. and SmarTone
(Hong Kong). In addition, Mr. Stanton is a trustee of Whitman College, a private
college. Mr. Stanton is currently a director of the CTIA. Mr. Stanton is married
to Ms. Gillespie.
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Donald Guthrie has been Vice Chairman of the Company since November 1995.
From 1986 to October 1995, he served as Senior Vice President and Treasurer of
McCaw and, from 1990 to October 1995, he served as Senior Vice
President -- Finance of LIN Broadcasting.
Robert R. Stapleton has been President of the Company since its formation
in July 1994, and President of GCC since November 1992. From August 1989 to
November 1992, he served in various positions with GCC, including Chief
Operating Officer and Vice President of Operations. From 1984 to 1989, Mr.
Stapleton was employed by mobile communications subsidiaries of Pacific Telesis,
Inc., which now are affiliated with AirTouch Communications.
Mikal J. Thomsen has been Chief Operating Officer of the Company since its
formation in July 1994. Mr. Thomsen was a director and Chief Operating Officer
of MCLP and its predecessor from its inception in 1991 until the Company's
formation in July 1994. From 1983 to 1991, Mr. Thomsen held various positions at
McCaw, serving as General Manager of its International Division from 1990 to
1991 and as General Manager of its West Florida Region from 1987 to 1990.
Theresa E. Gillespie has been Chief Financial Officer of the Company since
its formation in July 1994. Ms. Gillespie was Chief Financial Officer of MCLP
and its predecessor since its inception in 1991 until the Company's formation in
July 1994. Ms. Gillespie has been Chief Financial Officer of certain entities
controlled by Mr. Stanton and Ms. Gillespie since 1988. From 1986 to 1987, Ms.
Gillespie was Senior Vice President and Controller of McCaw. From 1975 to 1986
she was employed by a national public accounting firm. Ms. Gillespie is married
to Mr. Stanton.
Alan R. Bender has been Secretary, Senior Vice President and General
Counsel of the Company since its formation in July 1994. Mr. Bender joined GCC
in April 1990, as Senior Counsel, and was named Secretary in June 1990, General
Counsel in August 1990 and Vice President in March 1992. From 1988 to 1990, Mr.
Bender was Vice President and Senior Counsel of Equitec Financial Group, Inc., a
subsidiary of PacifiCorp Inc.
Cregg B. Baumbaugh has been Senior Vice President -- Corporate Development
of the Company since its formation in July 1994. From November 1989 through the
present, he has served in various positions with GCC, including Vice
President -- Business Development. From 1986 to 1989, Mr. Baumbaugh was employed
by The First Boston Corporation.
Timothy R. Wong has been Vice President -- Engineering of the Company since
January 1996. From 1990 to 1995, Mr. Wong held various positions at U S WEST
Cellular, serving as Executive Director -- Engineering and Operations from 1994
to 1995, Director of Wireless Systems Engineering in 1993, Manager of
International Wireless Engineering in 1992, and Manager -- Systems Design from
1990 to 1991.
Robert P. Dotson has been Vice President -- Marketing of the Company since
May 1996. Previously, Mr. Dotson held various marketing positions with PepsiCo's
KFC restaurant group, serving as Senior Director of Concept Development from
1994 to 1996, Director of International Marketing from 1993 to 1994, Divisional
Marketing Director from 1991 to 1993 and Manager of New Product Development and
Base Business Marketing from 1989 through 1991.
Bradley J. Horwitz has been Vice President -- International of the Company
and President of Western Wireless International Corporation, a subsidiary of the
Company, since November 1995. From 1983 to 1995, Mr. Horwitz held various
positions at McCaw, serving as Vice President -- International Operations from
1992 to 1995, Director -- Business Development from 1990 to 1992 and Director of
Paging Operations from 1986 to 1990.
Nastashia Stoneman Press has been Principal Accounting Officer since
December 1995. Ms. Press was Controller of the Company from its formation in
July 1994 to December 1995, and Controller of MCLP from April 1992 to the
Company's formation in July 1994. From 1989 to 1992, Ms. Press was Controller of
Institutional Communications Company. From 1983 to 1989, she held various
accounting and finance positions at MCI Communications Corporation.
David A. Bayer has been a director of the Company since its formation in
July 1994. Mr. Bayer was a director of GCC from February 1993 to December 1995.
Since November 1991, Mr. Bayer has
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been the President and owner of dbX Corporation. Mr. Bayer currently is a
director of MobileMedia Corporation ("MobileMedia").
John L. Bunce, Jr. has been a director of the Company since its formation
in July 1994. Mr. Bunce was a director of GCC from March 1992 to December 1995.
Mr. Bunce is a general partner of Hellman & Friedman, a private investment firm,
having joined Hellman & Friedman as an associate in 1988. Mr. Bunce currently is
a director of MobileMedia.
Mitchell R. Cohen has been a director of the Company since its formation in
July 1994. Mr. Cohen was a director of GCC from March 1992 to December 1995. Mr.
Cohen is a general partner of Hellman & Friedman, having joined Hellman &
Friedman as an associate in July 1989. From 1986 to 1989, Mr. Cohen was employed
by Shearson Lehman Hutton, Inc. Mr. Cohen currently is a director of MobileMedia
and Matrix Telecommunications Limited.
Jonathan M. Nelson has been a director of the Company since its formation
in July 1994. Mr. Nelson is a managing general partner of Providence Ventures,
L.P., the general partner of the general partner of Providence Media Partners
L.P. ("Providence"), a private equity fund. Since 1986, Mr. Nelson has been a
managing director of Narragansett Capital, Inc., a private management company
for three separate equity investment funds. Mr. Nelson is currently a director
of Wellman, Inc., Brooks Fiber Properties Inc. and CellNet Data Systems.
Terence M. O'Toole has been a director of the Company since its formation
in July 1994. Mr. O'Toole joined Goldman, Sachs & Co. ("Goldman Sachs") in 1983
and became a Vice President in April 1988 and a general partner in November
1992. He is currently a director of Insilco Corporation, a diversified
industrial holding company.
GCC filed a voluntary petition for bankruptcy under Chapter 11 of the
United States Bankruptcy Code in October 1991 and, pursuant to a pre-packaged
plan, emerged from bankruptcy in March 1992 under the controlling ownership of
the Hellman & Friedman Entities. Mr. Stapleton and Mr. Bender at the time of the
filing of the voluntary petition were executive officers of GCC, continue to be
executive officers of GCC and now concurrently serve as executive officers of
the Company.
BOARD OF DIRECTORS
Each member of the Board of Directors has been elected pursuant to a
stockholders agreement among certain of the Company's principal shareholders
entered into in connection with the Business Combination (the "Stockholders
Agreement"). Under the terms of the Stockholders Agreement, the current Board of
Directors consists of the Company's Chief Executive Officer (John W. Stanton),
three designees of Hellman & Friedman (John L. Bunce, Jr., Mitchell R. Cohen and
David A. Bayer), one designee of Goldman Sachs (Terence M. O'Toole), one
designee of Providence (Jonathan M. Nelson) and one designee selected by
Providence and Mr. Stanton (which position is currently vacant). The provisions
of the Stockholders Agreement, other than provisions providing for registration
rights, terminated on the closing of the May Offerings. Certain of such
shareholders are parties to a new Shareholders Agreement relating to the
election of directors. See "Certain Transactions."
The Executive Committee is currently comprised of Messrs. Stanton, Bunce
and O'Toole, and the Compensation Committee is currently comprised of Messrs.
Cohen, Nelson and Bayer. The Audit Committee is currently comprised of Messrs.
Cohen, Nelson and Bayer and is responsible for recommending to the Board of
Directors the engagement of the independent public accountants of the Company
and reviewing with the independent public accountants the scope and results of
the audits, the internal accounting controls of the Company, audit practices and
the professional services furnished by the independent public accountants.
The Washington Business Corporation Act (the "Washington Business Act")
provides that a company may indemnify its directors and officers as to certain
liabilities. The Company's Articles of Incorporation and Bylaws provide for the
indemnification of its directors and officers to the fullest extent permitted by
law, and the Company has entered into separate indemnification agreements with
each of its directors and officers to effectuate these provisions, and has
purchased director's
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and officer's liability insurance. The effect of such provisions is to indemnify
the directors and officers of the Company against all costs, expenses and
liabilities incurred by them in connection with any action, suit or proceeding
in which they are involved by reason of their affiliation with the Company, to
the fullest extent permitted by law.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid in 1995 to the
Company's Chief Executive Officer and the Company's five other most highly
compensated executive officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
BONUS OPTIONS/SARs COMPENSATION(1)
NAME AND PRINCIPAL POSITION SALARY ($) ($) (#) ($)
- ------------------------------------ ---------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
John W. Stanton..................... $120,000 $180,000 0 $ 4,500
Chairman & Chief Executive Officer
Robert R. Stapleton................. 139,461 100,000 139,500 4,500
President
Mikal J. Thomsen.................... 134,375 65,000 124,000 4,500
Chief Operating Officer
Theresa E. Gillespie................ 119,167 80,000 100,750 4,500
Chief Financial Officer
Alan R. Bender...................... 124,000 72,000 77,500 4,500
Secretary, Senior Vice President
and General Counsel
Cregg B. Baumbaugh.................. 124,000 72,000 77,500 4,500
Senior Vice President -- Corporate
Development
</TABLE>
- ---------------
(1) Company paid matching contributions to the Company's 401(k) Profit Sharing
Plan and Trust.
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended December 31, 1995 to the Named
Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED
------------------------------------------------------------ ANNUAL RATES
NUMBER OF PERCENT OF TOTAL OF STOCK PRICE
SECURITIES OF OPTIONS/SARs APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARs EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE(1) 5% 10%
- ------------------------ ------------- ---------------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
John W. Stanton......... 0 0% $ 0 0 $ 0 $ 0
Robert R. Stapleton..... 139,500 10 11.29 7/29/05 992,250 2,504,250
Mikal J. Thomsen........ 124,000 9 11.29 7/29/05 882,000 2,226,000
Theresa E. Gillespie.... 100,750 7 11.29 7/29/05 716,625 1,808,625
Alan R. Bender.......... 77,500 5 11.29 7/29/05 551,250 1,391,250
Cregg B. Baumbaugh...... 77,500 5 11.29 7/29/05 551,250 1,391,250
</TABLE>
- ---------------
(1) These options have terms of ten years from the date of grant, July 29, 1995,
and become exercisable as to 25% of the shares on the first anniversary and
an additional 25% every year thereafter until such options are fully
exercisable, provided that such officer remains continuously employed by the
Company.
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<PAGE> 82
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to expiration of their terms
assuming the specified compounded rates of appreciation on the base price
(5% and 10%) of the Common Stock over the terms of the options. The 5% and
10% numbers are calculated based on rules required by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth. Actual gains, if any, on stock option exercises are
dependent on the timing of such exercises and the future performance of the
Common Stock. There can be no assurance that the rates of appreciation
assumed in these columns can be achieved or that the amounts reflected will
be received by the individuals.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to each of the
Named Executive Officers concerning the exercise of stock options and
unexercised stock options held at December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS/SARs AT IN-THE-MONEY OPTIONS/SARs
SHARES FISCAL YEAR-END (#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Stanton........ 0 0 0 0 $ 0 $ 0
Robert R. Stapleton.... 0 0 470,168 211,833 8,938,825 2,491,321
Mikal J. Thomsen....... 0 0 36,168 196,333 463,782 2,317,553
Theresa E. Gillespie... 0 0 28,933 158,618 371,008 1,871,436
Alan R. Bender......... 0 0 182,900 120,900 3,420,277 1,425,293
Cregg B. Baumbaugh..... 0 0 181,868 118,833 3,407,051 1,398,788
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Messrs.
Stanton, Stapleton, Thomsen, Bender and Baumbaugh and Ms. Gillespie, pursuant to
which such persons serve as executive officers of the Company. Each agreement
provides that such person's employment by the Company may be terminated by the
Company at any time, with or without cause (as such term is defined in the
agreements). The agreements provide for initial annual base compensation of
$180,000, $150,000, $140,000, $130,000, $130,000 and $130,000, respectively, and
provide each executive officer an opportunity to earn an annual bonus, as
determined by the Board of Directors of the Company, targeted at 100%, 70%, 60%,
60%, 60% and 60%, respectively, of such person's base compensation. Each such
agreement provides that, in the event of an involuntary termination (as defined
therein) for other than cause (1) such executive officer will be entitled to
receive a severance payment in an amount equal to any accrued but unpaid
existing annual targeted incentive bonus through the date of termination, 12
months of such executive's then base compensation, and an amount equal to 12
months of such executive's existing annual targeted incentive bonus, (2) the
Company will, at its expense, make all specified insurance payment benefits on
behalf of such executive officer and his or her dependents for 12 months
following such involuntary termination and (3) with respect to any stock options
previously granted to each executive officer which remain unvested at the time
of involuntary termination, there shall be immediate vesting of that portion of
each such grant of any unvested stock options equal to the product of the total
number of such unvested options under such grant multiplied by a fraction, the
numerator of which is the sum of the number of days from the date on which the
last vesting of options under such grant occurred to and including the date of
termination plus 365, and the denominator of which is the number of days
remaining from the date on which the last vesting of
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<PAGE> 83
options under such grant occurred to and including the date on which the final
vesting under such grant would have occurred absent the termination. Mr.
Stapleton's agreement provides for an immediate vesting of all options upon his
involuntary termination for other than cause. Among other things, an executive
officer's death or permanent disability will be deemed an involuntary
termination for other than cause. In addition, each agreement provides for full
vesting of all stock options granted upon a change of control (as such term is
defined in the stock option agreements with the executive officer) of the
Company.
Each such employment agreement further provides that the Company has
entered or will enter into an indemnification agreement with such executive
officer pursuant to which the Company will agree to indemnify the executive
officer against certain liabilities arising by reason of the executive officer's
affiliation with the Company. Pursuant to the terms of each employment
agreement, each executive officer agrees that during such executive officer's
employment with the Company and for one year following the termination of such
executive officer's employment with the Company for any reason, such executive
officer will not engage in a business which is substantially the same as or
similar to the business of the Company and which competes within the applicable
commercial mobile radio services markets serviced by the Company. Mr. Stanton's
agreement provides that such prohibition shall not preclude Mr. Stanton's
investment in other companies engaged in the wireless communications business or
his ability to serve as a director of other companies engaged in the wireless
communications business, in each case subject to his fiduciary duties as a
director of the Company. See "Risk Factors -- Dependence Upon Key Personnel."
All key employees of the Company have executed a non-compete agreement
containing provisions substantially similar to those set forth in the employment
agreements described above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board was formed in July 1994.
None of the members was at any time during the fiscal year ended December 31,
1995, or at any other time, an officer or employee of the Company. No member of
the Compensation Committee of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee.
COMPENSATION OF DIRECTORS
Directors of the Company currently receive no compensation for serving on
the Board. Directors are not reimbursed for their out-of-pocket expenses
incurred in connection with attendance at meetings of, and other activities
relating to serving on, the Board of Directors and any committees thereof. The
Board of Directors may consider alternative compensation arrangements for the
directors from time to time.
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<PAGE> 84
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 30, 1996, by (i) each
person who is known by the Company to own beneficially 5% or more of either
class of Common Stock; (ii) each director of the Company; (iii) each Named
Executive Officer of the Company; and (iv) all directors and officers as a
group. Unless otherwise indicated, all persons listed have sole voting power and
investment power with respect to such shares, subject to community property
laws, where applicable, and the information contained in the notes to the table.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
----------------------------------- ---------------------------
NAME AND ADDRESS A SHARES B SHARES TOTAL A SHARES B SHARES TOTAL
- ------------------------------ --------- ---------- ---------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Hellman & Friedman(2)(5)...... 25,163,997 25,163,997 44.6 % 36.2 %
One Maritime Plaza, 12th
Floor
San Francisco, CA 94111
The Goldman Sachs Group, L.P.
and related investors(3)(5).. 12,099,029 12,099,029 21.4 17.4
85 Broad Street, 19th Floor
New York, NY 10004
John W. Stanton and Theresa E.
Gillespie(4)(5)(6).......... 10,000 6,290,544 6,300,544 * 11.1 9.1
2001 NW Sammamish Road
Issaquah, WA 98027
Providence Media Partners
L.P.(5)..................... 3,886,591 3,886,591 6.9 5.6
c/o Providence Ventures,
Inc.
900 Fleet Center
50 Kennedy Plaza
Providence, RI 02903
Putnam Investments, Inc....... 1,287,500 1,287,500 9.9 % 1.9
One Post Office Square
Boston, MA 02109
Robert A. Stapleton(6)........ 551,396 551,396 1.0 *
Mikal J. Thomsen(6)(7)........ 478,307 478,307 * *
Alan R. Bender(6)............. 247,492 247,492 * *
Cregg B. Baumbaugh(6)......... 240,199 240,199 * *
David A. Bayer(8)............. 818,159 818,159 1.5 1.2
John L. Bunce, Jr.(9)......... 25,163,997 25,163,997 44.5 36.2
Mitchell R. Cohen(9).......... 25,163,997 25,163,997 44.5 36.2
Terence M. O'Toole(10)........ 12,099,029 12,099,029 21.4 17.4
Jonathan M. Nelson(11)........ 6,000 3,886,591 3,892,591 * 6.9 5.6
All directors and executive
officers as a group (13
persons)(6)................. 16,500 49,790,970 49,807,470 * 86.2 71.7
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Computed in accordance with Rule 13d-3(d)(1) of the Exchange Act.
(2) Consists of shares held by Hellman & Friedman Capital Partners II, L.P.
("HFCP"), H&F Orchard Partners, L.P. ("HFOP") and H&F International
Partners, L.P. ("HFIP"), which are in turn beneficially owned by their
respective general partners and Warren Hellman, individually and as a
trustee of The Hellman Family Revocable Trust dated December 17, 1984 (the
"Hellman Trust" and with HFCP, HFOP and HFIP, the "Hellman Entities"), and
Tully M.
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<PAGE> 85
Friedman, individually and as the trustee of The Tully M. Friedman
Revocable Trust UAD January 3, 1980 (the "Friedman Trust" and with Hellman
Entities, the "Hellman & Friedman Entities"). HFCP owns of record
22,727,539 shares of Class B Common Stock, HFOP owns of record 2,033,024
shares of Common Stock and HFIP owns of record 403,434 shares of Class B
Common Stock. HFCP, HFOP and HFIP are California limited partnerships, the
sole general partners of which are entities indirectly controlled by the
Hellman Trust and the Friedman Trust. The principal business of each of
such partnerships is to make strategic investments in a variety of special
situations, including restructurings, recapitalizations and buyouts.
Hellman is a trustee of the Hellman Trust and Friedman is a trustee of the
Friedman Trust. Each of Hellman and Friedman is a citizen of the United
States. Hellman and Friedman, individually and as trustees of the
respective trusts, share voting and investment power with respect to the
shares of Class B Common Stock held by the Hellman & Friedman Entities.
(3) Consists of (i) 11,096,078 shares of Class B Common Stock held of record by
GS Capital Partners, L.P. ("GS Capital"), (ii) 580,813 shares of Class B
Common Stock held of record by Stone Street Fund 1992, L.P. ("Stone
Street"), (iii) 337,163 shares of Class B Common Stock held of record by
Bridge Street Fund 1992, L.P. ("Bridge Street") and (iv) 84,975 shares of
Class B Common stock held of record by The Goldman Sachs Group, L.P. ("GS
Group"). Each of GS Capital, Stone Street and Bridge Street is an
investment limited partnership, the general partner, the managing general
partner or the managing partner of which is an affiliate of GS Group. GS
Group disclaims beneficial ownership of shares held by such investment
partnerships to the extent partnership interests in such partnerships are
held by persons other than GS Group and its affiliates.
(4) Consists of (i) 1,686,069 shares of Class B Common Stock held of record by
PN Cellular, which is 78% owned and controlled by Mr. Stanton and Ms.
Gillespie, (ii) 1,274,520 shares of Class B Common Stock held of record by
Stanton Communications Corporation ("SCC"), which is substantially owned
and controlled by Mr. Stanton and Ms. Gillespie, (iii) 3,087,464 shares of
Class B Common Stock held by Mr. Stanton and Ms. Gillespie, as tenants in
common, and (iv) 159,437 shares of Class B Common Stock held of record by
The Stanton Family Trust. Mr. Stanton and Ms. Gillespie are married and
share voting and investment power with respect to the shares jointly owned
by them, as well as the shares held of record of PN Cellular, SCC and The
Stanton Family Trust.
(5) Parties or affiliates of parties to the Shareholders Agreement, which
provides that the parties thereto will vote their shares of Common Stock in
favor of the election as directors of the Company, the Chief Executive
Officer of the Company, one person designated by Stanton and Providence,
one person designated by Goldman Sachs, two persons designated by the
Hellman & Friedman Entities and one person selected by a majority of such
designated persons, subject to the ownership requirements set forth
therein. See "Certain Transactions."
(6) Includes aggregate exercisable options to purchase Class B Common Stock;
does not include unexercisable options. May include stock jointly or
separately owned with or by spouse.
(7) Mr. Thomsen jointly holds voting and investment power with respect to all
of such shares with Lynn C. Thomsen, his wife, except for shares issued or
issuable upon the exercise of stock options. Includes 172,484 shares of
Class B Common Stock beneficially owned by Mr. Thomsen through his
ownership of approximately 10.2% of PN Cellular. Mr. Thomsen does not have
voting control over such shares.
(8) All of such shares are owned by Bayer Investment Group. The David A. Bayer
Trust, of which Mr. Bayer is the trustee, is the managing general partner
of Bayer Investment Group. As a result, Mr. Bayer could be deemed to own
beneficially 100% of the 818,859 shares of Class B Common Stock held by
Bayer Investment Group. Mr. Bayer disclaims beneficial ownership as to
205,447 of such shares of Class B Common Stock.
(9) Mr. Bunce and Mr. Cohen may each be deemed to be the owner of the
25,163,997 shares of Class B Common Stock owned by the Hellman & Friedman
Entities as they are general
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<PAGE> 86
partners of Hellman & Friedman. Each of Mr. Bunce and Mr. Cohen disclaim
beneficial ownership of shares held by the Hellman & Friedman Entities to
the extent interests in such entities are held by persons other than such
individual.
(10) Mr. O'Toole may be deemed to be the owner of the 12,099,029 shares of Class
B Common Stock owned by affiliates of Goldman Sachs, an investment banking
firm of which he is a general partner. Mr. O'Toole disclaims beneficial
ownership of shares held by affiliates of Goldman Sachs to the extent
interests in such entities are held by persons other than Mr. O'Toole.
(11) Mr. Nelson may be deemed to be the owner of the 3,886,591 shares of Class B
Common Stock owned by Providence, as he is a managing general partner of
Providence Ventures, L.P., the general partner of the general partner of
Providence. Mr. Nelson disclaims beneficial ownership of shares held by
Providence to the extent interests in Providence are held by persons other
than Mr. Nelson.
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<PAGE> 87
CERTAIN TRANSACTIONS
In November 1993, the Hellman & Friedman Entities, Mr. Bayer, Mr. Stanton
and Ms. Gillespie each exercised rights to purchase shares of common stock of
GCC (the "GCC Stock"), which subsequently were exchanged for Class B Common
Stock. See "Principal Shareholders."
In 1993, prior to the Business Combination, GCC and MCLP exchanged certain
cellular systems owned by each of them.
Western Wireless Corporation was formed in July 1994 as part of the
Business Combination involving GCC, MCLP, Mr. Stanton and Ms. Gillespie and PN
Cellular. Immediately prior to the Business Combination, MCLP owned directly and
indirectly 2.5% of the outstanding shares of GCC Stock and a subsidiary of GCC
owned a 9.7% limited partnership interest in MCLP and 10% of the general partner
of MCLP. Pursuant to the Business Combination, Western Wireless Corporation
acquired approximately 95% of the outstanding shares of GCC Stock from certain
GCC stockholders in exchange for Class B Common Stock (the "GCC Exchange"). Of
the 45,042,681 shares of Class B Common Stock issued in the Business
Combination, 51.9% were issued to GCC stockholders, 46.2% were issued to the
partners of MCLP and 1.9% were issued in connection with interest acquired from
Mr. Stanton and Ms. Gillespie and their affiliates. Simultaneously with the GCC
Exchange, Western Wireless Corporation acquired all of the general and limited
partnership interests of MCLP in exchange for Class B Common Stock. As part of
the Business Combination, Western Wireless Corporation also acquired the
remaining ownership interests in a corporation controlled by Mr. Stanton and Ms.
Gillespie in which MCLP had a minority interest and in other partnerships
controlled by MCLP, Mr. Stanton and Ms. Gillespie in exchange for Class B Common
Stock. As a result of the Business Combination and a series of related
transactions, Western Wireless Corporation holds indirectly all of the assets
formerly held by MCLP, and GCC is a wholly-owned subsidiary of Western Wireless
Corporation.
In connection with the Business Combination, certain holders of GCC Stock
and certain holders of limited partnership interests in MCLP entered into the
Stockholders Agreement. The parties to the Stockholders Agreement beneficially
own approximately 68.3% of the Company's outstanding Common Stock. The
provisions of the Stockholders Agreement, other than the provisions relating to
registration rights, terminated at the closing of the May 1996 Offerings. See
"Management -- Board of Directors."
Concurrently with the execution of the Stockholders Agreement, the Hellman
& Friedman Entities, Mr. Stanton, Ms. Gillespie, PN Cellular, The Stanton Family
Trust and SCC (collectively, the "Stanton Entities"), GS Capital, Stone Street,
Bridge Street and GS Group (collectively, the "Goldman Sachs Entities") and
certain other shareholders entered into a Voting Agreement, which was to be
effective only upon the consummation of an initial public offering. The Voting
Agreement, which was superseded by the Shareholders Agreement, provided
generally that each of the Hellman & Friedman Entities, the Stanton Entities and
the Goldman Sachs Entities would vote their shares of Common Stock for one
member of the Board of Directors designated by each of the others so long as
each of the others beneficially owns at least 7 1/2% of the outstanding shares
of Common Stock of the Company. In connection with the May 1996 Offerings, the
Hellman & Friedman Entities, the Stanton Entities, the Goldman Sachs Entities
and Providence entered into the Shareholders Agreement, which superseded the
Voting Agreement and, with respect to election of directors of the Company,
provides that each of the Hellman & Friedman Entities, the Stanton Entities, the
Goldman Sachs Entities and Providence shall vote their shares of Common Stock to
elect a Board of Directors which will include (but not necessarily be limited
to) the following six members: (i) the Chief Executive Officer of the Company,
(ii) so long as the Hellman & Friedman Entities beneficially own at least (A)
15% of the total voting power (as defined in the Shareholders Agreement) of the
Company, two persons designated by the Hellman & Friedman Entities or (B) 7 1/2%
of the total voting power of the Company, one person designated by the Hellman &
Friedman Entities, (iii) so long as the Goldman Sachs Entities beneficially own
at least 7 1/2% of the total voting power of the Company, one person designated
by the Goldman Sachs Entities, (iv) so long as the Stanton Entities and
Providence collectively beneficially own at least 7 1/2% of the total
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<PAGE> 88
voting power of the Company, one person designated by majority vote of the
Stanton Entities and Providence (such designee being in addition to Mr. Stanton
if he is then serving on the Board of Directors by reason of being the Chief
Executive Officer of the Company); the Stanton Entities agreed that so long as
Mr. Stanton is serving as Chief Executive Officer and Providence owns at least
75% of the shares of Common Stock it beneficially owns at the date of execution
of the Shareholders Agreement, the Stanton Entities shall vote their shares of
Common Stock for one member of the Board of Directors designated by Providence;
and (v) one member of the Board of Directors of the Company selected by a
majority of the persons selected as described above. The Shareholders Agreement
further provides that so long as the Hellman & Friedman Entities hold shares of
Common Stock having voting power (as defined in the Shareholders Agreement) in
excess of 49.9% of the total voting power, then for so long as the Hellman &
Friedman Entities shall hold shares of Common Stock having voting power in
excess of the aforesaid percentage, it shall abstain from voting that number of
shares of Common Stock which gives it more votes than the aforesaid percentage.
Such agreement has a term of 10 years. The Goldman Sachs Entities are also
limited in their voting power pursuant to provisions of the Company's Articles
of Incorporation. See "Description of Capital Stock -- Certain Articles of
Incorporation, Bylaws and Statutory Provisions Affecting
Shareholders - Regulated Shareholders."
In the second quarter of 1995, in order to finance the acquisition of
broadband MTA PCS licenses through auctions conducted by the FCC, a number of
the Company's current shareholders and their affiliates purchased shares of
non-voting, convertible Series A Preferred Stock (the "PCS Preferred Stock") of
Western PCS Corporation, a wholly-owned subsidiary of the Company ("Western
PCS"), all the outstanding common stock of which was held by the Company, for a
total purchase price of $149,499,980. The PCS Preferred Stock was exchangeable
into shares of Class B Common Stock. The purchasers of the PCS Preferred Stock
were the Hellman & Friedman Entities, Goldman Sachs Entities, Mr. Stanton and
Ms. Gillespie, Providence, Bayer Investment Group and Toronto Dominion
Investments, Inc. To secure their purchase commitments prior to the purchase,
the subscribers agreed to pledge shares of the Company's stock or provide loans
to the Company. Loans aggregating approximately $13,850,000 were made to the
Company by subscribers. At the time of the purchase, the pledged shares were
released and the loans (including accrued interest in the amount of $226,000)
converted to equity in partial satisfaction of the purchase price. On June 26,
1995, the Company caused the exchange of the PCS Preferred Stock into Class B
Common Stock, leaving Western PCS as a wholly-owned subsidiary of the Company
and resulting in the issuance of 13,241,443 shares of Class B Common Stock to
the purchasers in exchange for the PCS Preferred Stock.
In July 1995, in connection with a private offering by the Company to all
GCC stockholders who were accredited investors to exchange their GCC Stock for
Class B Common Stock, Mr. Stapleton, Mr. Bender and Mr. Baumbaugh exchanged 30,
73 and 56 shares of GCC Stock for 9,300, 22,630 and 17,360 shares of Class B
Common Stock, respectively.
In November 1995, a wholly-owned subsidiary of the Company and Cook Inlet
PV/SS PCS Partners, L.P. (the "General Partner") formed a limited partnership,
Cook Inlet PCS, to participate in PCS C Block auction. Providence is a limited
partner of the General Partner of Cook Inlet PCS. The General Partner is not
otherwise affiliated with the Company. In connection with the formation of Cook
Inlet PCS, the Company granted to each partner of the General Partner the right,
during a specified period, to exchange its partnership interest in the General
Partner for shares of Class B Common Stock, the number of shares to be based on
the partners' capital contributions to the General Partner. Providence has the
right to exchange its partnership interest in the General Partner for up to
122,140 shares of Class B Common Stock.
In December 1995, GS Capital Partners Media Holding I, L.P., an affiliate
of the Goldman Sachs Entities, terminated and distributed the 3,842,531 shares
of Class B Common Stock registered in its name to its partners, GS Capital and
GS Capital Partners Media Holding I, Inc., both of which are
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<PAGE> 89
affiliates of the Goldman Sachs Entities. Following such distribution, GS
Capital Partners Media Holding I, Inc. merged with and into the Company and the
shares of Class B Common Stock owned by GS Capital Partners Media Holding I,
Inc. were canceled and a like number of shares of Class B Common Stock were
issued to GS Capital. GS Capital reimbursed the Company for all of the out-of-
pocket expenses incurred by it in connection with this transaction.
In February 1996, the Company acquired, through mergers intended to be
tax-free reorganizations, Palouse Paging, Inc. ("Palouse") and Sawtooth Paging,
Inc. ("Sawtooth"), paging system operators that provide services in some markets
in which the Company operates its cellular systems. Prior to the acquisitions,
Mr. Stanton and Ms. Gillespie had a significant ownership interest in each of
Palouse and Sawtooth. The acquisitions, each of which was approved by the
Company's Board of Directors in September 1995, contemplated a per share value
of the Common Stock of $11.29 for purposes of the exchange. The value of each of
Palouse and Sawtooth was determined by the disinterested directors of the
Company's Board of Directors. Mr. Stanton and Ms. Gillespie together had
independent legal representation in connection with the acquisitions and Mr.
Stanton did not participate in either the Board of Directors' decision as to
whether to complete the transaction or its determination of the value to be
assigned to the interests acquired. Prior to the acquisition of Palouse, Mr.
Stanton and Ms. Gillespie jointly owned approximately 99% of the issued and
outstanding shares of common stock of Palouse. In consideration for the
acquisition, the shares of stock of Palouse were exchanged for 515,561 shares of
Class B Common Stock. In connection with the acquisition, Palouse repaid Mr.
Stanton and Ms. Gillespie loans in the amount of $355,000. Prior to the
acquisition of Sawtooth, Mr. Stanton and Ms. Gillespie, the Company and another
individual, who now is an employee of the Company, owned approximately 47%, 47%
and 6%, respectively, of the issued and outstanding shares of common stock of
Sawtooth. In consideration for the acquisition of Sawtooth, the issued and
outstanding shares of common stock of Sawtooth owned by Mr. Stanton and Ms.
Gillespie and the other individual shareholder were exchanged for 79,748 shares
of Class B Common Stock. In connection with the acquisition, Sawtooth repaid Mr.
Stanton and Ms. Gillespie loans in the amount of $288,000.
Pursuant to an agreement reached in September 1995, Donald Guthrie, the
Company's Vice Chairman, purchased 88,567 shares of Class B Common Stock in
February 1996 for $999,950, which represents a per share price of $11.29 and he
was granted options to purchase 85,250 shares of Class B Common Stock at an
exercise price of $1.13 per share.
The Company and Western Wireless International Corporation
("International") have entered into an agreement (the "Horwitz Agreement") with
Bradley J. Horwitz, a Vice President of the Company and President of
International, pursuant to which Horwitz acquired 10% of the outstanding capital
stock of International for $100,000. The Company owns the balance of the
outstanding capital stock of International. Under the terms of the Horwitz
Agreement, under certain circumstances (including, among others, a change of
control of the Company and a sale of substantially all of the assets of
International) or after December 31, 1996, the Company shall have the right,
and/or Mr. Horwitz shall have the right to cause the Company, to exchange shares
of Class A Common Stock for all the shares of International capital stock owned
by Mr. Horwitz. The number of shares of Class A Common Stock to be delivered to
Mr. Horwitz is calculated in accordance with formulas (which formulas differ
depending upon the circumstances causing the exchange and which number depends
upon, among other things, the fair market value of the shares of International
stock at the time of the exchange) and would equal 8,860 shares of Class A
Common Stock based on the value of International stock on the date hereof. In
addition, if the Company proposes to sell its shares of International capital
stock, under certain circumstances as described in the Horwitz Agreement, the
Company can require Mr. Horwitz to sell, or must obtain for Mr. Horwitz the
right to sell, his shares of International capital stock at the same per share
price and on the same terms as the proposed sale by the Company.
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<PAGE> 90
An affiliate of the Goldman Sachs Entities is a member of the syndicate of
lenders pursuant to the Credit Facility and has committed to lend to the Company
up to the aggregate principal amount of $18.5 million.
Goldman Sachs served as a managing underwriter in the Company's May 1996
equity and debt public offering and as a Purchaser in its October 1996 private
debt offering, receiving customary fees therefor.
The Company believes that the foregoing transactions were on terms as fair
to the Company as those which would have been available in arm's-length
negotiations. The Senior Secured Facilities, the Washington Business Act (as
hereinafter defined) and the Indenture contain provisions which limit the terms
on which the Company may enter into transactions with its affiliates.
DESCRIPTION OF THE NOTES
The Exchange Notes, like the Original Notes, are to be issued under the
Indenture, dated as of October 24, 1996, by and between the Company and Harris
Trust Company of California, as Trustee (the "Trustee"). The following summary
of the material terms and provisions of the Notes and the Indenture does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Indenture, copies of which are available for inspection at the
Corporate Trust Office of the Trustee in Los Angeles, California and which may
also be obtained from the Company. Definitions relating to certain capitalized
terms are set forth under "-- Certain Definitions" and throughout this
description. Capitalized terms that are used but not otherwise defined herein
have the meanings assigned to them in the Indenture and such definitions are
incorporated herein by reference. As used in this section, the "Company" refers
to Western Wireless Corporation, unless the context otherwise requires.
GENERAL
The Original Notes are, and the Exchange Notes will be, unsecured
obligations of the Company, limited in aggregate principal amount to
$200,000,000. The Original Notes are, and the Exchange Notes will be senior
subordinated obligations of the Company, subordinated in right of payment to
Senior Indebtedness of the Company, including amounts outstanding under the
Credit Facility and senior in right of payment to any future subordinated
indebtedness of the Company. The Exchange Notes, like the Original Notes, will
rank pari passu with $200.0 million aggregate principal amount of the 2006
Notes. Unless otherwise noted, the following descriptions as to the Notes are
true for both the Original Notes and the Exchange Notes.
The Company has agreed to file and cause to become effective a registration
statement of which this Prospectus is a part, relating to an exchange offer for
the Original Notes, or, in lieu hereof, to file and cause to become effective a
resale shelf registration statement for the Original Notes. If such exchange
offer or shelf registration statement is not filed or is not declared effective,
or if such exchange offer is not consummated, within the time periods set forth
herein, Special Interest (as defined below) will accrue and be payable on the
Original Notes either temporarily or permanently. See "-- Registration Covenant;
Exchange Offer" below.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on February 1, 2007. Interest on the Notes will
accrue at a rate of 10 1/2% per annum and will be payable semiannually on each
February 1 and August 1, commencing on February 1, 1997, to the Holders of
record on the immediately preceding January 15 and July 15. Interest will be
computed on the basis of a 360-day year of twelve 30-day months; provided,
however, that any Special Interest on the Notes will be computed on the basis of
a 365- or 366-day year, as the case may be, and the number of days actually
elapsed. The Notes will be payable both as to principal and interest at the
office or agency of the Company maintained for such purpose
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within the City and State of New York. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose.
All moneys paid by the Company to a paying agent for the payment of
principal of (and premium, if any) and any interest on any Notes which remain
unclaimed for two years after such principal (or premium, if any) or interest
has become due and payable may be repaid to the Company and thereafter the
Holder of such Notes may look only to the Company for payment thereof.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURE AND TRANSFER
The Exchange Notes will be issued only in fully registered form, without
interest coupons, in denomination of $1,000 and integral multiples thereof, in
the form of a permanent global certificate in fully registered form (the "Global
Note") and deposited with the Trustee as custodian for The Depository Trust
Company ("DTC"), in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or Holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner of
an interest in the Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Notes
in certificated from except in the limited circumstances described below. See
"-- Exchange of Book-Entry Notes for Certificated Notes."
Depository Procedures. DTC has advised the Company that DTC is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
The Company expects that, pursuant to procedures established by DTC, (i)
upon issuance of the Global Note, DTC will credit the respective principal
amount of Exchange Notes of the individual beneficial interests represented by
such Global Note to the accounts of Participants and (ii) ownership of such
interests in the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not
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participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing such
interests. For certain other restrictions on the transferability of the Notes,
see "-- Exchange of Book-Entry Notes for Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of (and premium, if any) and interest
on a Global Note registered in the name of DTC or its nominee will be payable by
the Trustee to DTC or its nominee in its capacity as the registered holder under
the Indenture. Under the terms of the Indenture, the Company and the Trustee
will treat the persons in whose names the Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, none of the Company,
the Trustee nor any agent or the Company or the Trustee has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global Note, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Note, or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Note as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
Interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject to all cases to the rules and
procedures of DTC and is participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. If a Holder requires
physical delivery of a Certificated Note for any reason, including to sell
Exchange Notes to Persons in states which require physical delivery of such
Exchange Notes or to pledge such Exchange Notes, such holder must transfer its
interest in the Global Note in accordance with the normal procedures of DTC and
the procedures set forth in the Indenture.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between the Participants in DTC,
on the one hand, and Euroclear of CEDEL participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
CEDEL, as the case may be, by its respective depository; however, such
cross-market transactions will require delivery of instructions of Euroclear to
CEDEL, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or CEDEL, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the Global Note in DTC, and making or receiving
payment in accordance with normal procedures for
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same-day funds settlement applicable to DTC. Euroclear participants and CEDEL
participants may not deliver instructions directly to the depositories for
Euroclear or CEDEL.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Exchange Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes as to which such Participant or Participants has or have
given such direction. However, if there is an Event of Default (as defined
below) under the Notes, DTC reserves the right to exchange the Global Note for
Exchange Notes in certificated form, and to distribute such Exchange Notes to
its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Notes among participants in DTC,
Euroclear and CEDEL, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes. A Global Note is
exchangeable for definitive Exchange Notes in registered certificated form if
(i) DTC (x) notifies the Company that it is unwilling or unable to continue as
Depository for the Global Note and the Company thereupon fails to appoint a
successor depository or (y) has ceased to be a clearing agency registered under
the Exchange Act, (ii) the Company at its option, notifies the Trustee in
writing that it elects to cause the issuance of the Exchange Notes in
certificated form of (iii) there shall have occurred and be continuing a Default
or an Event of Default with respect to the Notes. In addition, beneficial
interests in a Global Note may be exchanged for certificated Exchange Notes upon
request but only upon at least 20 days prior written notice given to the Trustee
by or on behalf of DTC in accordance with its customary procedures. In all
cases, certificated Exchange Notes delivered in exchange for any Global Note or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures).
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Notes will, to the extent set forth in the Indenture, be subordinated in right
of payment to the prior payment in full of all Senior Indebtedness. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit or
creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due thereon
before the Holders of the Notes will be entitled to receive any Notes Payment.
In the event that any Senior Payment Default shall have occurred and be
continuing, then no Notes Payment shall be made unless and until such Senior
Payment Default shall have been cured or waived.
In the event that any Senior Nonmonetary Default shall have occurred and be
continuing, then, upon the receipt by the Company and the Trustee of written
notice of such Senior Nonmonetary Default from a Person designated as an
administrative agent for the Designated Senior Indebtedness or, if there is no
outstanding Designated Senior Indebtedness, any holder of Senior Indebtedness,
no Notes Payment shall be made during the period (the "Payment Blockage Period")
commencing on the date of such receipt of such written notice and ending on the
earlier of (i) the date on which such Senior Nonmonetary Default shall have been
cured or waived or shall have ceased to exist and any acceleration of Senior
Indebtedness shall have been rescinded or annulled or the Senior Indebtedness to
which such Senior Nonmonetary Default relates shall have been
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discharged or (ii) the 179th day after the date of such receipt of such written
notice. No more than one Payment Blockage Period may be commenced with respect
to the Notes during any 360-day period and there shall be a period of at least
181 consecutive days in each 360-day period in which no Payment Blockage Period
is in effect. No Payment Blockage Period shall be in effect if there is no
payment blockage period in effect with respect to any outstanding 2006 Notes.
For all purposes of this paragraph, no Senior Nonmonetary Default that was known
to the holders of Senior Indebtedness to exist or be continuing on the date of
commencement of any Payment Blockage Period shall be, or be made, the basis for
the commencement of a subsequent Payment Blockage Period by an administrative
agent for the Designated Senior Indebtedness unless such Senior Nonmonetary
Default shall have been cured for a period of not less than 90 consecutive days.
By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Indebtedness, the 2006 Notes or the
Notes may recover less, ratably, than holders of Senior Indebtedness and may
recover more, ratably, than the Holders of the Senior Subordinated Notes.
At June 30, 1996, Senior Indebtedness aggregated approximately $243.8
million. The Company expects from time to time to Incur additional Indebtedness
constituting Senior Indebtedness. See "Capitalization." The Indenture will not
prohibit or limit the Incurrence of additional Senior Indebtedness. In addition,
all existing and future indebtedness and other liabilities of the Company's
Subsidiaries will be effectively senior in right of payment to the Notes. At
June 30, 1996, the total outstanding Indebtedness of the Company's Subsidiaries
not eliminated in the Company's consolidated financial statements was
approximately $46.5 million.
OPTIONAL REDEMPTION
Prior to February 1, 2002, the Notes may be redeemed at any time at the
option of the Company, in whole or from time to time in part, at a redemption
price equal to the sum of (i) the principal amount of the Notes to be redeemed
together with accrued interest thereon to but excluding the date fixed for
redemption and (ii) the Make-Whole Amount, if any, with respect to the Notes or
portion thereof being redeemed.
On or after February 1, 2002, the Notes may be redeemed at any time at the
option of the Company, in whole or from time to time in part, at the following
redemption prices (expressed as percentages of principal amount), in each case
together with accrued interest to but excluding the date fixed for redemption,
if redeemed during the 12-month period beginning February 1 of each of the years
indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------------------------------- ----------
<S> <C>
2002............................................. 105.25%
2003............................................. 103.50%
2004............................................. 101.75%
2005 and thereafter.............................. 100.00%
</TABLE>
Notwithstanding the previous two paragraphs, on or before February 1, 1999,
the Company may at its option, apply Qualified Capital Stock Proceeds and
Affiliate and Related Person Proceeds to redeem up to $66 million in aggregate
principal amount of Notes at 110.50% (expressed as a percentage of the stated
principal amount thereof), together with accrued interest to but excluding the
date fixed for redemption.
Notice of any optional redemption of any Notes (or portion thereof) will be
given to Holders at their addresses appearing in the Security Register, not less
than 30 nor more than 60 days prior to the date fixed for redemption. The notice
of redemption shall state the redemption date, the redemption price, if less
than all the outstanding Senior Subordinated Notes are to be redeemed, principal
amounts of the particular Notes to be redeemed, that on the redemption date the
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redemption price will become due and payable upon each Note to be redeemed and
the place or places where such Notes are to be surrendered for payment of the
redemption price.
No sinking fund is provided for the Notes.
REGISTRATION COVENANT; EXCHANGE OFFER
The Company has entered into an Exchange and Registration Rights Agreement
(the "Registration Rights Agreement") pursuant to which the Company agreed, for
the benefit of the Holders of the Original Notes, (i) to file with the
Commission, within 30 days following the Closing, a registration statement (the
"Exchange Offer Registration Statement") under the Securities Act relating to an
Exchange Offer pursuant to which notes substantially identical to the Original
Notes (except that such notes will not contain terms with respect to the Special
Interest payments described below or transfer restrictions) (the "Exchange
Notes") would be offered in exchange for the then outstanding Original Notes
tendered at the option of the Holders and (ii) to use their best efforts to
cause the Exchange Offer Registration Statement to become effective as soon as
practicable thereafter. The registration statement of which this Prospectus is a
part has been filed to satisfy such obligation. The Company has further agreed
to commence the Exchange Offer promptly after the Exchange Offer Registration
Statement has become effective, hold such offer open for at least 30 days, and
issue Exchange Notes for all Original Notes validly tendered and not withdrawn
before the expiration of such offer.
Under existing Commission interpretations, the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act, except that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resale of
those Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of any unsold allotment from the
original sale of the Senior Subordinated Notes) by delivery of the prospectus
contained in the Exchange Offer Registration Statement. Under the Registration
Rights Agreement, the Company is required to allow Participating Broker-Dealers
and other persons, if any, subject to similar prospectus delivery requirements
to use the prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of such Exchange Notes. The Exchange Offer
Registration Statement will be kept effective for a period of up to 90 days
after the Exchange Offer has been consummated in order to permit resales of
Exchange Notes acquired by broker-dealers in after-market transactions. Each
Holder of the Original Notes (other than certain specified Holders) who wishes
to exchange such Original Notes for Exchange Notes in the Exchange Offer will be
required to represent that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
commencement of the Exchange Offer it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes and that it is not an Affiliate of the Company.
However, if on or before the date of consummation of the Exchange Offer the
existing Commission interpretations are changed such that the Exchange Notes
would not in general be freely transferable on such date, the Company will, in
lieu of effecting registration of Exchange Notes, file a registration statement
under the Securities Act relating to a shelf registration of the Original Notes
for resale by Holders (the "Resale Registration") to become effective and to
remain effective (except for one period not to exceed 30 consecutive days in any
twelve month period) for a period of up to three years after the Closing. In
addition, in the event the Purchasers shall not have resold all of the Original
Notes purchased by them pursuant to the Purchase Agreement (defined below) prior
to the expiration of the Exchange Offer and are not entitled to rely on the
interpretation of the Commission Staff to receive freely transferable Exchange
Notes, the Company will file a Resale Registration; provided that the expenses
related to such Resale Registration shall be paid by the Purchasers after nine
months from the date of effectiveness of such Resale Registration. The Company
will, in the event of the Resale Registration, provide to the Holders of the
Original Notes
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copies of the prospectus that is a part of the registration statement filed in
connection with the Resale Registration, notify such Holders when the Resale
Registration for the Original Notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Original Notes. A
Holder of Original Notes that sells such Original Notes pursuant to the Resale
Registration generally would be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers, will
be subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a Holder (including
certain indemnification obligations).
In the event that (i) the Company has not filed the registration statement
relating to the Exchange Offer (or, if applicable, the Resale Registration)
within 30 days following the Closing, (ii) such registration statement (or, if
applicable, the Resale Registration) has not become effective within 75 days
following the Closing, (iii) the expiration of the Exchange Offer has not
occurred within 45 business days after the effective date of the Exchange Offer
Registration Statement or (iv) any registration statement required by the
Registration Rights Agreement is filed and declared effective but shall
thereafter cease to be effective (except as specifically permitted therein)
without being succeeded immediately by an additional registration statement
filed and declared effective (any such event referred to in clauses (i) through
(iv), a "Registration Default"; provided that no more than one Registration
Default shall be deemed to be in effect at any one time), then interest will
accrue (in addition to the stated interest on the Original Notes) at the rate of
0.5% per annum on the principal amount of the Original Notes, for the period
from the occurrence of the Registration Default until such time as no
Registration Default is in effect. Such additional interest (the "Special
Interest") will be payable in cash semiannually in arrears on each February 1
and August 1. For each 90-day period that the Registration Default continues,
the per annum rate of such Special Interest will increase by an additional 0.5%,
provided that such rate shall in no event exceed 2.0% per annum in the
aggregate. Special Interest, if any, will be computed on the basis of a 365 or
366 day year, as the case may be, and the number of days actually elapsed.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which will be available upon request to the Company.
The Original Notes and the Exchange Notes will be considered collectively
to be a single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and Offers to Purchase, and for
purposes of this Description of the Notes (except under this caption
"-- Registration Covenant; Exchange Offer") all references herein to "Original
Notes" or "Notes" shall be deemed to refer collectively to the Original Notes
and any Exchange Notes, unless the context otherwise requires.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of a Note shall
have the right to have such Note repurchased by the Company on the terms and
conditions set forth in the Indenture. The Company shall, within 30 days
following the date of the consummation of a transaction resulting in a Change of
Control, mail an Offer to Purchase all outstanding Notes at a purchase price
equal to 101% of their aggregate principal amount plus accrued interest to but
excluding the Purchase Date. The Credit Facility precludes the Company from
making such an Offer to Purchase, and the Company will be required to obtain
written consents or waivers from the lenders under the Credit Facility or repay
Indebtedness under the Credit Facility in order to be able to make the Offer to
Purchase.
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"Change of Control" means (i) directly or indirectly a sale, transfer or
other conveyance of all or substantially all the assets of the Company, on a
consolidated basis, to any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable), excluding transfers or conveyances to or among the Company's Wholly
Owned Restricted Subsidiaries, as an entirety or substantially as an entirety in
one transaction or series of related transactions, in each case with the effect
that any Person or group of Persons that, as of the date of the Indenture, are
not Initial Investors or Affiliates of the Initial Investors own more than 50%
of the total Voting Power entitled to vote in the election of directors,
managers or trustees of the transferee entity immediately after such
transaction, (ii) any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
other than the Initial Investors (or any Person or group of Persons that, at the
date of the Indenture, are Affiliates of the Initial Investors), is or becomes
the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a Person shall be deemed to
have "beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total Voting Power of
the Company or (iii) during any period of 24 consecutive months, individuals who
at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved), cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-l thereunder, in connection
with any Offer to Purchase.
COVENANTS
LIMITATION ON CONSOLIDATED INDEBTEDNESS
The Indenture will prohibit the Company and any of its Restricted
Subsidiaries from Incurring any Indebtedness unless the Company's Indebtedness
to EBITDA Ratio at the end of the fiscal quarter immediately preceding the
Incurrence of such Indebtedness, after giving pro forma effect thereto, is less
than:
<TABLE>
<CAPTION>
FOR THE PERIOD RATIO
---------------------------------------------- -------------
<S> <C>
Prior to June 30, 2000........................ 9 to 1; and
Thereafter.................................... 7 to 1
</TABLE>
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may Incur the following Indebtedness without regard to the foregoing
limitations:
(i) Indebtedness evidenced by the Notes or otherwise arising under the
Indenture;
(ii) Indebtedness of the Company or any Restricted Subsidiary, as the
case may be, that is outstanding or committed at the date of the Indenture
under the Credit Facility (including any letters of credit issued
thereunder) and the NORTEL Facility and any renewal, extension, refinancing
or refunding thereof in an amount which, together with any amount remaining
outstanding or committed under the Credit Facility and the NORTEL Facility,
does not exceed $950 million outstanding; provided that this clause (ii)
shall not prohibit the Company from incurring additional Indebtedness under
the Credit Facility or the NORTEL Facility otherwise permitted pursuant to
this covenant;
(iii) Indebtedness of the Company or any Restricted Subsidiary that is
outstanding or committed prior to February 1, 2000 for the acquisition,
construction or improvement by the Company or any Restricted Subsidiary of
assets in the Wireless Communications Business; provided that the amount of
such Indebtedness at any time outstanding does not exceed 100% of the Fair
Market Value of such assets;
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(iv) Indebtedness of the Company or any Wholly Owned Restricted
Subsidiary of the Company owing to the Company or any Wholly Owned
Restricted Subsidiary of the Company;
(v) Indebtedness of the Company or any Restricted Subsidiary to renew,
extend, refinance or refund any Indebtedness of the Company or any
Restricted Subsidiary outstanding or committed on the date of renewal,
extension, refinancing or refunding other than Indebtedness Incurred
pursuant to clause (ii) or (iv); provided, however, that such Indebtedness
does not exceed the principal amount of outstanding or committed
Indebtedness so renewed, extended, refinanced or refunded plus financing
fees and other expenses associated therewith; provided, further, that (a)
such renewing, extending, refinancing or refunding Indebtedness shall have
no mandatory repayments or redemptions prior to the Indebtedness being
renewed, extended, refinanced or refunded and (b) in the case of any
refinancing or refunding of Indebtedness pari passu to the Notes, the
refinancing or refunding Indebtedness is made pari passu or subordinated to
the Notes and, in the case of any refinancing or refunding of Indebtedness
subordinated to the Notes, the refinancing or refunding Indebtedness is
made subordinate to the Notes to substantially the same extent as the
Indebtedness refinanced or refunded;
(vi) Indebtedness Incurred by the Company or any Restricted Subsidiary
under Interest Hedge Agreements to hedge permitted Indebtedness; and
(vii) Indebtedness of the Company or any Restricted Subsidiary that is
outstanding or committed prior to February 1, 2000, other than Indebtedness
permitted pursuant to clauses (i) through (vi) above, which, together with
any other outstanding indebtedness incurred pursuant to this clause (vii),
does not exceed $50 million at any time outstanding or committed.
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES
The Indenture will prohibit the Company from allowing any Restricted
Subsidiary of the Company to create or issue any Preferred Stock except:
(i) Preferred Stock outstanding on the date of the Indenture;
(ii) Preferred Stock issued to and held by the Company or any Wholly
Owned Restricted Subsidiary of the Company;
(iii) Preferred Stock issued by any Person prior to that Person's
having become a direct or indirect Restricted Subsidiary of the Company;
(iv) Preferred Stock issued by a Restricted Subsidiary the proceeds of
which are used to refinance outstanding Preferred Stock of a Restricted
Subsidiary, provided that (a) the liquidation value of the refinancing
Preferred Stock does not exceed the liquidation value so refinanced plus
financing fees and other expenses associated with such refinancing and (b)
such refinancing Preferred Stock has no mandatory redemptions prior to the
Preferred Stock being refinanced; and
(v) Preferred Stock issued by a Restricted Subsidiary with a
cumulative liquidation preference in an amount which could have been
Incurred at the time of such issuance as Indebtedness under the provision
of the Indenture described under "-- Limitation on Consolidated
Indebtedness."
LIMITATION ON CERTAIN ASSET DISPOSITIONS
The Indenture will prohibit the Company or any Restricted Subsidiary from
making any Asset Disposition in one or more related transactions that result in
aggregate net proceeds in excess of $10 million unless (i) the consideration
received at the time of such Asset Disposition is at least equal to the Fair
Market Value of the assets as determined by the Board of Directors of the
Company (which determination will be evidenced by a Board Resolution), (ii) (A)
at least 85% of the consideration received consists of cash or readily
marketable cash equivalents or the assumption of Indebtedness of the Company or
any Restricted Subsidiary or (B) so long as no Event of Default or event which
with notice or lapse of time would become an Event of Default has occurred
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and is continuing, the consideration paid to the Company or such Restricted
Subsidiary is substantially comparable in type to the assets being sold as
determined by the Board of Directors of the Company (which determination will be
evidenced by a Board Resolution) and (iii) all the Net Available Proceeds shall
be applied (a) first, to the payment of Senior Indebtedness (or Indebtedness of
such Restricted Subsidiary, as the case may be) then outstanding; (b) second, to
make any offer to purchase required under the 2006 Notes Indenture; (c) third,
to make an Offer to Purchase any outstanding Notes at par value plus accrued
interest and any other offer to purchase required under the terms of
Indebtedness that is pari passu to the Notes, on a pro rata basis; and (d)
fourth, to the repayment of other Indebtedness of the Company or a Restricted
Subsidiary. The Company will not be able to make an offer to purchase pursuant
to clause (ii)(b) or (c) without obtaining written consents from or repaying the
lenders under the Credit Facility.
Notwithstanding clause (iii) of the preceding paragraph, the Indenture will
not require the Company to repay Senior Indebtedness (or Indebtedness of such
Restricted Subsidiary) then outstanding, to make an Offer to Purchase any
outstanding Notes at par value or to repay any other Indebtedness with the
proceeds of any Asset Disposition to the extent that the Net Available Proceeds
from any Asset Disposition are invested within 365 days of such Asset
Disposition in assets or an entity in the Wireless Communications Business or
the Company or a Restricted Subsidiary shall have entered into a binding
agreement to invest in such assets or entity and such investment shall have been
consummated within eighteen months of such Asset Disposition.
For purposes of the foregoing, "Net Available Proceeds" means the aggregate
amount of cash (including any other consideration that is converted into cash)
received by the Company or a Restricted Subsidiary in respect of such an Asset
Disposition, less the sum of (i) all fees, commissions and other expenses
Incurred in connection with such Asset Disposition, including the amount of
income taxes required to be paid by the Company or a Restricted Subsidiary in
connection therewith and (ii) the aggregate amount of cash so received which is
used to retire any existing Indebtedness of the Company or a Restricted
Subsidiary which is required to be repaid in connection therewith.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture will prohibit the Company or any Restricted Subsidiary from
making any Restricted Payment unless after giving effect thereto (a) no Event of
Default or event which with notice or lapse of time or both would become an
Event of Default has occurred and is continuing; (b) the Company would be
permitted to Incur an additional $1.00 of Indebtedness pursuant to the provision
of the Indenture described in the first paragraph under "--Limitation on
Consolidated Indebtedness"; and (c) the total of all Restricted Payments made on
or after the date of the Indenture does not exceed the sum of (i) Cumulative
EBITDA less 1.6 times Cumulative Interest Expense and (ii) 100% of the aggregate
Affiliate and Related Person Proceeds and Qualified Capital Stock Proceeds of
the Company after the date of the Indenture.
The foregoing provision shall not be violated, so long as no Event of
Default or event which with notice or lapse of time or both would become an
event of default has occurred and is continuing (other than in the case of
clause (ii)), by reason of (i) the payment of any dividend within 60 days after
declaration thereof if at the declaration date such payment would have complied
with the foregoing provision, (ii) any refinancing of any Indebtedness otherwise
permitted under the provision of the Indenture described under clause (ii) or
(v) of "--Limitation on Consolidated Indebtedness," (iii) Permitted Joint
Venture Investments, (iv) the payment of scheduled dividends on, or the
redemption of, Preferred Stock permitted to be created or issued pursuant to the
provision of the Indenture described under "-- Limitation on Preferred Stock of
Restricted Subsidiaries" or (v) Restricted Payments, in addition to Restricted
Payments permitted pursuant to clauses (i) through (iv) above, not in excess of
$25 million in the aggregate after the date of the Indenture.
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LIMITATIONS CONCERNING DISTRIBUTIONS AND TRANSFERS BY RESTRICTED
SUBSIDIARIES
The Indenture will provide that the Company shall not, and shall not permit
any Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual restriction or prohibition on the ability of any
Restricted Subsidiary to (i) pay dividends on, or make other distributions in
respect of, its capital stock, or any other ownership interest or participation
in, or measured by, its profits, to the Company or any Restricted Subsidiary or
pay any Indebtedness or other obligation owed to the Company or any Restricted
Subsidiary, (ii) make any loans or advances to the Company or any Restricted
Subsidiary or (iii) transfer any of its property or assets to the Company or any
Restricted Subsidiary. Notwithstanding the foregoing, the Company may, and may
permit any Restricted Subsidiary to, suffer to exist any such restriction or
prohibition (i) pursuant to any agreement in effect on the date of the
Indenture, (ii) pursuant to an agreement entered into after the date of the
Indenture relating to any Indebtedness the Incurrence of which is permitted
under the Indenture, provided, however, that the provisions contained in such
agreement relating to such encumbrance or restriction are no more restrictive in
any material respect than those contained in the NORTEL Facility or are no more
restrictive in any material respect than those contained in the Indenture, (iii)
pursuant to an agreement relating to any Indebtedness of such Restricted
Subsidiary which was outstanding or committed prior to the date on which such
Restricted Subsidiary was acquired by the Company other than in anticipation of
becoming a Restricted Subsidiary or (iv) pursuant to an agreement effecting a
renewal, extension, refinancing or refunding of any agreement described in
clauses (i) through (iii) above, provided, however, that the provisions
contained in such renewal, extension, refinancing or refunding agreement
relating to such encumbrance or restriction are no more restrictive in any
material respect than the provisions contained in the agreement the subject
thereof.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
RESTRICTED SUBSIDIARIES
Subject to the requirements of the provision of the Indenture described
under "-- Consolidation, Merger, Conveyance, Transfer or Lease," the Indenture
will provide that the Company will not, and will not permit any Wholly Owned
Restricted Subsidiary to, transfer, convey, sell, lease or otherwise dispose of
any Capital Stock of such Wholly Owned Restricted Subsidiary or any other Wholly
Owned Restricted Subsidiary to any Person other than the Company or a Wholly
Owned Restricted Subsidiary; and shall not permit any Wholly Owned Restricted
Subsidiary to issue shares of its Capital Stock or securities convertible into,
or warrants, rights or options, to subscribe for or purchase shares of, its
Capital Stock to any Person other than the Company or a Wholly Owned Restricted
Subsidiary. Notwithstanding the foregoing, the Company may, and may allow any
Wholly Owned Restricted Subsidiary to, transfer, convey, sell, lease or dispose
of the Capital Stock of such Wholly Owned Restricted Subsidiary or of any other
Wholly Owned Restricted Subsidiary or allow any Wholly Owned Restricted
Subsidiary to issue Capital Stock or securities convertible into, or warrants,
rights or options, to subscribe for or purchase shares of, its Capital Stock to
any Person provided that all the Capital Stock of such Wholly Owned Restricted
Subsidiary is sold or otherwise disposed of and provided that such sale or
disposition is effected in accordance with the terms of the provision of the
Indenture described under "--Limitation on Certain Asset Dispositions."
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary of the Company to, enter into any transaction
involving aggregate consideration in excess of $1 million, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with or to any Affiliate or Related Person (other than a
Restricted Subsidiary), unless a majority of the disinterested members of the
Board of Directors of the Company determines (which determination will be
evidenced by a Board Resolution) that (i) such transaction is in the best
interests of the Company or such Restricted Subsidiary and (ii) such
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transaction is on terms that are no less favorable to the Company or a
Restricted Subsidiary than those which might be obtained in arm's length
transactions with a third party at the time.
LIMITATION ON LIENS
The Indenture will provide that the Company may not, and may not permit any
Restricted Subsidiary of the Company to, Incur or suffer to exist any Lien on or
with respect to any property or assets now owned or hereafter acquired to secure
any Indebtedness that is pari passu or subordinated to the Notes without making,
or causing such Restricted Subsidiary to make, effective provision for securing
the Notes (i) equally and ratably with such Indebtedness as to such property for
so long as such Indebtedness will be so secured or (ii) in the event such
Indebtedness is Indebtedness of the Company which is subordinate in right of
payment to the Notes, prior to such Indebtedness as to such property for so long
as such Indebtedness will be so secured.
The foregoing restrictions shall not apply to: (i) Liens existing in
respect of any Indebtedness that exists on the date of the Indenture; (ii) Liens
in favor of the Company or Liens in favor of a Wholly Owned Restricted
Subsidiary of the Company on the assets or Capital Stock of another Wholly Owned
Restricted Subsidiary of the Company; (iii) Liens to secure Indebtedness
outstanding or committed for the purpose of financing all or any part of the
purchase price or the cost of construction or improvement of the equipment or
other property subject to such Liens; provided, however, that (a) the principal
amount of any Indebtedness secured by such a Lien does not exceed 100% of such
purchase price or cost, (b) such Lien does not extend to or cover any other
property other than such item of property or any improvements on such item and
(c) the Incurrence of such Indebtedness is otherwise permitted by the Indenture;
(iv) Liens on property existing immediately prior to the time of acquisition
thereof (and not Incurred in anticipation of the financing of such acquisition);
or (v) Liens to secure Indebtedness to extend, renew, refinance or refund (or
successive extensions, renewals, refinancings or refundings), in whole or in
part, Indebtedness secured by any Lien referred to in the foregoing clauses (i),
(iii) and (iv) so long as such Lien does not extend to any other property and
the principal amount of Indebtedness so secured is not increased except as
otherwise permitted under the provision of the Indenture described under clause
(ii) or (v) of "--Limitation on Consolidated Indebtedness."
LIMITATION ON CERTAIN DEBT
The Indenture will provide that the Company will not Incur any Indebtedness
that is subordinate in right of payment to any other Indebtedness of the Company
unless the Indebtedness so Incurred is either pari passu or subordinate in right
of payment to the Notes.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Indenture will provide that the Company will not consolidate with or
merge into any Person or permit any other Person to consolidate with or merge
into the Company, or transfer, sell, convey or lease or otherwise dispose of all
or substantially all of its assets to, any Person unless (i)(a) the Company is
the surviving entity or (b) if the Company is not the surviving entity then the
successor or transferee assumes all the obligations of the Company under the
Notes and the Indenture, (ii) the Consolidated Net Worth of the successor or
transferee immediately after the transaction is not less than 100% of the
Company's Consolidated Net Worth immediately prior to the transaction, (iii)
immediately after giving effect to such transaction, the Company would be
permitted to Incur at least $1.00 of additional Indebtedness pursuant to the
provision of the Indenture described in the first paragraph under "--Limitation
on Consolidated Indebtedness," (iv) after giving effect to such transaction no
Event of Default or event which with notice or lapse of time would become an
Event of Default has occurred and (v) an Officers' Certificate and an Opinion of
Counsel covering such conditions shall be delivered to the Trustee.
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EVENTS OF DEFAULT AND REMEDIES
The following are Events of Default under the Indenture: (i) failure to pay
the principal of or premium, if any, on the Notes at Maturity; (ii) failure to
pay any interest on the Notes when it becomes due and payable continued for 30
days; (iii) failure, on the applicable Purchase Date, to purchase Notes required
to be purchased by the Company pursuant to an Offer to Purchase as to which an
Offer has been mailed to Holders; (iv) failure to perform or comply with the
provisions of the Indenture described under "--Mergers, Consolidations and
Certain Sales of Assets"; (v) failure to perform any other covenant or agreement
of the Company under the Indenture continued for 30 days after written notice to
the Company by the Trustee or Holders of at least 25% in aggregate principal
amount of outstanding Notes; (vi) default by the Company or any Restricted
Subsidiary under the terms of any instrument evidencing or securing Indebtedness
having an outstanding principal amount in excess of $5 million in the aggregate,
which default results in the acceleration of the payment of such Indebtedness or
constitutes the failure to pay the principal of such Indebtedness at maturity;
(vii) the rendering of a final judgment or judgments against the Company or a
Restricted Subsidiary in an amount in excess of $5 million which remains
undischarged or unstayed for a period of 60 days after the date on which the
right of appeal has expired; and (viii) certain events of bankruptcy, insolvency
or reorganization affecting the Company or a Restricted Subsidiary.
If an Event of Default, other than an event described under (viii) above,
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in aggregate principal amount of the Notes by notice as provided in the
Indenture, may declare the principal amount of the Notes to be due and payable
immediately; provided, however, that after such acceleration, but before a
judgment or decree based on acceleration, the Holders of a majority in aggregate
principal amount of outstanding Notes may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the non-payment
of accelerated principal of the Notes, have been cured or waived as provided in
the Indenture. If an Event of Default described under (viii) above shall occur,
the Notes will become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of an Event of Default and
unless the Holders of at least 25% in aggregate principal amount of the
outstanding Notes shall have made written request to the Trustee and the Trustee
shall not have received from the Holders of a majority in aggregate principal
amount of the outstanding Notes a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. However, such
limitations do not apply to a suit instituted by a Holder of a Note for
enforcement of payment of the principal of and premium, if any, or interest on
such Note on or after the respective due dates expressed in such Note. The
Holders of a majority in aggregate principal amount of the Notes outstanding may
waive any existing Default except a Default in the payment of interest or
principal (including premium) on the Notes.
CERTAIN DEFINITIONS
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Affiliate and Related Person Proceeds" means any cash payment received by
the Company or any Restricted Subsidiary from any Affiliate or Related Person
from any transaction permitted under
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the provisions of the Indenture described under "--Limitations on Transactions
with Affiliates and Related Persons."
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Restricted Subsidiaries
(including a consolidation or merger or other sale of any such Restricted
Subsidiary with, into or to another Person in a transaction in which such
Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a
disposition by a Subsidiary of such Person to such Person or a Wholly Owned
Restricted Subsidiary of such Person or by such Person to a Wholly Owned
Restricted Subsidiary of such Person) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Subsidiary of
such Person, (ii) substantially all of the assets of such Person or any of its
Subsidiaries representing a division or line of business or (iii) other assets
or rights of such Person or any of its Subsidiaries having a Fair Market Value
greater than $100,000.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors, to be in full force and effect on the date of such certification
and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York City, the State of
Washington or the State of California are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" means that portion of any obligation of a Person
as lessee under a lease which is required to be capitalized on the balance sheet
of such lessee in accordance with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Consolidated Income Tax Expense" of any Person means for any period the
provision for income taxes of such Person and its Consolidated Restricted
Subsidiaries for such period.
"Consolidated Indebtedness" of any Person means at any date the
Indebtedness of such Person and its Consolidated Restricted Subsidiaries at such
date.
"Consolidated Interest Expense" of any Person means for any period the
interest expense included in an income statement (taking into account the effect
of any Interest Hedge Agreements but without deduction of interest income) of
such Person and its Consolidated Restricted Subsidiaries for such period,
including without limitation or duplication (or, to the extent not so included,
with the addition of), (i) the portion of any rental obligation in respect of
any Capital Lease Obligation allocable to interest expense in accordance with
generally accepted accounting principles; (ii) the amortization of Indebtedness
discounts; (iii) any payments or fees with respect to letters of credit, bankers
acceptances or similar facilities; (iv) fees with respect to Interest Hedge
Agreements; (v) the portion of any rental obligations in respect of any Sale and
Leaseback Transaction allocable to interest expense (determined as if such were
treated as a Capital Lease Obligation); and (vi) Preferred Stock dividends
declared and payable in cash.
"Consolidated Net Income" of any Person means for any period the net income
(or loss) of such Person for such period determined on a consolidated basis in
accordance with generally accepted accounting principles; provided that there
shall be excluded therefrom (to the extent included and without duplication) (i)
the net income (or loss) of any Person acquired by such Person or a Restricted
Subsidiary of such Person after the date of the Indenture in a pooling-of-
interests transaction for any period prior to the date of such transaction, (ii)
the net income (or loss) of any Person that is not a Consolidated Restricted
Subsidiary of such Person except to the extent of the amount of dividends or
other distributions actually paid to such Person by such other Person during
such period, (iii) gains or losses from sales of assets other than sales of
assets
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acquired and held for resale in the ordinary course of business and (iv) all
extraordinary gains and extraordinary losses.
"Consolidated Net Worth" of any Person means the consolidated shareholders'
equity of such Person, determined on a consolidated basis in accordance with
generally accepted accounting principles; provided that, with respect to the
Company, adjustments following the date of the Indenture to the accounting books
and records of the Company in accordance with Accounting Principles Board
Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting
from the acquisition of control of the Company by another Person and its
Subsidiaries shall not be given effect to.
"Consolidated Restricted Subsidiary" of any Person means all other Persons
that would be accounted for as consolidated Persons in such Person's financial
statements in accordance with generally accepted accounting principles other
than Unrestricted Subsidiaries.
"Credit Facility" means the Loan Agreement, dated as of May 6, 1996, among
the Company, The Toronto-Dominion Bank, Barclays Bank, PLC, and Morgan Guaranty
Trust Company of New York, as Managing Agents, and the other financial
institutions named therein, as such agreement may be amended, supplemented,
restated or otherwise modified from time to time.
"Cumulative EBITDA" means EBITDA of the Company and its Consolidated
Restricted Subsidiaries for the period beginning on the first day of the fiscal
quarter immediately following the date of the Indenture, through and including
the end of the last fiscal quarter preceding the date of any proposed Restricted
Payment.
"Cumulative Interest Expense" means the total amount of Consolidated
Interest Expense of the Company and its Consolidated Restricted Subsidiaries for
the period beginning on the first day of the fiscal quarter immediately
following the date of the Indenture, through and including the end of the last
fiscal quarter preceding the date of any proposed Restricted Payment.
"Depositary" means a clearing agency registered under the Exchange Act that
is designated to act as Depositary for the Notes until a successor Depositary
shall have become such pursuant to the applicable provisions of the Indenture,
and thereafter "Depositary" shall mean such successor Depositary. The Depositary
initially is DTC.
"Designated Senior Indebtedness" means the Indebtedness under the Credit
Facility.
"EBITDA" of any Person means for any period the Consolidated Net Income for
such period increased by the sum of (i) Consolidated Interest Expense of such
Person for such period, plus (ii) Consolidated Income Tax Expense of such Person
for such period, plus (iii) the consolidated depreciation and amortization
expense included in the income statement of such Person and its Consolidated
Restricted Subsidiaries for such period, plus (iv) all other non-cash charges
and expenses that were deducted in determining Consolidated Net Income for such
period, minus (v) all non-cash revenues and gains to the extent included in
Consolidated Net Income for such period.
"Fair Market Value" means, with respect to any assets or Person, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined (i) if such Person or assets has a Fair Market Value of less than $5
million, by any officer of the Company and evidenced by an Officers'
Certificate, dated within 30 days of the relevant transaction, or (ii) if such
Person or assets has a Fair Market Value in excess of $5 million or more, by a
majority of the Board of Directors of the Company and evidenced by a Board
Resolution, dated within 30 days of the relevant transaction.
"Holder" means a Person in whose name a Note is registered in the Security
Register.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become
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liable in respect of such Indebtedness or other obligation or the recording, as
required pursuant to generally accepted accounting principles or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in generally
accepted accounting principles that results in an obligation of such Person that
exists at such time becoming Indebtedness shall not be deemed an Incurrence of
such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business), (v) every Capital Lease Obligation of such Person,
(vi) the maximum fixed redemption or repurchase price of Redeemable Stock of
such Person at the time of determination, (vii) every obligation to pay rent or
other payment amounts of such Person with respect to any Sale and Leaseback
Transaction to which such Person is a party, (viii) every obligation of the type
referred to in clauses (i) through (vii) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise and (ix) the liquidation value of Preferred Stock issued pursuant to
the provision of the Indenture described in clause (v) of
"-- Limitation on Preferred Stock of Restricted Subsidiaries."
"Indebtedness to EBITDA Ratio" of any Person means at any date the ratio of
Consolidated Indebtedness outstanding on such date to EBITDA for the four full
fiscal quarters immediately preceding such date; provided, however, that, in the
event such person or any of its Restricted Subsidiaries has acquired a Person
during or after such period in a pooling-of-interests transaction, such
computation shall be made on a pro forma basis as if the transaction had taken
place on the first day of such period.
"Initial Investors" means the Stanton Entities, the Hellman & Friedman
Entities, the Goldman Sachs Entities and Providence.
"Interest Hedge Agreements" means any interest rate swap, cap, collar,
floor, caption or swaption agreements, or any similar arrangements designed to
hedge the risk of variable interest rate volatility or to reduce interest costs,
arising at any time between the Company or any Restricted Subsidiary, on the one
hand, and any Person (other than an Affiliate of the Company or any Restricted
Subsidiary), on the other hand, as such agreement or arrangement may be
modified, supplemented and in effect from time to time.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than an easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Make-Whole Amount" on any date in respect of any Note means the excess, if
any, of (i) the aggregate present value as of such date of each dollar of
principal being redeemed or paid and the amount of interest (exclusive of
interest accrued to such date) that would have been payable in respect of each
such dollar if such redemption or payment had not been made, determined by
discounting, on a semi-annual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date on
which notice of redemption or payment is made) from the respective dates on
which principal and interest would have been payable if such
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redemption or payment had not been made, over (ii) the aggregate principal
amount of such Senior Subordinated Note being redeemed or paid.
"Maturity" means, when used with respect to any Senior Subordinated Note,
the date on which the principal of such Senior Subordinated Note becomes due and
payable, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"NORTEL Facility" means the Loan Agreement, dated June 30, 1995, between
Western PCS II Corporation and Northern Telecom Inc., as such agreement may be
amended, supplemented, restated or otherwise modified from time to time.
"Notes" means, collectively, the Original Notes and the Exchange Notes, and
"Note" refers to either a "Original Note" or Exchange Note, as the case may be.
"Notes Payment" means any payment or distribution of any kind or character,
whether in cash, property or securities, or account of principal of (or premium,
if any) or interest on or other obligations in respect of the Original Notes or
the Exchange Notes or other Indebtedness of the Company that is pari passu or
subordinate in right of payment to the Notes or on account of any purchase or
other acquisition of Original Notes or Exchange Notes or such other Indebtedness
by the Company or any subsidiary of the Company.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
to each Holder at his address appearing in the Security Register on the date of
the Offer offering to purchase up to the principal amount of Notes specified in
such Offer at the purchase price specified in such Offer. Unless otherwise
required by applicable law, the Offer shall specify an expiration date (the
"Expiration Date") of the Offer to Purchase which, subject to any contrary
requirements of applicable law, shall be not less than 30 days nor more than 60
days after the date of such Offer to Purchase and a settlement date (the
"Purchase Date") for purchase of Notes within five Business Days after the
Expiration Date. The Offer shall also state the section of the Indenture
pursuant to which the Offer to Purchase is being made, the Expiration Date and
the Purchase Date, the aggregate principal amount of the outstanding Notes
offered to be purchased by the Company, the purchase price to be paid by the
Company and the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase.
"Officers' Certificate" means a certificate signed by two officers at least
one of whom shall be the principal executive officer, principal accounting
officer or principal financial officer of the Company and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be reasonably acceptable to the Trustee and
delivered to the Trustee.
"Permitted Joint Venture" means, as applied to any Person, any corporation
or other entity (a) engaged in the acquisition, ownership, operation and
management of assets in the Wireless Communications Business, (b) over which
such Person is responsible (either directly or through a services agreement) for
day-to-day operations or otherwise has operational and managerial control, (c)
of which more than forty percent (40%) of the outstanding Capital Stock (other
than directors' qualifying shares) having ordinary Voting Power to elect its
board of directors, regardless of the existence at the time of a right of the
holders of any class or classes of securities of such corporation to exercise
such Voting Power by reason of the happening of any contingency, in the case of
a corporation, or more than forty percent (40%) of the outstanding ownership
interests, in the case of an entity other than a corporation, is at the time
owned directly or indirectly by such Person, or by one or more Subsidiaries of
such Person, or by such Person and by one or more Subsidiaries of such Person
and (d) with respect to which such Person has the right or option to acquire all
of the outstanding Capital Stock or ownership interests not owned by such
Person.
"Permitted Joint Venture Investment" means (i) any payment on account of
the purchase, redemption, retirement or acquisition of (A) any shares of Capital
Stock or other ownership
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interests of a Permitted Joint Venture or (B) any option, warrant or other right
to acquire shares of Capital Stock or ownership interests of a Permitted Joint
Venture or (ii) any loan, advance, lease, capital contribution to, or investment
in, or payment of a guarantee of any obligation of a Permitted Joint Venture;
provided that such loan, advance, lease, capital contribution, investment or
payment provides for a return that is senior in right of payment to any return
on the Capital Stock or ownership interests of such Permitted Joint Venture;
provided, further, that not less than 75% of the aggregate Permitted Joint
Venture Investments in any Permitted Joint Venture shall be Permitted Joint
Venture Investments described in clause (ii).
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Qualified Capital Stock" means, with respect to any Person, any and all
shares of Capital Stock other than Redeemable Stock issued by such Person after
the date of the Indenture.
"Qualified Capital Stock Proceeds" means, with respect to any Person, (a)
in the case of any sale of Qualified Capital Stock, the aggregate net cash
proceeds received by such Person, after payment of expenses, commissions and the
like Incurred by such Person in connection therewith, and net of Indebtedness
that such Person Incurred, guaranteed or otherwise became liable for in
connection with the issuance or acquisition of such Capital Stock; and (b) in
the case of any exchange, exercise, conversion or surrender of any Preferred
Stock or Indebtedness of such Person or any Subsidiary issued for cash after the
date of the Indenture for or into shares of Qualified Capital Stock of such
Person, the liquidation value of the Preferred Stock or the net book value of
such Indebtedness as adjusted on the books of such Person to the date of such
exchange, exercise, conversion or surrender, plus any additional amount paid by
the securityholders to such Person upon such exchange, exercise, conversion or
surrender and less any and all payments made to the securityholders, and all
other expenses, commissions and the like Incurred by such Person or any
Subsidiary in connection therewith.
"Redeemable Stock" of any Person means any equity security of such Person
that by its terms or otherwise is required to be redeemed prior to the final
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time prior to the final Stated Maturity of the Notes.
"Reinvestment Rate" means the arithmetic mean of the yields under the
respective heading "Week Ending" published in the most recent Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the remaining life to maturity,
as of the payment date of the principal being redeemed or paid. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
the relevant periods to the nearest month. For the purpose of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
"Related Person" of any Person means any other Person owning (a) 5% or more
of the outstanding Common Stock of such Person or (b) 5% or more of the Voting
Power of such Person.
"Restricted Payment" means, with respect to any Person, (i) any declaration
or payment of a dividend or other distribution on any shares of such Person's
Capital Stock (other than dividends payable solely in shares of its Capital
Stock or options, warrants or other rights to acquire its Capital Stock and
other than any declaration or payment of a dividend or other distribution by a
Restricted Subsidiary to the Company or another Restricted Subsidiary), (ii) any
payment on account of the purchase, redemption, retirement or acquisition of (A)
any shares of Capital Stock of such Person or any Related Person (other than a
Restricted Subsidiary) of such Person or (B) any option, warrant or other right
to acquire shares of Capital Stock of such Person or any Related Person
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(other than a Restricted Subsidiary) of such Person, in each case other than
pursuant to the cashless exercise of options, (iii) any loan, advance, capital
contribution to, or investment in, or payment of a guarantee of any obligation
of, or purchase, redemption or other acquisition of any shares of Capital Stock
or any Indebtedness of, any Affiliate or Related Person (other than a Restricted
Subsidiary or other than any loan, advance, capital contribution to, or
investment in, the Company or another Restricted Subsidiary by a Restricted
Subsidiary, or any payment by any Restricted Subsidiary of any loan, advance or
other Indebtedness or other amount owed by a Restricted Subsidiary to the
Company or another Restricted Subsidiary) and (iv) any redemption, defeasance,
repurchase or other acquisition or retirement for value prior to any scheduled
maturity, repayment or sinking fund payment, of any Indebtedness of such Person
which is subordinate in right of payment to the Notes.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
other than an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than 270 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Security Register" has the meaning set forth in the Indenture.
"Senior Indebtedness" means the principal of (and premium, if any) and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-petition interest is allowed in such proceeding) on (i) Indebtedness of
the Company created pursuant to the Credit Facility and all other obligations
thereunder or under the notes, security documents, pledge agreements, Interest
Hedge Agreements or other agreements or instruments executed in connection
therewith, (ii) Indebtedness of the Company created pursuant to any vendor
financing Incurred for the acquisition, construction or improvement by the
Company or any Restricted Subsidiary of assets in the Wireless Communications
Business, (iii) all other Indebtedness of the Company referred to in the
definition of Indebtedness other than clauses (iv), (vi) and (ix) thereof (and
clause (viii) thereof to the extent applicable to Indebtedness Incurred under
clauses (iv) and (vi) thereof), whether Incurred on or prior to the date of the
Indenture or thereafter Incurred, other than the Notes, and (iv) amendments,
renewals, extensions, modifications, refinancings and refundings of any such
Indebtedness; provided, however, the following shall not constitute Senior
Indebtedness: (A) any Indebtedness owed to a Person when such Person is a
Restricted Subsidiary of the Company, (B) any Indebtedness which by the terms of
the instrument creating or evidencing the same is not superior in right of
payment to the Notes, (C) any Indebtedness Incurred in violation of the
Indenture (but, as to any such Indebtedness, no such violation shall be deemed
to exist for purposes of this clause (c) if the holder(s) of such Indebtedness
or their representative and the Trustee shall have received an Officers'
Certificate of the Company to the effect that the Incurrence of such
Indebtedness does not (or in the case of revolving credit Indebtedness, that the
Incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate the Indenture) or (D)
any Indebtedness which is subordinated in right or payment in respect to any
other Indebtedness of the Company.
"Senior Nonmonetary Default" means the occurrence or existence and
continuance of any event of default, or of any event which, after notice or
lapse of time (or both), would become an event of default, under the terms of
any instrument pursuant to which any Senior Indebtedness is
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outstanding, permitting (after notice or lapse of time or both) one or more
holders of such Senior Indebtedness (or a trustee or agent on behalf of the
holders thereof) to declare such Senior Indebtedness due and payable prior to
the date on which it would otherwise become due and payable, other than a Senior
Payment Default.
"Senior Payment Default" means any default in the payment of principal of
(or premium, if any) or interest on any Senior Indebtedness when due, whether at
the stated maturity of any such payment or by declaration of acceleration, call
for redemption or otherwise.
"Stated Maturity," when used with respect to any Note or any installment of
interest thereon, means the date specified in such Note as the date on which the
principal of such Note or such installment of interest is due and payable.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.
"Subsidiary" means, as applied to any Person, (a) any corporation of which
more than fifty percent (50%) of the outstanding Capital Stock (other than
directors' qualifying shares) having ordinary Voting Power to elect its board of
directors, regardless of the existence at the time of a right of the holders of
any class or classes of securities of such corporation to exercise such Voting
Power by reason of the happening of any contingency, or any entity other than a
corporation of which more than fifty percent (50%) of the outstanding ownership
interests, is at the time owned directly or indirectly by such Person, or by one
or more Subsidiaries of such Person, or by such Person and one or more
Subsidiaries of such Person, or (b) any other entity which is directly or
indirectly controlled or capable of being controlled by such Person, or by one
or more Subsidiaries of such Person, or by such Person and one or more
Subsidiaries of such Person, including Permitted Joint Ventures.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors of such Person in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of
any Person may designate any Restricted Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Common Stock or Preferred Stock of,
or owns or holds any lien on any property of, such Person or any Restricted
Subsidiary; provided that either (A) the Subsidiary to be so designated has
total assets of $1,000 or less or (B) if such Subsidiary has assets greater than
$1,000, that the Fair Market Value of the Subsidiary at the time of such
designation would be permitted as an investment under the provision of the
Indenture described under "--Limitation on Restricted Payments." The Board of
Directors of any Person may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary of such Person; provided that immediately after giving
effect to such designation (x) such Person would be permitted to Incur $1.00 of
additional Indebtedness pursuant to the provision of the Indenture described in
the first paragraph under "--Limitation on Consolidated Indebtedness" and (y) no
Event of Default or event which with notice or lapse of time or both would
become an Event of Default has occurred and is continuing. Any such designation
by the Board of Directors shall be evidenced by a Board Resolution submitted to
the Trustee.
"Voting Power" of any Person means the aggregate number of votes of all
classes of Capital Stock of such Person which ordinarily has voting power for
the election of directors of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly
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Owned Restricted Subsidiaries of such Person or by such Person and one or more
Wholly Owned Restricted Subsidiaries of such Person.
"Wireless Communications Business" means the provision of wireless
communications services and other related services.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the Holder of each Note
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (ii) reduce the principal amount of or
premium, if any, or interest on any Note, (iii) change the place or currency of
payment of principal of, or premium or interest on any Note, (iv) impair the
right to institute suit for the enforcement of any payment on or with respect to
any Note, (v) reduce the percentage of aggregate principal amount of Notes
outstanding necessary to amend the Indenture, (vi) reduce the percentage of
aggregate principal amount of Notes outstanding necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (vii) modify such provisions with respect to modification and waiver,
(viii) modify the subordination provisions in a manner adverse to the Holders of
the Notes, (ix) following the mailing of an Offer to Purchase, modify the
provisions of the Indenture with respect to such Offer to Purchase in a manner
adverse to such Holder or (x) modify the provision of the Indenture described
under "-- Limitation on Certain Debt."
The Holders of a majority in aggregate principal amount of the outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. The Holders of a majority in aggregate principal amount of the
outstanding Notes may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest and certain covenants
and provisions of the Indenture which cannot be amended without the consent of
the Holder of each outstanding Note affected.
DEFEASANCE
The Indenture provides that the Company, at its option, (i) will be
discharged from any and all obligations in respect of outstanding Notes (except
for certain obligations to register the transfer or exchange of Notes, to
replace mutilated, lost, destroyed or stolen Notes and to maintain paying agents
and hold moneys for payment in trust), and the provisions of the Indenture
described under "--Subordination" shall cease to be effective, or (ii) need not
comply with certain restrictive covenants and that such omission shall not be
deemed to be an Event of Default under the Indenture and the Notes, and the
provisions of the Indenture described under "--Subordination" shall cease to be
effective, in either case (i) or (ii) upon irrevocable deposit with the Trustee,
in trust, of money, and/or U.S. government obligations which will provide money
without the need for reinvestment, in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants to pay the
principal of, and premium, if any, and each installment of interest, if any, on
the outstanding Notes in accordance with the terms of the Indenture and the
Notes. Such trust may only be established if, among other things, (1) with
respect to clause (i), the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or there has been a
change in law, which provides that Holders of Notes will not recognize gain or
loss for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred; or, with respect to clause (ii), the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Notes will not recognize gain or loss for federal income
tax purposes as a result or such deposit and defeasance and will be subject to
federal income tax on the same amount, in the same manner
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and at the same times as would have been the case if such deposit, defeasance
and discharge had not occurred; (2) no Event of Default or event that, with the
passing of time or the giving of notice, or both, shall constitute an Event of
Default shall have occurred and be continuing on the date of such deposit; (3)
no Event of Default described under clause (viii) under "Events of Default"
above or event that, with the passing of time or the giving of notice, or both,
shall constitute an Event of Default under such clause (viii) shall have
occurred and be continuing at any time during the period ending on the 121st day
following such date of deposit; (4) such deposit shall not cause the trust so
created to be subject to the Investment Company Act or 1940 or shall be
qualified under such act or exempt from regulation thereunder; and (5) certain
other customary conditions precedent.
NOTICES
Notices to Holders of Exchange Notes will be given by mail to the addresses
of such Holders as they may appear in the Security Register.
TITLE
The Company, the Trustee and any agent of the Trustee may treat the Person
in whose name a Exchange Note as the absolute owner thereof (whether or not such
Exchange Note may be overdue) for the purpose of making payment and for all
other purposes.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
THE TRUSTEE
The Indenture provides that, subject to the duty of the Trustee during an
Event of Default to act with the required standard of care, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable security or indemnity. Subject to certain
provisions, including those requiring security or indemnification of the
Trustee, the Holders of a majority in principal amount of the Notes will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of its obligations under the Indenture and
as to any default in such performance. The Trustee also serves as the Trustee
under the 2006 Notes Indenture.
DESCRIPTION OF INDEBTEDNESS
Set forth below is a description of certain terms of the Company's Senior
Secured Facilities. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
CREDIT FACILITY
The Company has a $950 million Credit Facility with a consortium of
financial institutions. The following summary of the material terms and
provisions of the Credit Facility does not purport to be complete and is subject
to and qualified in its entirety by reference to the Credit Facility.
Pursuant to the Credit Facility, the lenders have agreed to make loans to
the Company (the "Loans"), on a revolving credit basis, in the aggregate
principal amount not to exceed $750 million outstanding at any time through
December 31, 1999 at which time the then outstanding principal
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amount of the Loans converts to a five year term loan. The Company's ability to
borrow funds under the Credit Facility is subject to compliance with certain
operating covenants set forth therein. The principal amount thereof is required
to be amortized in the following percentages during the five year period
commencing on January 1, 2000 and terminating on December 31, 2004: 7%, 13%,
20%, 30% and 30%. The Credit Facility also includes a $200 million term loan.
Such term loan is required to be amortized in the following amounts during the
five year period beginning April 1, 2000 and terminating on March 31, 2005:
$1,000,000, $1,000,000, $1,000,000, $1,000,000 and $196,000,000. The term loan
is subject to and otherwise governed by the terms and conditions of the Credit
Facility.
Revolving credit borrowings under the Credit Facility bear interest, at the
Company's option, at an annual rate of interest equal to either (i) the greater
of (x) the prime rate of The Toronto-Dominion Bank, New York Branch, or (y) the
Federal Funds rate plus 5/8%, (ii) a Eurodollar rate or (iii) a CD rate, in each
instance plus an applicable margin. Such applicable margin ranges from 0.50% to
1.50%, in the case of Loans based on the prime rate or Federal Funds rate, 1.50%
to 2.50%, in the case of Loans based on a Eurodollar rate, and 1.75% to 2.75% in
the case of Loans based on a CD rate, in each case based upon the leverage ratio
of the Company and certain of its subsidiaries. The term loan under the Credit
Facility bears interest at a Eurodollar rate plus 2.75%. The Company has entered
into certain long-term interest rate swap and cap agreements with a total
notional amount of $205 million. As of June 30, 1996, the weighted average
interest rate under these agreements was approximately 6.7%.
The Credit Facility contains affirmative covenants of the Company,
including, among others, maintenance of its licenses and properties, compliance
with laws, insurance, payment of taxes, payment of other indebtedness, the
entering into of interest rate hedging agreements and delivery of financial and
other information. The Credit Facility requires that the Company and certain of
its subsidiaries comply with certain financial tests and maintain certain
financial ratios. The financial ratio covenants in the Credit Facility include,
among others, a limitation on the incurrence of indebtedness based on the ratio
of the Company's indebtedness to operating cash flow (as defined in the Credit
Facility) and a requirement that the Company's ratio of operating cash flow to
cash interest expense be not less than specified levels. In addition, the
Company is required to make certain repayments of the Credit Facility from
certain asset sales and excess cash flow. The Credit Facility also contains
restrictive covenants which impose restrictions and/or limitations on the
operations and activities of the Company and certain of its subsidiaries,
including, among others, the incurrence of indebtedness, the creation or
incurrence of liens, the sale of assets, investments and acquisitions, mergers,
declaration or payment of dividends on or other payments or distributions to
shareholders or material transactions with an affiliate on terms less favorable
than those obtainable from a nonaffiliate.
The Credit Facility currently limits total investment by the Company in its
subsidiaries owning PCS licenses to $450 million from and after May 6, 1996,
plus $233.9 million, cash proceeds from equity issuances by the Company after
May 6, 1996 and $14 million.
The Credit Facility provides for various events of default, including,
without limitation, interest and payment defaults, breach of the Company's
covenants, agreements, representations and warranties under the Credit Facility,
cross defaults to certain other indebtedness, judgments in excess of $1 million
which remain undischarged for a period of 30 days, certain events relating to
bankruptcy or insolvency, revocation of any material FCC license, the failure of
Mr. Stanton, Ms. Gillespie and certain related entities to own in the aggregate
3,100,000 (1,550,000 after December 31, 1996) shares of Common Stock, or Mr.
Stanton ceasing, for any reason, to be the Chairman of the Company's Board of
Directors, unless a successor acceptable to the requisite percentage of lenders
pursuant to the Credit Facility is appointed within 60 days of the date Mr.
Stanton ceases to be Chairman.
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The repayment of the Loans is secured by, among other things, the grant of
a security interest in all of the assets of the Company excluding, among other
things, the capital stock and assets of Western PCS II Corporation, a
wholly-owned indirect subsidiary of the Company ("Western PCS II"), that are
pledged to NORTEL pursuant to the NORTEL Facility. Western PCS II currently
holds the Company's PCS licenses for the Honolulu, Salt Lake City and El
Paso/Albuquerque MTAs as well as certain related PCS assets. See
"Business -- Introduction," "-- Governmental Regulation -- Licensing of PCS
Systems" and "-- NORTEL Facility."
NORTEL FACILITY
In connection with the Project and Supply Agreement between Western PCS and
NORTEL, Western PCS II entered into a $200 million NORTEL Facility. The
following summary of the material terms and provisions of the NORTEL Facility
does not purport to be complete and is subject to and qualified in its entirety
by reference to the NORTEL Facility.
Pursuant to the NORTEL Facility, NORTEL has agreed to make loans to Western
PCS II (the "NORTEL Loans"), on a revolving credit basis, in an aggregate
principal amount not to exceed $200 million outstanding at any time through June
30, 2000. On such date the then outstanding principal amount of the NORTEL Loans
convert to a three and one-half year term loan with the final payment due on
December 31, 2003. Western PCS II's ability to borrow funds under the NORTEL
Facility is subject to compliance with certain operating covenants set forth
therein. Borrowings under the NORTEL Facility also are limited based on formulas
related to the amount of purchases under the Project and Supply Agreement and
the amount of purchases of PCS equipment from NORTEL or other vendors for use in
Western PCS II's PCS systems.
Borrowings under the NORTEL Facility bear interest, at Western PCS II's
option, at an annual rate of interest equal to either (i) the greater of (x) the
prime rate of The Toronto-Dominion Bank, New York Branch, or (y) the Federal
Funds rate plus 5/8%, plus in either event 1.50%, or (ii) the LIBOR rate plus
2.50%.
The NORTEL Facility contains affirmative covenants of Western PCS II,
including, among others, maintenance of its licenses and properties, compliance
with laws, insurance, payment of taxes, payment of other indebtedness and
delivery of financial and other information. The NORTEL Facility requires that
Western PCS II comply with certain financial tests and maintain certain
financial ratios. The NORTEL Facility contains, among others, covenants of
Western PCS II relating to minimum gross revenues and the ratio of cash coverage
(as defined in the NORTEL Facility) to operating cash flow (as defined in the
NORTEL Facility). In addition, Western PCS II is required to make certain
repayments of the NORTEL Facility from certain asset sales and excess cash flow.
The NORTEL Facility also contains certain restrictive covenants which impose
restrictions and/or limitations on the operations and activities of Western PCS
II including, among other things, the incurrence of indebtedness, the creation
or incurrence of liens, the sale of assets, investments or acquisitions,
mergers, declaration or payment of dividends on or other payments or
distributions to its stockholder or material transactions with an affiliate on
terms less favorable than those obtainable from a non-affiliate.
The NORTEL Facility provides for various events of default including,
without limitation, interest and payment defaults, breach of Western PCS II's
covenants, agreements, representations and warranties under the NORTEL Facility,
cross defaults to certain other indebtedness, including the Credit Facility,
judgments in excess of $1 million which remain undischarged for a period of 30
days, bankruptcy or similar proceedings, revocation of any material FCC license,
the termination of the Project and Supply Agreement prior to the satisfaction of
certain conditions and the failure of the Company to beneficially own and
control, directly or indirectly, a majority of Western PCS II's capital stock or
shares entitling the Company to elect a majority of Western PCS II's board of
directors.
111
<PAGE> 114
The repayment of the NORTEL Loans is secured by, among other things, a
pledge of all of the outstanding capital stock and a grant of a security
interest in all of the assets of Western PCS II to NORTEL.
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
On May 29, 1996, the Company issued $200 million principal amount of 2006
Notes. The 2006 Notes mature on June 1, 2006 and have terms and covenants
substantially similar to the Senior Subordinated Notes except that an offer to
purchase the 2006 Notes is to be made prior to an offer to purchase the Notes
under certain circumstances. The 2006 Notes rank pari passu with the Notes.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Preston Gates & Ellis. Partners in that firm hold an aggregate of 14,057 shares
of the Company's Common Stock.
EXPERTS
The audited consolidated financial statements and schedule of Western
Wireless Corporation and the audited consolidated financial statements of MCLP
included in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
112
<PAGE> 115
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Original
Notes directly from the Company or (iii) a broker-dealer who acquired Original
Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holders' business, and such holders are not engaged in, and do
not intend to engage in, and have no arrangement or understanding with any
person to participate in, a distribution of such Exchange Notes. Broker-dealers
receiving Exchange Notes pursuant to the Exchange Offer will be subject to a
prospectus delivery requirement with respect to any resale of such Exchange
Notes. To date, the Staff has taken the position that such broker-dealers may
fulfill their prospectus delivery requirements with respect to transactions
involving an exchange of securities such as the exchange pursuant to the
Exchange Offer (other than a resale of an unsold allotment from the sale of the
Original Notes to the Purchasers) with the prospectus contained in the Exchange
Offer Registration Statement. Pursuant to the Registration Rights Agreement, the
Company has agreed to permit any broker-dealers and other persons, if any,
subject to similar prospectus delivery requirements to use this Prospectus in
connection with the resale of such Exchange Notes. The Company has agreed that
it will make this Prospectus, and any amendment or supplement to this
Prospectus, available to any broker-dealer that requests such documents in the
Letter of Transmittal.
Each holder of the Original Notes who wishes to exchange its Original Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer -- Terms and
Conditions of the Letter of Transmittal". In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Original Notes that were acquired by it as a result of market-making
activities or other trading activities, will be required to acknowledge that it
will deliver a prospectus in connection with any resale by it of such Exchange
Notes.
The Company will not receive any proceeds from any sale of Exchange Notes
by brokers-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and be delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
113
<PAGE> 116
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
WESTERN WIRELESS CORPORATION CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................................. F-2
Consolidated Balance Sheets as of June 30, 1996, and December 31, 1995 and 1994...... F-3
Consolidated Statements of Operations for the six months ended June 30, 1996 and 1995
and the years ended December 31, 1995, 1994 and 1993............................... F-4
Consolidated Statements of Shareholders' Equity for the six months ended June 30,
1996 and the years ended December 31, 1995, 1994 and 1993.......................... F-5
Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995
and the years ended December 31, 1995, 1994 and 1993............................... F-6
Notes to Consolidated Financial Statements........................................... F-7
Schedule II -- Valuation and Qualifying Accounts..................................... F-27
MARKETS CELLULAR LIMITED PARTNERSHIP CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants............................................. F-28
Consolidated Balance Sheets as of June 30, 1994, and December 31, 1993 and 1992...... F-29
Consolidated Statements of Operations for the six months ended June 30, 1994 and
1993, the year ended December 31, 1993, and the period from October 6, 1992
(inception) to December 31, 1992................................................... F-30
Consolidated Statements of Partners' Capital for the six months ended June 30, 1994,
the year ended December 31, 1993, and the period from October 6, 1992 (inception)
to December 31, 1992............................................................... F-31
Consolidated Statements of Cash Flows for the six months ended June 30, 1994 and
1993, the year ended December 31, 1993, and the period from October 6, 1992
(inception) to December 31, 1992................................................... F-32
Notes to Consolidated Financial Statements........................................... F-33
</TABLE>
F-1
<PAGE> 117
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Western Wireless Corporation:
We have audited the accompanying consolidated balance sheets of Western Wireless
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Western Wireless
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Seattle, Washington,
March 15, 1996
F-2
<PAGE> 118
WESTERN WIRELESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
JUNE 30, --------- ---------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 90,729 $ 8,572 $ 7,787
Accounts receivable, net of allowance for doubtful
accounts of $3,061, $2,800 and $1,772,
respectively........................................ 23,578 18,074 11,635
Inventory.............................................. 16,602 5,361 4,978
Prepaid expenses and other current assets.............. 7,288 4,001 2,369
Deposit held by FCC.................................... 1,500 10,000
----------- --------- ---------
Total current assets........................... 138,197 37,508 36,769
Property and equipment, net of accumulated depreciation
of $74,508, $53,423 and $25,098, respectively.......... 296,769 193,692 120,648
Licensing costs and other intangible assets, net of
accumulated amortization of $40,923, $28,364 and
$11,701, respectively.................................. 538,816 417,971 211,309
Investments in unconsolidated affiliates................. 5,088 8,388 587
Other assets............................................. 1,094 1,469 881
----------- --------- ---------
$ 979,964 $ 659,028 $ 370,194
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 7,812 $ 7,568 $ 7,840
Accrued liabilities.................................... 20,112 16,659 11,440
Construction accounts payable.......................... 57,742 28,408 5,102
Unearned revenue and customer deposits................. 4,601 3,301 3,891
Loans from shareholders................................ 10,000
Current portion of long-term debt...................... 941
----------- --------- ---------
Total current liabilities...................... 90,267 55,936 39,214
----------- --------- ---------
Long-term debt, net of current portion................... 446,471 362,487 200,587
----------- --------- ---------
Commitments and contingent liabilities (Notes 9 and 17)
Minority interests in equity of consolidated
subsidiary............................................. 3,376
---------
Shareholders' equity:
Preferred stock, no par value, 50,000,000 shares
authorized, no shares issued and outstanding........
Common stock, no par value, and paid-in capital;
300,000,000 shares authorized; Class A, 12,734,190
(unaudited) shares issued and outstanding at June
30, 1996, and Class B, 56,661,721 (unaudited),
58,047,235 and 42,983,360 issued and outstanding,
respectively........................................ 568,624 324,729 155,187
Deferred compensation.................................. (1,104)
Deficit................................................ (124,294) (84,124) (28,170)
----------- --------- ---------
Total shareholders' equity..................... 443,226 240,605 127,017
----------- --------- ---------
$ 979,964 $ 659,028 $ 370,194
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 119
WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
SIX MONTHS ENDED ----------- ----------- -----------
JUNE 30,
-------------------------
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber revenues............... $ 79,151 $ 43,551 $ 105,430 $ 38,838 $ 11,105
Roamer revenues................... 15,871 11,967 29,660 16,746 7,285
Equipment sales and
other revenue................... 9,582 5,179 11,465 7,524 2,344
----------- ----------- ----------- ----------- -----------
Total revenues............. 104,604 60,697 146,555 63,108 20,734
----------- ----------- ----------- ----------- -----------
Operating expenses:
Cost of service................... 19,554 12,132 27,686 13,303 4,310
Cost of equipment sales........... 14,792 8,890 20,705 11,446 3,533
General and administrative........ 28,409 13,153 31,253 15,226 6,253
Sales and marketing............... 32,078 16,411 41,390 18,553 6,101
Depreciation and amortization..... 33,434 21,900 49,456 25,670 5,399
Provision for restructuring
costs........................... 2,478
----------- ----------- ----------- ----------- -----------
Total operating expenses... 128,267 72,486 170,490 86,676 25,596
----------- ----------- ----------- ----------- -----------
Operating loss...................... (23,663) (11,789) (23,935) (23,568) (4,862)
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest and financing expense,
net............................. (17,014) (11,329) (25,428) (10,659) (2,242)
Gain (loss) on dispositions,
net............................. (255) (8) (573) 6,202 10,102
Other, net........................ 762 518 627 2,065 331
----------- ----------- ----------- ----------- -----------
Total other income
(expense)................ (16,507) (10,819) (25,374) (2,392) 8,191
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary
item.............................. (40,170) (22,608) (49,309) (25,960) 3,329
Extraordinary loss on early
extinguishment of debt............ (6,645) (6,645)
----------- ----------- ----------- ----------- -----------
Net income (loss).......... $ (40,170) $ (29,253) $ (55,954) $ (25,960) $ 3,329
=========== =========== =========== =========== ===========
Income (loss) per common share
before extraordinary item......... $ (0.66) $ (0.43) $ (0.87) $ (0.59) $ 0.10
Per common share effect of
extraordinary item................ (0.12) (0.12)
----------- ----------- ----------- ----------- -----------
Net income (loss) per common
share............................. $ (0.66) $ (0.55) $ (0.99) $ (0.59) $ 0.10
=========== =========== =========== =========== ===========
Weighted average common shares and
common equivalent shares
outstanding....................... 60,925,000 53,574,000 56,470,000 43,949,000 32,253,000
=========== =========== =========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 120
WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
COMMON STOCK
SHARES --------------- TOTAL
----------------------- PAR VALUE AND DEFERRED SHAREHOLDERS'
CLASS A CLASS B PAID-IN CAPITAL COMPENSATION DEFICIT EQUITY
---------- ---------- --------------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992.............. 21,658,612 $ 70,318 $ (457) $ (5,539) $ 64,322
Shares issued:
For cash, net of costs.............. 4,217,761 17,008 17,008
In exchange for long-term notes
payable plus accrued interest..... 277,512 1,058 1,058
Deferred compensation................. 172 172
Net income............................ 3,329 3,329
---------- --------- --------- --------- ---------
Balance, December 31, 1993.............. 26,153,885 88,384 (285) (2,210) 85,889
Business Combination:
Shares issued:
To acquire MCLP................... 18,160,643 70,918 70,918
To acquire interests in
subsidiaries................... 39,761 160 160
GCC shares held by minority
interests......................... (1,370,929) (4,275) (4,275)
Deferred compensation................. 285 285
Net loss.............................. (25,960) (25,960)
---------- --------- --------- --------- ---------
Balance, December 31, 1994.............. 42,983,360 155,187 (28,170) 127,017
Shares issued:
For cash, net of costs.............. 12,665,905 143,002 143,002
In exchange for shareholder loans
plus accrued interest............. 1,245,998 14,068 14,068
For minority interests in GCC,
net............................... 896,210 9,944 9,944
In exchange for wireless
assets............................ 217,000 2,450 2,450
Upon exercise of stock
options........................... 38,762 78 78
Net loss.............................. (55,954) (55,954)
---------- --------- --------- --------- ---------
Balance, December 31, 1995.............. 58,047,235 324,729 (84,124) 240,605
Shares issued (unaudited):
For cash, net of costs.............. 10,664,800 88,567 234,949 234,949
Class B selling shareholders during
IPO............................... 1,985,200 (1,985,200)
Exchange of Class B shares for Class
A................................. 84,190 (84,190)
In exchange for wireless assets..... 595,309 7,117 7,117
Deferred compensation (unaudited)..... 1,829 (1,104) 725
Net loss (unaudited).................. (40,170) (40,170)
---------- ---------- --------- ---------- --------- ---------
Balance, June 30, 1996 (unaudited)...... 12,734,190 56,661,721 $ 568,624 $ (1,104) $(124,294) $ 443,226
========== ========== ========= ========== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 121
WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------
------------------------- 1995 1994 1993
1995 --------- --------- --------
-----------
1996 (UNAUDITED)
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)................................... $ (40,170) $ (29,253) $ (55,954) $ (25,960) $ 3,329
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization................... 33,972 21,900 49,456 25,670 5,399
Amortization of deferred interest............... 1,465
Extraordinary loss on early extinguishment of
debt......................................... 6,645 6,645
(Gain) loss on dispositions, net................ 573 (6,202) (10,102)
Employee equity compensation.................... 725 285 172
Other, net...................................... 708 96 527 163
Changes in operating assets and liabilities, net
of effects from consolidating acquired
interests:
Accounts receivable, net................... (4,929) (3,268) (5,748) (2,249) (2,303)
Inventory.................................. (10,957) 1,184 (239) (3,454) (150)
Prepaid expenses and other current
assets................................... (3,241) (162) (1,284) 4,843 111
Accounts payable........................... (539) 1,628 (272) (1,465) 354
Accrued liabilities........................ 3,066 (199) 6,421 5,082 1,110
Unearned revenue and customer deposits..... 814 1,350 (870) 2,299 360
--------- --------- -------- -------- --------
Net cash used in operating activities........... (20,551) (79) (745) (988) (255)
--------- --------- -------- -------- --------
Investing activities:
Purchase of property and equipment.................. (89,825) (22,164) (79,464) (47,423) (25,113)
Purchase of wireless licenses and other............. (77,346) (134,735) (137,805)
Acquisition of wireless properties, net of cash
acquired.......................................... (40,102) (53,387) (60,700) (30,566) (25,661)
Proceeds from disposition of assets, net............ 10,163 19,739
Investments in unconsolidated affiliates............ 2,478 (240) (8,268) (2,364) (1,500)
Purchase of subsidiary stock, including fees........ (5,843) (5,842)
FCC deposit......................................... 1,500 (1,500)
--------- --------- -------- -------- --------
Net cash used in investing activities........... (203,295) (216,369) (293,579) (70,190) (32,535)
--------- --------- -------- -------- --------
Financing activities:
Proceeds from issuance of common stock, net......... 234,949 143,002 143,080 17,008
Additions to long-term debt......................... 548,800 363,000 438,000 214,729 20,726
Payment of debt..................................... (465,011) (276,492) (277,015) (135,264) (981)
Deferred financing costs............................ (12,735) (12,639) (12,798) (8,688) (541)
Loans from shareholders............................. 3,842 3,842
--------- --------- -------- -------- --------
Net cash provided by financing activities....... 306,003 220,713 295,109 70,777 36,212
--------- --------- -------- -------- --------
Increase (decrease) in cash and cash equivalents...... 82,157 4,265 785 (401) 3,422
Cash and cash equivalents, beginning of period........ 8,572 7,787 7,787 8,188 4,766
--------- --------- -------- -------- --------
Cash and cash equivalents, end of period.............. $ 90,729 $ 12,052 $ 8,572 $ 7,787 $ 8,188
========= ========= ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 122
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
Western Wireless Corporation (the "Company") provides wireless
communications services in the western United States principally through the
ownership and operation of cellular communications systems. In addition to the
cellular communications systems, the Company has acquired seven personal
communications services ("PCS") licenses covering seven Metropolitan Trading
Areas ("MTAs"). During the months of February and June 1996, the Company
initiated service in the Honolulu and Salt Lake City MTAs, respectively. In July
1996, the Company initiated PCS service in the Albuquerque MTA and plans to
initiate PCS service in the Portland MTA during August 1996. The Company intends
to initiate wireless services in the remaining MTAs by the end of the first
calendar quarter of 1997.
The Company was formed in July 1994 in a business combination (the
"Business Combination") among several companies, principally MARKETS Cellular
Limited Partnership ("MCLP") and General Cellular Corporation ("GCC"). The
Business Combination has been accounted for as a purchase with GCC deemed to be
the acquiring company. As a result, the financial results after the date of the
Business Combination reflect the consolidated operations of GCC and MCLP; all
financial results prior to such date reflect only the consolidated operations of
GCC, which is considered the Company's predecessor for accounting purposes. The
Company had previously reported this transaction as a pooling of interests. The
impact of restating the transaction as a purchase was to increase licensing
costs.
The Company expects to incur significant operating losses and to generate
negative cash flows from operating activities during the next several years
while it develops and constructs its PCS systems and builds a PCS customer base.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation:
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and its affiliate investments in which the Company
has a greater than 50% interest. All affiliate investments in which the Company
has between a 20% and 50% interest are accounted for using the equity method.
All significant intercompany accounts and transactions have been eliminated.
Markets operated under an Interim Operating Authority ("IOA") are not material
to the Company's operations. All IOA revenues and expenses are included within
the appropriate line items of the Company's Consolidated Statements of
Operations.
Unaudited interim financial statements:
The interim consolidated financial information contained herein is
unaudited but, reflects all adjustments which are, in the opinion of management,
necessary to a fair presentation of the financial position, results of
operations and cash flows for the periods presented. All such adjustments are of
a normal, recurring nature. Results of operations for interim periods presented
herein are not necessarily indicative of results of operations for the entire
year.
Cash and cash equivalents:
Cash and cash equivalents generally consist of cash, time deposits,
commercial paper and money market instruments. The Company invests its excess
cash in deposits with major banks, and money market securities of investment
grade companies from a variety of industries and, therefore, bears minimal risk.
These investments have original maturity dates not exceeding three months. Such
investments are stated at cost, which approximates fair value.
F-7
<PAGE> 123
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
Revenue recognition:
Service revenues based on customer usage are recognized at the time the
service is provided. Access and special feature service revenues are recognized
when earned. Sales of equipment, primarily handsets, are recognized when the
goods are delivered.
Inventory:
Inventory consists primarily of handsets and accessories. Inventory is
stated at the lower of cost or market, determined on a first-in, first-out
basis.
Property and equipment and depreciation:
Property and equipment are stated at cost. Depreciation commences once the
assets have been placed in service and is computed using the straight-line
method over the estimated useful lives of the assets which primarily range from
three to ten years.
Licensing costs and other intangible assets and amortization:
Licensing costs primarily represent costs incurred to apply for or acquire
FCC wireless licenses, including cellular licenses obtained by the Company
principally through acquisitions, and PCS licenses which were auctioned by the
FCC during 1995. Amortization of cellular licenses is computed using the
straight-line method over 15 years.
The Company's PCS licenses represent qualified assets pursuant to Statement
of Financial Accounting Standards 34; interest capitalizable as of December 31,
1995 was not material. During the six months ended June 30, 1996, the Company
capitalized interest in the amount of $2.4 million pertaining to the build out
of its PCS markets. Amortization of PCS licenses begins with the commencement of
service to customers and is computed using the straight-line method over 40
years. At December 31, 1995, operations had not commenced in any of the
Company's PCS markets.
In February and June 1996, respectively, the Company initiated commercial
operations in its Honolulu, Hawaii and Salt Lake City, Utah PCS markets.
Other intangible assets consist primarily of deferred financing costs.
Deferred financing costs are amortized using the effective interest rate method
over the terms of the respective loans.
Income taxes:
The Company accounts for deferred taxes using the asset and liability
method.
Net income (loss) per common share:
Net income (loss) per common share is calculated using the weighted average
number of shares of outstanding common stock and common stock equivalents during
the period. As required by the Securities and Exchange Commission (the "SEC"),
common shares issued by the Company in the year preceding the filing of an
initial public offering have been included in the calculation of shares used in
determining the net income (loss) per share as if they had been outstanding for
the entire period prior to, and including the interim period ended March 31,
1996, the effect of which is anti-dilutive. The calculation of shares used for
periods subsequent to this interim period have been calculated based on the
requirements of Accounting Principles Board Opinion Number 15. Due to the net
loss of the six months ended June 30, 1996, all options and warrants are
anti-dilutive, thus primary and fully diluted loss per share are equal.
F-8
<PAGE> 124
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
Interest rate swap and cap agreements:
As required under the Credit Facility (as defined in Note 6), the Company
enters into interest rate swap and cap agreements to manage interest rate
exposure pertaining to long-term debt. Interest rate swap agreements are
accounted for on an accrual basis. Amounts to be paid or received under interest
rate swap agreements are included as a component of interest expense in the
periods in which they accrue. Premiums paid for purchased interest rate cap
agreements are amortized to interest expense over the terms of the agreements.
Unamortized premiums are accounted for as assets in the consolidated balance
sheets. Amounts received under the interest rate cap agreements, if any, are
accounted for on an accrual basis and recognized as a reduction to interest
expense.
Supplemental cash flow disclosure:
Cash paid for interest was $21.7 million, $10.9 million and $0.2 million
for the years ended December 31, 1995, 1994 and 1993, respectively.
Cash paid for interest (net of amounts capitalized) was $19.6 million
(unaudited) and $12.7 million (unaudited) for the six months ended June 30, 1996
and 1995, respectively.
Non-cash investing and financing activities were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
SIX MONTHS ------- ------- ------
ENDED
-------------
JUNE 30, 1996
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Conversion of revolving debt to term
debt.................................... $ 200,000
Conversion of FCC deposit to wireless
license................................. $10,000
Issuance of common stock in exchange for
wireless properties..................... 7,117 2,450
Exchange of shareholder loans and accrued
interest for common stock............... 14,068
Shareholder loans to fund FCC deposit..... $10,000
Notes payable plus accrued interest
converted into common stock............. $1,058
</TABLE>
The Business Combination described in Notes 1 and 12 was also a non-cash
transaction involving the issuance of 18,160,643 shares of the Company's common
stock to acquire the assets and liabilities of MCLP and 39,761 shares of the
Company's common stock for interests in subsidiaries. During 1995, the Company
issued 896,210 shares of its common stock in exchange for minority interests in
GCC.
Concentration of credit risk:
The Company's customers are dispersed throughout rural areas of the western
United States. No single customer accounted for a significant amount of the
Company's sales, and there were no significant accounts receivable from a single
customer. The Company reviews the credit histories of potential customers prior
to extending credit and maintains allowances for potential credit losses. The
Company maintains cash and cash equivalents in high credit quality financial
institutions. The Company believes that its risk from concentration of credit is
limited.
F-9
<PAGE> 125
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
Estimates used in preparation of financial statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Recently issued accounting standards:
The Financial Accounting Standards Board has recently issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." This statement requires that long-lived assets and
certain identifiable intangible assets be reviewed to determine whether the
carrying amount is recoverable based on estimated future cash flows expected
from the use of the assets and cash to be received upon disposal of the assets.
The Financial Accounting Standards Board has also recently issued Statement No.
123 "Accounting for Stock-Based Compensation." This statement affects the
valuation and disclosure of stock-based transactions with employees. The Company
plans to use the pro forma disclosure alternative. The Company's adoption of
these standards in 1996 does not have any material impact on the financial
position, results of operations or cash flows of the Company.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
JUNE 30, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Land, buildings and improvements................ $ 5,566 $ 2,879 $ 2,328
Wireless communications systems................. 214,769 165,825 124,165
Furniture and equipment......................... 27,230 16,273 7,391
-------- -------- --------
247,565 184,977 133,884
Less accumulated depreciation................... (74,508) (53,423) (25,098)
-------- -------- --------
173,057 131,554 108,786
Construction in progress........................ 123,712 62,138 11,862
-------- -------- --------
$ 296,769 $193,692 $120,648
======== ======== ========
</TABLE>
Depreciation expense was $30.2 million, $17.0 million and $4.1 million for
the years ended December 31, 1995, 1994 and 1993, respectively.
Depreciation expense was $21.4 million (unaudited) and $13.7 million
(unaudited) for the six months ended June 30, 1996 and 1995, respectively.
4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES:
At December 31, 1995, the Company's investments in unconsolidated
affiliates consisted of an interest in Sawtooth Paging, Inc. ("Sawtooth") and an
interest in Cook Inlet Western Wireless PV/SS PCS, L.P. ("Cook Inlet PCS").
The Company had approximately a 47% and 45% ownership interest in Sawtooth
as of December 31, 1995 and 1994, respectively. Sawtooth is also owned 47% by
certain officers, one of
F-10
<PAGE> 126
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES: -- (CONTINUED)
whom is also a director, of the Company. Subsequent to year end, the Company
purchased the remaining unowned portion of Sawtooth. (See Note 17).
In November 1995, a wholly owned subsidiary of the Company entered into an
agreement to form Cook Inlet PCS in order to participate in the FCC's C Block
auction of PCS licenses. Cook Inlet PCS intends to bid on, acquire, own, develop
and operate systems for any PCS licenses acquired during the C Block auction.
The continued existence of Cook Inlet PCS is contingent upon the successful
acquisition of at least one C Block license during the auction currently
underway. The Company has a 49.9% ownership interest in Cook Inlet PCS. At
December 31, 1995, the Company's investment in Cook Inlet PCS was approximately
$7.6 million. At June 30, 1996, the Company's investment in Cook Inlet PCS was
approximately $4.6 million (unaudited).
The assets, liabilities and results of operations of Sawtooth and Cook
Inlet PCS are not material to the Company.
5. ACCRUED LIABILITIES:
Accrued liabilities consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Accrued payroll and benefits................................. $ 5,551 $ 3,913
Accrued sales and property taxes............................. 3,236 1,613
Accrued interest expense..................................... 4,471 1,697
Other........................................................ 3,401 4,217
------- -------
$ 16,659 $ 11,440
======= =======
</TABLE>
6. LONG-TERM DEBT:
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------
1996 1995 1994
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Credit Facility
Revolver (a).............................. $347,000 $197,000
Term Loan (b)............................. $200,000
10-1/2% Senior Subordinated Notes Due 2006
(c)....................................... 200,000
NORTEL Facility (d)......................... 43,800 13,000
Other(e).................................... 2,671 2,487 4,528
-------- -------- --------
446,471 362,487 201,528
Less current portion........................ 941
-------- -------- --------
$446,471 $362,487 $200,587
======== ======== ========
</TABLE>
(a) Credit Facility -- Revolver
On June 30, 1995, the Company entered into a credit facility with a group
of lenders (the "Credit Facility"). Pursuant to the Credit Facility, the banks
have agreed to make loans to the Company, on a revolving credit basis, in an
aggregate principal amount not to exceed $750 million during the
F-11
<PAGE> 127
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT -- (CONTINUED):
period ending December 30, 1998. On December 31, 1998, the loans convert to term
loans payable over five years.
Under the Credit Facility, interest is payable at the applicable margin in
excess of the prevailing Base Rate, Eurodollar or CD rate. The rate is selected
at the Company's option. The applicable margin is determined quarterly based on
the leverage ratio of the Company, excluding certain of its subsidiaries.
Interest is fixed for a period ranging from one month to one year, depending on
the type of loan, although if the Company selects the Base Rate option, the
interest rate will fluctuate during the period as the Base Rate fluctuates. At
December 31, 1995, all loans under the Credit Facility had been borrowed using
the Eurodollar rate option. The weighted average interest rate, including the
appropriate applicable margin, at December 31, 1995 was 7.41%. The Credit
Facility also provides for an annual fee of 0.5% of the unused commitment,
payable quarterly.
The weighted average interest rate, including applicable margin, for the
six months ended June 30, 1996 was 8.3% (unaudited).
The Credit Facility contains affirmative covenants, including among others,
maintenance of its licenses and properties, compliance with laws, insurance,
payment of taxes, payment of other indebtedness and delivery of financial and
other information. The Credit Facility requires that the Company, excluding
certain of its subsidiaries, comply with financial tests and maintain certain
financial ratios, including among others, maximum leverage, debt service and
fixed charges. As of June 30, 1996 and December 31, 1995, the unused portion of
the commitment under the Credit Facility was $750 million (unaudited) and $403
million, respectively.
The Credit Facility also contains certain restrictive covenants which
impose limitations on the operations and activities of the Company and certain
of its subsidiaries, including the incurrence of other indebtedness, the
creation of liens, the sale of assets, investments and acquisitions and payment
of dividends. The Credit Facility currently limits total investments by the
Company in its subsidiaries owning PCS licenses to $450 million and further
limits the total investment by the Company to $100 million (both of which are
exclusive of license acquisition costs of approximately $144 million and
exclusive of the proceeds of the NORTEL Facility (defined below)) in its PCS
subsidiaries until the PCS licenses granted by the FCC are final and
unappealable.
The repayment of the Credit Facility is secured by, among other things, the
grant of a security interest in substantially all of the assets of the Company,
excluding, among other items, the capital stock and assets of the subsidiary
that is party to the NORTEL Facility.
Upon execution of the Credit Facility, the Company repaid all of its
outstanding indebtedness under its then existing revolving/term loan agreement
(the "Previous Agreement"). Pursuant to the Previous Agreement, the lenders
thereunder agreed to make loans to the Company on a revolving credit basis in an
aggregate principal amount not to exceed $325 million. The Previous Agreement
was collateralized by substantially all of the assets of the Company. The
weighted average interest rate on the outstanding principal under the Previous
Agreement at December 31, 1994 was 8.21%.
The Company incurred an extraordinary loss of approximately $6.6 million in
connection with the early repayment of the outstanding indebtedness under the
Previous Agreement during 1995. The loss primarily consisted of the write-off of
the related financing costs which had been deferred and only partially
amortized.
F-12
<PAGE> 128
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT -- (CONTINUED):
(b) Credit Facility -- Term Loan
On May 6, 1996, the Company amended the Credit Facility to increase the
Company's borrowing capacity. The increase took the form of a $200 million term
loan (the "Term Loan") which increased the maximum total borrowings under the
Credit Facility to $950 million. Additionally, the repayment terms and the
related covenant requirements were extended by one year.
(c) 10 1/2% Senior Subordinated Notes Due 2006
In May 1996, the Company sold $200 million principal amount of 10 1/2%
Senior Subordinated Notes Due 2006 for net proceeds of $193.0 million. The 2006
Notes were issued pursuant to the 2006 Notes Indenture. See "Use of Proceeds."
The 2006 Notes mature on June 1, 2006. Interest on the 2006 Notes accrues
and is payable semi-annually. The 2006 Notes are callable after 2001 and prior
thereto under certain circumstances. The Credit Facility prohibits the repayment
of all or any portion of the principal amount of the 2006 Notes prior to the
repayment of all indebtedness under the Credit Facility.
The 2006 Notes Indenture contains, among others, covenants with respect to
incurrence of indebtedness, issuance of preferred stock of subsidiaries,
restricted payments, distributions and transfers by subsidiaries, certain asset
dispositions, issuances and sales of capital stock of wholly-owned subsidiaries,
transactions with affiliates and related persons and mergers, consolidations and
certain sales of assets. The indebtedness covenant limits the incurrence of
indebtedness by the Company based on the Company's ratio of indebtedness to
EBITDA; provided, however, that such limitation does not prohibit, among other
exceptions, indebtedness incurred or committed by the Company for the
acquisition, construction or improvement of assets in the wireless
communications business.
The 2006 Notes are subordinate in right of payment to the Credit Facility
and the NORTEL Facility.
(d) NORTEL Facility
Effective June 30, 1995, a wholly owned subsidiary of the Company entered
into a $200 million credit facility (the "NORTEL Facility") with Northern
Telecom Inc. ("NORTEL") which expires on December 31, 2003. The NORTEL Facility
bears interest at the subsidiary's option at either the higher of the prime rate
or the Federal Funds Rate, plus 0.625%, plus in either case a margin of 1.5%, or
the London Interbank Offered Rate ("LIBOR") plus a margin of 2.5%. The NORTEL
Facility includes quarterly financial covenants which contain provisions
regarding the maintenance of operating cash flow ratios beginning September 30,
2000, total debt and minimum revenue levels and a minimum cash coverage ratio.
The NORTEL Facility also contains certain restrictive covenants which impose
limitations on the operations and activities of the subsidiary, including limits
on new indebtedness, sale of existing assets, permitted investments and business
acquisitions and payment of cash dividends by the subsidiary. The NORTEL
Facility also provides for interest only payments through September 30, 2000,
and includes mandatory prepayment clauses contingent upon specific operating
results. The NORTEL Facility is collateralized by substantially all of the
subsidiary's assets and the stock of such subsidiary.
Commencing September 30, 2000, and at the end of each calendar quarter
thereafter, the subsidiary is required to make payments on the principal amount
outstanding under the NORTEL Facility in increasing quarterly installments.
F-13
<PAGE> 129
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT -- (CONTINUED):
As of December 31, 1995, the unused portion of the commitment under the
NORTEL Facility was $187 million. Outstanding borrowings at December 31, 1995,
were drawn under the LIBOR rate option with a weighted average interest rate of
8.43%.
As of June 30, 1996, the unused portion of the commitment under the NORTEL
Facility was $156 million (unaudited). Outstanding borrowings at June 30, 1996
were drawn under the LIBOR rate option with a weighted average interest rate of
8.0% (unaudited) for the six months ended June 30, 1996.
(e) Other
At December 31, 1995 and 1994, the Company had other debt of approximately
$2.5 million and $4.5 million, respectively.
During the six months ended June 30, 1996, the Company incurred costs that
were deferred, in the amount of approximately $12.7 million (unaudited), which
related to the Senior Subordinated Notes issuance and the amendment to the
Credit Facility.
The Company amended the Credit Facility in May 1996 to allow, among other
things, an increase of $200 million to the Credit Facility by the inclusion of a
term loan in such amount and to amend the existing repayment terms and financial
covenants.
The aggregate amounts of principal maturities of the Company's debt are as
follows (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
YEAR ENDING DECEMBER 31, JUNE 30, 1996 DECEMBER 31, 1995
------------------------------------------------ ------------- -----------------
<S> <C> <C>
1996....................................... $ 0 $ 0
1997....................................... 17 0
1998....................................... 2,528 2,487
1999....................................... 45 24,290
2000....................................... 5,179 46,410
Thereafter................................. 438,702 289,300
-------- --------
$ 446,471 $ 362,487
======== ========
</TABLE>
7. FINANCIAL INSTRUMENTS:
The Company uses various financial instruments as part of its overall
strategy to manage the Company's exposure to market risks associated with
interest rate fluctuations. The Company has only limited involvement with these
financial instruments, and does not use them for trading purposes. Interest rate
swaps allow the Company to raise long-term borrowings at variable rates and swap
them into fixed rates for shorter durations. This enables the Company to
separate interest rate management from debt funding decisions. Interest rate cap
agreements are used to reduce the potential impact of increases in interest
rates on borrowings based upon variable interest rates. These transactions do
not subject the Company to risk of loss because gains and losses on these
contracts are offset against losses and gains on the underlying liabilities. No
collateral is held in relation to the Company's financial instruments.
At December 31, 1995, the Company had entered into interest rate caps and
swaps with a total notional amount of $375 million, of which $185 million was of
a short-term duration. The remaining $190 million had initial terms ranging from
three to 3 1/2 years and effectively converted $190 million of variable rate
debt to fixed rate. The weighted average interest rate under these agreements
was approximately 6.75% at December 31, 1995. Total net expense incurred during
the year ended December 31, 1995 for the Company's interest rate caps and swaps
was approximately $0.5 million.
F-14
<PAGE> 130
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FINANCIAL INSTRUMENTS -- (CONTINUED):
The amount of unrealized loss attributable to changing interest rates at
December 31, 1995 was immaterial.
At December 31, 1994, the Company had interest rate protection in the form
of interest rate caps covering $105 million of the outstanding balance under the
Previous Agreement. Total net expense incurred during the year ended December
31, 1994 for the Company's interest rate caps and swaps was approximately $0.3
million. The amount of unrealized loss attributable to changing interest rates
at December 31, 1994 was immaterial.
At June 30, 1996, the Company had interest rate swap and cap agreements
with a total notional amount of $205 million (unaudited), all of which was of a
long-term nature. Total net expense incurred for the six months ended June 30,
1996 was approximately $0.4 million (unaudited).
8. DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS:
The Company's carrying value of financial instruments approximated fair
value. The estimated fair value of the Company's financial instruments has been
determined using available market information and appropriate valuation
methodologies. The fair value of derivative positions were determined by
obtaining market quotes.
9. COMMITMENTS AND CONTINGENT LIABILITIES:
Commitments:
The Company leases various facilities, cell site locations, rights-of-way
and equipment under operating lease agreements. The leases expire at various
dates through the year 2036. Some leases have options to renew for additional
periods up to 30 years. Certain leases require the Company to pay property
taxes, insurance and normal maintenance costs. Significantly all of the
Company's leases have fixed minimum lease payments. The Company has no
significant capital lease liabilities.
Future minimum payments required under operating leases and agreements that
have initial or remaining noncancellable terms in excess of one year, are
summarized below (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, 1996 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
YEAR ENDING DECEMBER 31,
1996................................... $ 3,707 $ 5,429
1997................................... 6,903 4,914
1998................................... 5,921 4,261
1999................................... 4,948 3,388
2000................................... 4,238 2,604
Thereafter............................. 7,759 5,828
------- -------
$33,476 $26,424
======= =======
</TABLE>
Aggregate rental expense for all operating leases was approximately $4.8
million, $2.2 million and $0.9 million for the years ended December 31, 1995,
1994 and 1993, respectively.
In order to ensure adequate supply of certain inventory requirements, the
Company has committed to purchase from a supplier a minimum number of PCS and
dual-mode handsets totaling approximately $43.7 million prior to October 1999.
No orders had been placed as of December 31, 1995. At June 30, 1996 the Company,
under this agreement, had purchased $20.5 million (unaudited), of which $8.1
million (unaudited) was outstanding.
F-15
<PAGE> 131
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND CONTINGENT LIABILITIES -- (CONTINUED):
In December 1995, a wholly owned subsidiary of the Company entered into an
agreement with this supplier to purchase a minimum of $50 million of wireless
communications equipment and services for the Company's PCS systems prior to
December 31, 1998. The Company has an option to extend the purchase commitment
period to four years by increasing the minimum purchase commitment to $100
million. In exchange for meeting minimum purchase milestones, the Company will
receive volume discounts in the form of credit memos from the supplier which may
be used at the Company's option against either the most recent payment owed to
the supplier or future purchases. The purchase agreement is valid through
December 2005. At December 31, 1995, the Company had outstanding purchase orders
totaling approximately $16 million under the agreement. At June 30, 1996 the
Company, under this agreement, had purchased $27.1 million (unaudited), of which
$22.1 million (unaudited) was outstanding.
In connection with the NORTEL Facility, a wholly owned subsidiary of the
Company entered into an agreement with NORTEL to purchase $200 million of PCS
network equipment and related services. At December 31, 1995, under this
agreement, the Company had purchased approximately $22.5 million and had
outstanding purchase orders totaling approximately $3.2 million. The agreement
expires June 30, 2000. At June 30, 1996, the Company had purchased, net of
canceled and amended purchase orders, approximately $80.9 million (unaudited)
under this agreement, of which approximately $55.9 million (unaudited) was
outstanding.
The Company has various other purchase commitments for materials, supplies
and other items incident to the ordinary course of business. In the aggregate,
such commitments are not at prices in excess of current market value.
Contingent liabilities:
The Company is involved in various lawsuits arising in the normal course of
business, none of which is expected to have a material adverse effect on the
Company's financial position, cash flows, liquidity or results of operations.
In the ordinary course of business, the Company is subject to extensive and
changing federal, state and local laws and regulations with regard to
environmental matters. To date the Company has not identified any potential
liabilities pertaining to environmental cleanup on properties owned or operated
by the Company.
F-16
<PAGE> 132
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES:
Significant components of deferred income tax assets and liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $ 37,666 $ 20,494
Other temporary differences................................ 5,589 3,834
-------- --------
Total deferred tax assets.................................... 43,255 24,328
Valuation allowance.......................................... (34,083) (18,261)
-------- --------
9,172 6,067
Deferred tax liabilities:
Property and wireless licenses basis differences........... (9,172) (6,067)
-------- --------
$ 0 $ 0
======== ========
</TABLE>
For tax purposes, the Company had available at December 31, 1995, net
operating loss carryforwards for regular tax purposes of approximately $94
million which will expire in 2002 through 2010. The Company may be limited in
its ability to use these carryforwards in any one year due to ownership changes
that preceded the Business Combination. The change in the valuation allowance
was an increase of $15.8 million in 1995 and decreases of $4.7 million and $0.3
million in 1994 and 1993, respectively.
Management believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realization of
the net deferred tax assets. Such factors include recurring operating losses
resulting primarily from the development of the Company's PCS business and
expected increased competition from new entrants into the Company's existing
markets. Accordingly, a valuation allowance has been provided for the net
deferred tax assets of the Company.
The difference between the statutory tax rate of approximately 40% (35%
federal and 5% state net of federal benefits) and the tax benefit of zero
recorded by the Company is primarily due to the Company's full valuation
allowance against its net deferred tax assets.
11. SHAREHOLDERS' EQUITY:
(a) Business Combination
On July 29, 1994, certain shareholders in GCC, holding approximately 95% of
the then outstanding stock of GCC, and holders of all MCLP partnership interests
exchanged their ownership interests for common stock of the Company in the
Business Combination. The participating GCC shareholders exchanged 23,384,345
shares of GCC common stock in a one-for-one exchange for common stock in the
Company. Under the terms of the Business Combination, the MCLP partnership
interests received 18,160,643 shares of common stock in the Company, net of
661,609 shares of GCC stock owned by MCLP. GCC directly and indirectly owned
MCLP partnership interests of approximately 9.9% which were converted into
2,059,352 shares of common stock of the Company. These shares are excluded from
those outstanding for each of the periods presented. GCC's investment in MCLP
had been recorded at a cost of $8.3 million. The fair value of common
F-17
<PAGE> 133
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SHAREHOLDERS' EQUITY -- (CONTINUED):
stock of the Company issued to acquire the non-GCC partnership interests in MCLP
was $70.9 million.
The Company recorded a provision for restructuring costs in 1994 of
approximately $2.5 million, primarily related to the elimination of duplicative
headquarters and other facilities and employee relocation costs.
(b) GCC Minority Interest
During 1995 and 1994, subsequent to the Business Combination, the Company
completed two cash redemptions of the remaining shares (the "Redemptions") of
GCC's common stock. In addition, as part of the 1995 Redemption, the Company
issued 896,210 shares of the Company's common stock for GCC common stock in a
one-for-one exchange.
These redemptions eliminated all minority interest positions in the equity
of GCC. The cost in excess of the carrying amounts of the minority interests
acquired increased licensing costs and other intangible assets by approximately
$11 million and $1 million for the years ended December 31, 1995 and 1994,
respectively.
(c) Stock Option Plan
On September 20, 1994, the Board of Directors of the Company established
the 1994 Management Incentive Stock Option Plan (the "Plan") which became
effective November 17, 1994. The Plan was amended by the Board of Directors on
September 15, 1995, and approved as adopted and amended by the shareholders of
the Company on November 16, 1995. The Plan, as amended, provides for the
issuance of up to 5,890,000 shares of common stock as either Nonstatutory Stock
Options or as Incentive Stock Options. The terms and conditions of options
granted under the Plan, including all vesting provisions, are at the discretion
of the Administrator of the Plan. The Plan provided for the conversion to stock
options of the Company for the stock options issued under a plan previously
created by GCC and for the conversion of unvested rights to ownership in MCLP by
its B Unit holders, as well as new options granted by the Company in the normal
course of business subsequent to the Business Combination.
As of July 29, 1994, GCC had granted options to purchase 1,061,251 shares
of GCC stock at an average of approximately $2.98 per share; 545,629 of such
options were fully vested as of that date. The Business Combination
automatically accelerated the vesting of the remaining options under the terms
of the GCC Option Plan. All such options were converted into options to purchase
common stock of the Company.
F-18
<PAGE> 134
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SHAREHOLDERS' EQUITY -- (CONTINUED):
Options granted, exercised and canceled under the above Plans are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Outstanding, beginning of period......... 2,181,514 760,272 504,814
Options granted.......................... 1,453,125 1,112,900 263,500
Options issued for conversion of unvested
MCLP B units........................... 322,013
Options exercised........................ (38,762)
Options canceled......................... (57,469) (13,671) (8,042)
------------- ------------- -------------
Outstanding, end of period............... 3,538,408 2,181,514 760,272
============= ============= =============
Price of options:
Granted during period.................... $11.29-$12.90 $1.10-$ 9.68 $ 4.03
Exercised during period.................. $ 1.61-$ 4.03 N/A N/A
Canceled during period................... $ 1.10-$ 9.68 $1.61-$ 3.23 $1.61-$ 4.03
Options exercisable...................... 1,582,012 1,383,264 232,944
Options available for future grant....... 2,312,830 3,708,486 5,129,728
Exercise price of outstanding options.... $ 1.10-$12.90 $1.10-$ 9.68 $1.61-$ 4.03
</TABLE>
(d) Stock Issuances
In November 1995, the Board of Directors approved an increase in the number
of authorized shares of the Company's common stock from 25 million to 300
million.
During 1995, a wholly owned subsidiary issued 4,300,001 shares of Series A
Preferred Stock to certain existing shareholders of the Company at $35.00 per
share for aggregate proceeds of approximately $150 million, which was comprised
of approximately $14 million of converted debt to shareholders and approximately
$136 million in cash. The preferred stock in the subsidiary was converted into
common stock of the Company on a one for 3.1 basis. Additionally, the Company
sold 581,901 shares of common stock at $11.29 per share for cash during 1995 to
existing shareholders.
In November 1993, the Company completed a rights offering to existing
shareholders, pursuant to which shareholders subscribed for 3,875,273 shares of
common stock at $4.03 per share, for aggregate cash proceeds of approximately
$14.5 million and $1.1 million through the conversion of outstanding notes
payable and accrued interest to shareholders of the Company, less offering
expenses.
In February 1993, the Company sold 620,000 shares of common stock for
aggregate proceeds of $2.5 million.
Subsequent to December 31, 1995, the Company sold 88,567 shares of its
common stock to an officer of the Company at $11.29 per share for aggregate
proceeds of approximately $1.0 million.
During the second quarter of 1996, 10,664,800 shares of common stock were
issued and approximately $233.9 million in net proceeds were received by the
Company under a registration statement of the Company's Class A Common Stock
filed with the SEC.
F-19
<PAGE> 135
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. ACQUISITION OF MARKETS CELLULAR LIMITED PARTNERSHIP:
On July 29, 1994, the Company acquired MCLP in the Business Combination in
exchange for 18,160,643 shares of common stock of the Company. The Business
Combination was accounted for using the purchase method.
The purchase price of MCLP was determined as follows (in thousands):
<TABLE>
<S> <C>
Fair value of shares issued to non-GCC interests....................... $ 70,918
GCC's investments in MCLP.............................................. 8,250
MCLP's long-term debt assumed.......................................... 59,590
Transaction fees and other............................................. 1,310
--------
$140,068
=========
The purchase price was allocated as follows (in thousands):
Cash acquired.......................................................... $ 11,726
Working capital and tangible assets acquired........................... 37,346
Licenses and other intangible assets................................... 90,996
--------
$140,068
=========
</TABLE>
The following unaudited pro forma information presents the results of
operations of the Company as if the Business Combination occurred on January 1,
1993. These results include certain adjustments to conform with the Company's
accounting policies, increased amortization expense and the elimination of the
provision for nonrecurring restructuring costs related to the Business
Combination. These results are not necessarily indicative of the results that
actually would have
F-20
<PAGE> 136
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. ACQUISITION OF MARKETS CELLULAR LIMITED PARTNERSHIP -- (CONTINUED)
been attained if the Business Combination had been in effect at the beginning of
1993 or which may be attained in the future (in thousands, except per share
data):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1993
-----------
1994 (UNAUDITED)
-----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Subscriber revenues.............................................. $ 47,410 $ 17,310
Roamer revenues.................................................. 19,985 11,345
Equipment sales.................................................. 9,207 4,109
-------- --------
Total revenues........................................... 76,602 32,764
-------- --------
Operating expenses:
Cost of service.................................................. 15,961 7,692
Cost of equipment sales.......................................... 13,758 5,862
General and administrative....................................... 18,600 10,712
Sales and marketing.............................................. 23,099 11,398
Depreciation and amortization.................................... 33,389 13,102
-------- --------
Total operating expenses................................. 104,807 48,766
-------- --------
Operating loss..................................................... (28,205) (16,002)
Other income (expense):
Interest and financing expense................................... (13,113) (5,202)
Gain on dispositions, net........................................ 6,202 6,357
Other income (expense)........................................... 657 (120)
-------- --------
Net loss................................................. $ (34,459) $ (14,967)
======== ========
Net loss per common share.......................................... $ (0.66) $ (0.30)
======== ========
</TABLE>
F-21
<PAGE> 137
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. OTHER ACQUISITIONS AND DISPOSITIONS:
Acquisitions:
The following table summarizes the cellular market acquisitions of the
Company for each of the three years ended December 31 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
MARKET
Kansas 14 RSA............................. April
South Dakota 3 RSA........................ May
Kansas 8 RSA.............................. May
South Dakota 1 RSA(a)..................... December
Nevada 5 RSA.............................. January
South Dakota 8 RSA........................ April
Nebraska 3 RSA............................ August
Kansas 4, 9 and 10 and Missouri 9 RSAs.... November
Minnesota 3 RSA........................... December
Sioux Falls, SD MSA....................... May
South Dakota 7 RSA........................ July
Odessa, TX MSA and New Mexico 6 RSA....... October
Nebraska 9 and 10 RSAs.................... November
Purchase price including cash and
liabilities assumed:
Cash paid................................. $38,600 $40,800 $16,200
========= ========= =========
Liabilities assumed....................... $ 500 $ 2,500 $25,500
========= ========= =========
</TABLE>
- ---------------
(a) 217,000 shares of common stock were issued at $11.29 per share as part of
the South Dakota 1 acquisition.
With the exception of the South Dakota 1, South Dakota 8 and the Nebraska 9
and 10 RSA acquisitions which were stock purchases, the above transactions were
asset purchases. All of these transactions were accounted for using the purchase
method. Approximately 95% of the total purchase price of each acquisition has
been allocated to licensing costs. Acquisitions of additional minority interests
in owned markets are not reflected above. The results of operations of the
properties acquired are included in the Consolidated Statement of Operations
from the date of acquisition.
In September 1993, the Company entered into an agreement to operate the
cellular system in the Abilene, TX MSA market. Pursuant to that agreement, the
Company funded the build-out of the system and operated the system throughout
the remainder of 1993 and 1994. In February 1994, the Company agreed to buy the
system subject to approval from the FCC. The transfer of the license was
approved by the FCC in November 1994, at which time the Company was obligated to
pay $16.1 million. This amount was paid in January 1995.
In June 1996, the Company acquired the operations and the cellular license
for the Kansas 3, RSA for approximately $4.1 million in cash. The transaction
was accounted for using the purchase method.
F-22
<PAGE> 138
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. OTHER ACQUISITIONS AND DISPOSITIONS -- (CONTINUED):
Exchanges:
In July 1995, a subsidiary of the Company exchanged its cellular assets in
the Minnesota 5 RSA market, Minnesota 3 RSA market, a portion of the Minnesota 2
RSA market (Beltrami County), its majority interest in the Alton, IL MSA market,
minority interests in the Wausau and Eau Claire, WI MSA markets and $3.0 million
in cash for the cellular assets and license for the Lubbock, TX MSA market.
There was no gain or loss recognized on the transaction.
In November 1994, the Company exchanged the assets in Hood River Cellular
Telephone Company, a subsidiary of the Company, which included the cellular
licenses of the Oregon 2 and Washington 7 RSA markets, in return for the assets
and license in the Pueblo, CO MSA market and approximately $2.4 million in cash.
There was no gain or loss recognized on the transaction.
In July 1994, a subsidiary of the Company exchanged its Chico, CA MSA
market for the Texas 3 and Texas 8 RSA markets. As part of the same agreement, a
subsidiary of the Company obtained the Sioux City, IA MSA market and
approximately $4.5 million in cash. As a result of the transaction, a gain of
approximately $2.9 million was recognized.
In September 1993, the Company exchanged its majority interest in the
Alexandria, LA MSA market, together with the Company's minority interest in the
Lake Charles, LA MSA market and approximately $7.2 million in cash, for the
majority interest and certain minority interests in the Lincoln, NE MSA market.
There was no gain or loss recognized on the transaction.
In March 1993, pursuant to an agreement between the Company and MCLP, the
Company exchanged its Wyoming 2, Montana 4 and Montana 7 RSA markets along with
certain minority interests and cash in the amount of $1.3 million for the Rapid
City, SD MSA market and the South Dakota 5 and South Dakota 6 RSA markets.
Dispositions:
In April 1994, the assets of Lawton Cellular License Corporation, a
subsidiary of the Company, were sold including the cellular license for the
Lawton, OK MSA market for approximately $7.3 million in cash and marketable
securities. As a result of the transaction, the Company recorded a gain of
approximately $3.3 million.
In April 1993, the Company sold its Texas 4 market for approximately $0.5
million in cash, recording a gain of approximately $0.1 million. In addition,
the assets of Potomac Valley Cellular Partnership, the cellular licensee for the
Cumberland, MD/WV wireline MSA market, were sold for cash and marketable
securities. As a result of the transaction, the Company recorded a gain of
approximately $2.1 million.
In March 1993, the Company sold its majority interest in the Burlington, NC
MSA market and certain other minority interests for approximately $10.1 million
in cash. As a result of the transaction, the Company recorded a gain of
approximately $5.5 million.
During 1993, the Company sold certain of its minority interests in various
markets. As a result of these transactions, the Company recorded a gain of
approximately $2.4 million.
Pro forma unaudited consolidated operating results of the Company and the
above transactions (including the acquisition of MCLP which is discussed in Note
12) for the years ended Decem-
F-23
<PAGE> 139
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. OTHER ACQUISITIONS AND DISPOSITIONS -- (CONTINUED):
ber 31, 1995 and 1994, assuming the acquisitions and dispositions, had been made
as of January 1, 1994, are summarized below (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Revenues..................................................... $149,547 $ 89,945
======== ========
Loss before extraordinary item............................... $(49,840) $(44,043)
Extraordinary loss........................................... (6,645)
-------- --------
Net loss................................................ $(56,485) $(44,043)
======== ========
Loss per common share before extraordinary item.............. $ (0.88) $ (1.00)
Per common share effect of extraordinary item................ (0.12)
-------- --------
Net loss per common share............................... $ (1.00) $ (1.00)
======== ========
</TABLE>
These pro forma results have been prepared for comparative purposes only
and include certain adjustments such as additional depreciation and amortization
expense resulting from allocating a portion of the purchase price to fixed and
wireless assets, and increased interest expense. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combinations been in effect on January 1, 1994 or of future results of
operations of the consolidated entities.
14. EMPLOYEE BENEFIT PLANS:
The Company has an employee savings plan (the "Savings Plan") that
qualifies as a deferred salary arrangement under Section 401(k) of the Internal
Revenue Code. After one year of full-time employment (1,000 hours), an employee
is eligible to participate in the Savings Plan. Under the Savings Plan,
participating employees may defer a portion of their pretax earnings, up to the
Internal Revenue Service annual contribution limit. The Company matches 50% of
each employee's contribution up to 6% of their total compensation. The Company's
contributions are fully vested upon the completion of three years of service.
The Company's contributions were approximately $0.4 million, $0.1 million and
$0.1 million for the years ended December 31, 1995, 1994 and 1993, respectively.
F-24
<PAGE> 140
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SELECTED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED):
Selected quarterly consolidated financial information for the years ended
December 31, 1995 and 1994 is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
LOSS
BEFORE
LOSS BEFORE EXTRAORDINARY NET LOSS
TOTAL OPERATING EXTRAORDINARY ITEM PER PER COMMON
QUARTER ENDED(1) REVENUES LOSS ITEM NET LOSS COMMON SHARE SHARE
- ----------------------- -------- --------- ------------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1994......... $ 6,989 $ (5,441) $ (6,613) $ (6,613) $(0.20) $(0.20)
June 30, 1994.......... 9,135 (2,493) (488) (488) (0.01) (0.01)
September 30, 1994..... 23,289 (5,645) (5,938) (5,938) (0.11) (0.11)
December 31, 1994...... 23,695 (9,989) (12,921) (12,921) (0.25) (0.25)
------- ------- ------- -------
Total 1994... $ 63,108 $ (23,568) $ (25,960) $(25,960)
======= ======= ======= =======
March 31, 1995......... $ 26,084 $ (7,766) $ (12,463) $(12,463) $(0.24) $(0.24)
June 30, 1995.......... 34,613 (4,023) (10,145) (16,790) (0.19) (0.31)
September 30, 1995..... 42,120 (3,749) (11,135) (11,135) (0.19) (0.19)
December 31, 1995...... 43,738 (8,397) (15,566) (15,566) (0.25) (0.25)
------- ------- ------- -------
Total 1995... $146,555 $ (23,935) $ (49,309) $(55,954)
======= ======= ======= =======
March 31, 1996......... $ 46,035 $ (10,505) $ (18,574) $(18,574) $(0.31) $(0.31)
June 30, 1996.......... 58,569 (13,158) (21,596) (21,596) (0.35) (0.35)
------- ------- ------- -------
Total 1996... $104,604 $ (23,663) $ (40,170) $(40,170)
======= ======= ======= =======
</TABLE>
- ---------------
(1) Acquisitions and dispositions referenced in Notes 12 and 13 will affect the
comparability of the information presented from period to period.
16. RELATED PARTY TRANSACTIONS:
Cook Inlet Western Wireless PV/SS PCS, L.P.:
In 1995, a wholly owned subsidiary of the Company formed a limited
partnership with Cook Inlet PV/SS PCS Partners, L.P. (the "General Partner"). A
6.7% shareholder of the Company is also a limited partner of the General
Partner.
Shareholder loans:
During 1994 and 1995, certain shareholders entered into bridge loan
agreements with a wholly owned subsidiary of the Company. During 1995, the
bridge loans, together with accrued interest thereon, were exchanged for shares
of the Company's common stock.
During 1995, certain officers, one of whom is a director, of the Company
who are also shareholders of Palouse and Sawtooth provided Palouse and Sawtooth
with short-term financing which was repaid by the Company subsequent to year end
as a result of the merger discussed in Note 17 below.
Goldman, Sachs & Co.:
In connection with the debt and equity offerings the Company paid total
underwriting fees during the three months ended June 30, 1996 of approximately
$23.3 million. Goldman, Sachs & Co., an affiliate of a shareholder of the
Company, was the lead underwriter on both offerings.
F-25
<PAGE> 141
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. SUBSEQUENT EVENTS AND PENDING TRANSACTIONS:
In May 1996 the Company's common stock was split into 3.1 shares of common
stock for each share of the then-existing common stock. The Company's
consolidated financial statements and footnotes have been retroactively restated
to reflect the stock split for all periods presented.
On December 29, 1995, the shareholders of the Company, Palouse and Sawtooth
approved the merger of Palouse and Sawtooth into wholly owned subsidiaries of
the Company. Subsequent to year end, shareholders of Palouse and Sawtooth
exchanged their shares for 515,561 and 79,748 shares of the Company's common
stock, respectively. Certain shareholders of Palouse and Sawtooth were also
officers and shareholders of the Company. The holder of the controlling
interests in Palouse and Sawtooth did not hold a controlling interest in the
Company. The Company accounted for the transaction as a stock purchase. In
addition, the Company paid approximately $3.1 million and $0.3 million of
outstanding debt of Palouse and Sawtooth, respectively.
Subsequent to December 31, 1995, the Company recorded deferred compensation
of approximately $1.8 million upon the issuance of 85,250 options to purchase
shares of common stock to an officer of the Company at an exercise price of
$1.13 per share.
In June 1996, the Company purchased a Denver MTA PCS wireless license for
$66.1 million. This transaction was accounted for as an asset purchase.
On October 20, 1995, the Company entered into an agreement to purchase the
assets of the wireless communications system of the Fargo, ND MSA and the North
Dakota 3 RSA IOA for cash of approximately $31.5 million. This transaction was
completed on January 23, 1996.
18. REINCORPORATION AND COMMISSION REGISTRATION STATEMENT:
In May 1996 the Company effected a recapitalization pursuant to which the
Company reclassified its 300 million shares of authorized capital stock into two
classes of common stock, Class A Common Stock and Class B Common Stock, each
without par value, and 50 million shares of preferred stock. Subsequently, the
Company effected a reincorporation merger pursuant to which it merged with and
into a wholly owned Washington subsidiary.
In March 1996, the Company filed registration statements with the
Commission relating to offerings of the Company's Class A Common Stock, no par
value, and 10 1/2% Notes. An affiliate of the Company acted as an underwriter in
the offerings.
F-26
<PAGE> 142
WESTERN WIRELESS CORPORATION
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
ACCOUNTS RECEIVABLE ALLOWANCE FOR DOUBTFUL ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER DEDUCTIONS AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(1) (2) PERIOD
- ----------------------------------------- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995............. $ 1,772 $ 4,558 $ 892 $ (4,422) $ 2,800
====== ====== ==== ======= ======
Year ended December 31, 1994............. $ 476 $ 1,885 $ 638 $ (1,227) $ 1,772
====== ====== ==== ======= ======
Year ended December 31, 1993............. $ 298 $ 546 $ 286 $ (654) $ 476
====== ====== ==== ======= ======
</TABLE>
- ---------------
(1) Represents market acquisitions and dispositions and late fees.
(2) Write-offs, net of bad debt recovery.
F-27
<PAGE> 143
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO MARKETS CELLULAR LIMITED PARTNERSHIP:
We have audited the accompanying consolidated balance sheets of MARKETS
Cellular Limited Partnership (a Delaware limited partnership) and subsidiary
companies as of June 30, 1994, December 31, 1993 and 1992, and the related
consolidated statements of operations, partners' capital and cash flows for the
six months ended June 30, 1994, the year ended December 31, 1993, and the period
from October 6, 1992 (inception) to December 31, 1992. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MARKETS Cellular Limited
Partnership and subsidiary companies as of June 30, 1994, December 31, 1993 and
1992, and the results of their operations and their cash flows for the six
months ended June 30, 1994, the year ended December 31, 1993, and the period
from October 6, 1992 (inception) to December 31, 1992, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Seattle, Washington,
March 15, 1996
F-28
<PAGE> 144
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31,
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 11,726,000 $ 1,390,000 $ 3,026,000
Accounts receivable, net of allowance for
doubtful accounts of $436,000, $397,000
and $84,000, respectively................ 4,162,000 2,574,000 522,000
Inventory................................... 839,000 413,000 83,000
Prepaid expenses and other current assets... 1,035,000 1,783,000 206,000
------------ ------------ -----------
Total current assets................ 17,762,000 6,160,000 3,837,000
Property and equipment, net of accumulated
depreciation of $7,737,000, $4,335,000 and
$280,000, respectively...................... 40,887,000 35,212,000 12,088,000
Licensing costs and other intangible assets,
net of accumulated amortization of
$5,731,000, $3,664,000 and $275,000,
respectively................................ 56,537,000 57,189,000 25,493,000
Investments in unconsolidated affiliates...... 3,445,000 3,367,000 2,079,000
Cellular properties pending disposition,
net......................................... 10,884,000
Other assets.................................. 1,200,000 1,023,000 1,512,000
------------ ------------ -----------
$119,831,000 $102,951,000 $55,893,000
============ ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable............................ $ 4,923,000 $ 1,855,000 $ 464,000
Accrued liabilities......................... 3,545,000 1,573,000 733,000
Accounts payable, affiliates................ 1,618,000
Construction accounts payable............... 865,000 1,196,000 1,553,000
Unearned revenue and customer deposits...... 1,368,000 804,000 65,000
Current portion of long-term debt........... 593,000 239,000 3,146,000
------------ ------------ -----------
Total current liabilities........... 11,294,000 5,667,000 7,579,000
Long-term debt, including deferred interest,
net of current portion...................... 58,997,000 57,584,000 5,051,000
Commitments (Note 5)
Minority interests in equity of consolidated
subsidiaries................................ 76,000 56,000 15,000
Partners' capital............................. 49,464,000 39,644,000 43,248,000
------------ ------------ -----------
$119,831,000 $102,951,000 $55,893,000
============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE> 145
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------- OCTOBER 6, 1992
JUNE 30, YEAR ENDED (INCEPTION) TO
1994 DECEMBER 31, 1993 DECEMBER 31, 1992
------------ JUNE 30, ----------------- -----------------
1993
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Subscriber revenues............... $ 8,260,000 $ 1,718,000 $ 6,205,000 $ 249,000
Roamer revenues................... 3,101,000 831,000 4,060,000 412,000
Equipment sales................... 1,682,000 934,000 1,765,000 69,000
------------ ------------ ------------ ------------
Total revenues............. 13,043,000 3,483,000 12,030,000 730,000
------------ ------------ ------------ ------------
Operating expenses:
Cost of service................... 2,658,000 1,076,000 3,382,000 384,000
Cost of equipment sales........... 2,312,000 1,150,000 2,329,000 69,000
General and administrative........ 4,833,000 1,270,000 4,459,000 687,000
Sales and marketing............... 4,546,000 1,640,000 5,297,000 290,000
Depreciation and amortization..... 6,024,000 3,040,000 7,701,000 555,000
------------ ------------ ------------ ------------
Total operating expenses... 20,373,000 8,176,000 23,168,000 1,985,000
------------ ------------ ------------ ------------
Operating loss...................... (7,330,000) (4,693,000) (11,138,000) (1,255,000)
------------ ------------ ------------ ------------
Other income (expense):
Interest and financing expense.... (2,454,000) (734,000) (2,960,000) (156,000)
Loss on disposition of cellular
equipment....................... (3,704,000) (3,745,000)
Other, net........................ (1,751,000) (608,000) (451,000) 91,000
------------ ------------ ------------ ------------
Total other income
(expense)................ (4,205,000) (5,046,000) (7,156,000) (65,000)
------------ ------------ ------------ ------------
Net loss................... $(11,535,000) $ (9,739,000) $ (18,294,000) $ (1,320,000)
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE> 146
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
LIMITED PARTNERS
GENERAL ----------------------
PARTNER UNITS AMOUNTS TOTAL
--------- ----- ------------ ------------
<S> <C> <C> <C> <C>
Partners' cash contributions.......... $ 750,000 1,236 $ 30,738,000 $ 31,488,000
Partners' property contributions...... 532 13,292,000 13,292,000
Offering and syndication costs........ (212,000) (212,000)
Net loss.............................. (19,000) (1,301,000) (1,320,000)
--------- ----- ------------ ------------
Balance at December 31, 1992.......... 731,000 1,768 42,517,000 43,248,000
Partners' cash contributions........ 567 14,690,000 14,690,000
Net loss............................ (261,000) (18,033,000) (18,294,000)
--------- ----- ------------ ------------
Balance at December 31, 1993.......... 470,000 2,335 39,174,000 39,644,000
Partners' cash contributions........ 35,000 772 19,220,000 19,255,000
Conversion of note and accrued
interest to equity............... 298,000 298,000
Class B unit awards recorded as
compensation expense............. 1,459,000 1,459,000
Partnership interests granted in
payment of fee................... 343,000 343,000
Net loss............................ (134,000) (11,401,000) (11,535,000)
--------- ----- ------------ ------------
Balance at June 30, 1994.............. $ 371,000 3,107 $ 49,093,000 $ 49,464,000
========= ===== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE> 147
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------- OCTOBER 6, 1992
JUNE 30, YEAR ENDED (INCEPTION) TO
1994 JUNE 30, DECEMBER 31, 1993 DECEMBER 31, 1992
------------ 1993 ----------------- -----------------
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Operating activities:
Net loss..................................... $(11,535,000) $ (9,739,000) $ (18,294,000) $ (1,320,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization............ 6,024,000 3,040,000 7,701,000 555,000
Deferred interest and financing costs.... 2,425,000 646,000 2,142,000 11,000
Class B unit awards...................... 1,459,000
Partnership interests granted in payment
of fee................................ 343,000
Loss on disposition of cellular
equipment............................. 3,704,000 3,745,000
Minority interests in net loss of
consolidated subsidiaries............. 72,000 (3,000) (12,000) (76,000)
Changes in operating assets and
liabilities, net of effects from
consolidating acquired interests:
Accounts receivable, net............ (1,588,000) (1,101,000) (1,888,000) 33,000
Other current assets................ (989,000) (888,000) (1,591,000) (32,000)
Current liabilities................. 4,485,000 2,047,000 2,263,000 836,000
------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities............................... 696,000 (2,294,000) (5,934,000) 7,000
------------ ------------ ------------ ------------
Investing activities:
Acquisition of cellular properties, net of
cash acquired.............................. (1,359,000) (10,208,000) (10,208,000) (24,840,000)
Investments in unconsolidated affiliates..... (150,000) (1,288,000) (266,000)
Purchase of property and equipment........... (7,576,000) (18,342,000) (27,657,000) (1,679,000)
Proceeds from disposition of assets, net..... 1,307,000 2,514,000
Additions to licensing costs and other
assets..................................... (986,000) (1,923,000) (2,491,000) (1,614,000)
------------ ------------ ------------ ------------
Net cash used in investing activities...... (10,071,000) (29,166,000) (39,130,000) (28,399,000)
------------ ------------ ------------ ------------
Financing activities:
Partner cash contributions, net of
syndication costs.......................... 19,255,000 7,320,000 14,690,000 31,276,000
Additions to long-term debt.................. 635,000 29,828,000 36,532,000 250,000
Payment of debt.............................. (179,000) (4,981,000) (5,630,000)
Purchase of interest rate caps............... (546,000)
Repayment of accounts payable, affiliates.... (1,618,000) (1,618,000) (108,000)
------------ ------------ ------------ ------------
Net cash provided by financing
activities............................... 19,711,000 30,549,000 43,428,000 31,418,000
------------ ------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents.................................. 10,336,000 (911,000) (1,636,000) 3,026,000
Cash and cash equivalents, beginning of
period....................................... 1,390,000 3,026,000 3,026,000 0
------------ ------------ ------------ ------------
Cash and cash equivalents, end of period....... $ 11,726,000 $ 2,115,000 $ 1,390,000 $ 3,026,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE> 148
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PARTNERSHIP ORGANIZATION AND OPERATIONS:
General:
MARKETS Cellular Limited Partnership ("MCLP" or the "Partnership") was a
Delaware limited partnership with PN Cellular Limited Partnership as the General
Partner ("GP"). The Partnership was formed on October 6, 1992. On July 29, 1994,
the Partnership was combined with General Cellular Corporation ("GCC") in a
business combination (the "Business Combination"), which was accounted for as a
purchase of the Partnership by GCC. Concurrent with the Business Combination,
Western Wireless Corporation (the "Company") became the successor entity. These
consolidated financial statements reflect the operations of MCLP through June
30, 1994. The results of operations of MCLP from July 1, 1994, to July 29, 1994,
are not significant.
The Partnership was principally engaged in the ownership and operation of
cellular communications systems. Cellular licenses are awarded by the Federal
Communications Commission ("FCC") in either Metropolitan Statistical Areas
("MSAs") or Rural Service Areas ("RSAs"). The Partnership had operations in the
states of Colorado, Idaho, Minnesota, Montana, North Dakota, Oregon, Washington
and Wyoming.
Organization:
The Partnership was comprised of Class A limited partners ("Class A LPs"),
Class B limited partners ("Class B LPs") and the General Partner. At December
31, 1992, a total of 3,004 Class A units were subscribed by Class A LPs at a
cost of $25,000 per unit. The Partnership Agreement authorized the sale of an
additional 103 units which were subscribed in 1993 at a cost per unit of
$25,000, plus an additional $5,000 per unit for the right to purchase the Class
A units. The $5,000 per unit was payable at the subscription date. The Class A
LPs (other than Class A LPs contributing cellular assets in exchange for Class A
units) were required to purchase at least one-half of their subscribed units
upon becoming Class A LPs.
The GP had the discretion to issue up to 2,320 Class B units in the
Partnership during the term of the Partnership to employees and persons who
performed services on behalf of the Partnership. The Class B units had no cash
purchase price. At June 30, 1994, 1,933 Class B units had been issued, of which
548 Class B units had vested and 1,385 Class B units had not yet vested. In
connection with the Business Combination, the 548 vested Class B units converted
into shares of the Company common stock; the 1,385 unvested Class B units became
automatically vested and were converted to fully vested options to purchase
shares of the Company common stock. Compensation expense of $1,459,000 was
recognized related to these units vesting.
Allocation of profits, losses and distributions:
Profits and losses of the Partnership were generally allocated as follows:
(1) To the GP and Class A LPs in proportion to their capital contributions
and the Preferred Return of 10% per annum on their capital
contributions,
(2) Next, to the Class B LPs 3.093% of the aggregate amount of the
Preferred Return of the GP and Class A LPs,
(3) Next, of the remaining amounts to be allocated -- 84% to the Class A
LPs, 3% to the Class B LPs and 13% to the GP.
F-33
<PAGE> 149
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation:
The consolidated financial statements include the accounts of the
Partnership, its wholly owned subsidiaries and its affiliate investments in
which the Partnership has a greater than 50% interest. All affiliate investments
in which the Partnership has between a 20% and 50% interest are accounted for
using the equity method. All significant intercompany accounts and transactions
have been eliminated.
Unaudited interim financial statements:
The interim consolidated financial information contained herein is
unaudited but, in the opinion of management, includes all adjustments which are
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods presented. Results of operations for
interim periods presented herein are not necessarily indicative of results of
operations for the entire year.
Cash and cash equivalents:
Cash and cash equivalents consist of cash on hand, deposits in banks and
highly liquid investments purchased with an original maturity of less than three
months. The carrying value of cash and cash equivalents reported in the balance
sheets approximates fair market value.
Revenue recognition:
Service revenues based on customer usage are recognized at the time the
service is provided. Access and special feature service revenues are recognized
when earned. Sales of equipment, primarily handsets, are recognized when the
goods are delivered.
Inventory:
Inventory consists primarily of handsets and accessories. Inventory is
stated at the lower of cost or market, determined on a first-in, first-out
basis.
Property and equipment and depreciation:
Property and equipment were stated at cost. Depreciation was computed using
the straight-line method over the estimated useful lives of the assets which
ranged from three to ten years.
Licensing costs and other intangible assets and amortization:
Licensing costs primarily represented costs incurred to develop or acquire
cellular licenses. Amortization began with the commencement of service to
customers and was computed using the straight-line method over 15 years.
Intangible assets primarily included deferred financing costs and organization
costs, which included legal and other direct costs of certain acquisitions.
Using the effective interest rate method, deferred financing costs were
amortized over the life of the loan and organization costs were amortized over
five years.
Investments in unconsolidated affiliates:
Investments in unconsolidated affiliates reflected MCLP's investment in
Stanton Communications, Inc. ("SCI") and Sawtooth Paging, Inc. ("Sawtooth").
These investments were stated at cost and adjusted for the Partnership's share
of undistributed earnings and losses. The excess of
F-34
<PAGE> 150
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)
the Partnership's investment in SCI over the underlying book value of the net
assets was amortized using the straight-line method over 40 years. The assets,
liabilities and results of operations of SCI and Sawtooth were not material to
MCLP. Sawtooth was also owned 45% by managing partners of the Partnership.
Cellular properties pending disposition, net:
At December 31, 1992, the Partnership had agreements to trade certain
cellular assets for other cellular assets, pending approval for the transfers of
licenses. Accordingly, the assets of the cellular systems to be traded, net of
any related liabilities, and the results of operations related to those assets
were classified separately in the accompanying consolidated balance sheets and
statements of operations. For the period from October 6, 1992 to December 31,
1992, and the year ended December 31, 1993, the results of operations related to
these assets were not material. At December 31, 1993, the Partnership had
consummated the trades.
Other assets:
Included in other assets on the Consolidated Balance Sheets are assets, net
of liabilities, attributable to markets in which MCLP had an Interim Operating
Authority ("IOA") issued by the FCC. MCLP had IOAs which were granted by the FCC
in January 1993 for Wyoming 4 and North Dakota 3. In February 1994, the FCC
granted MCLP IOAs for Idaho 3 and Montana 3. MCLP management believes that
amounts capitalized relating to IOAs are realizable either through operations,
sale to the permanent licensee or ultimate acquisition of the license.
During 1992, MCLP managed certain cellular properties prior to ownership.
Included in other assets were advances to those properties still under
management agreements at December 31, 1992. Costs incurred by the Partnership
for managed properties prior to ownership were reflected as other income
(expense) in the 1992 Consolidated Statement of Operations.
Offering and syndication costs:
Costs incurred directly relating to the offering of the Class A LP units
were treated as a reduction of the capital contributed by the Limited Partners.
Federal income taxes:
The Partnership was not subject to federal income taxes since all taxable
income or loss accrued to the individual partners. No provision was made in the
statements of operations for federal income taxes.
Since the Partnership had losses since inception, there would have been no
tax benefit recorded had the Partnership been a taxable entity.
Other:
Accrued liabilities included $867,000 and $628,000 of accrued employee
expenses at June 30, 1994, and December 31, 1993, respectively. Other current
assets at December 31, 1993, included $1,237,000 of cellular communications
equipment credits.
F-35
<PAGE> 151
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)
Concentration of credit risk:
The Partnership's customers were dispersed throughout rural areas of the
western United States. No single customer accounted for a significant amount of
the Partnership's revenues, and there were no significant accounts receivable
from a single customer. The Partnership reviewed the credit histories of
potential customers prior to extending credit and maintains allowances for
potential credit losses. The Partnership maintained cash and cash equivalents in
high credit quality financial institutions. The Partnership believed that its
risk from concentration of credit was limited.
Interest rate swap and cap agreements:
As required by the loan agreement with AT&T Credit Corporation, the
Partnership entered into interest rate cap agreements to manage interest rate
exposure pertaining to long-term debt. Premiums paid for purchased interest rate
cap agreements were amortized to interest expense over the terms of the
agreements. Unamortized premiums were accounted for as assets in the
Consolidated Balance Sheets. Amounts received under the interest rate cap
agreements, if any, were accounted for on an accrual basis and recognized as a
reduction to interest expense.
Supplemental cash flow disclosures:
Non-cash investing and financing activities were as follows:
<TABLE>
<CAPTION>
OCTOBER 6, 1992
SIX MONTHS YEAR ENDED (INCEPTION) TO
ENDED JUNE 30, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
------------------- ----------------- -----------------
<S> <C> <C> <C>
Issuance of partnership units in
exchange for property................. $13,292,000
Acquisition of cellular market in
exchange for debt assumed............. $ 1,680,000
Conversion of note and accrued interest
to partners' capital.................. $ 298,000
</TABLE>
Estimates used in preparation of financial statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
F-36
<PAGE> 152
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at June 30, 1994 and
December 31, 1993 and 1992:
<TABLE>
<CAPTION>
DECEMBER DECEMBER
JUNE 30, 31, 31,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Cellular property and equipment..... $38,698,000 $34,829,000 $ 9,902,000
Office equipment and improvements... 1,725,000 1,211,000 561,000
Automotive equipment................ 461,000 346,000 129,000
----------- ----------- -----------
40,884,000 36,386,000 10,592,000
Less accumulated depreciation....... (7,737,000) (4,335,000) (280,000)
----------- ----------- -----------
33,147,000 32,051,000 10,312,000
Construction in progress............ 7,740,000 3,161,000 1,776,000
----------- ----------- -----------
$40,887,000 $35,212,000 $12,088,000
=========== =========== ===========
</TABLE>
Depreciation expense was $2.1 million and $1.7 million (unaudited) for the
six months ended June 30, 1994 and 1993, respectively, and $4.3 million and $0.3
million for the year ended December 31, 1993 and the period from October 6, 1992
(inception) to December 31, 1992, respectively.
F-37
<PAGE> 153
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT:
Long-term debt at June 30, 1994 and December 31, 1993 and 1992 consisted of
the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Loan agreement with AT&T Credit Corporation;
interest payable at 90 day commercial paper rate
plus 4.5%, including deferred interest of
$3,869,000 (9.02% total interest rate at June 30,
1994) and $1,975,000 at June 30, 1994 and December
31, 1993, respectively........................... $ 47,733,000 $ 45,208,000
Purchase money and working capital notes payable to
AT&T Credit Corporation; interest payable
quarterly at 9.5% per annum. Notes refinanced in
1993.............................................. $ 460,000
Purchase money and working capital notes payable to
vendors; interest payable at the prime rate plus
2%. Notes repaid in 1993.......................... 4,770,000
Purchase money and working capital notes payable to
vendor; interest payable monthly at the Morgan
Guaranty Base Rate plus 2% (9.25% total interest
rate at June 30, 1994); all of the assets and
license of Oregon 2 RSA and partnership interest
in Hood River Cellular Telephone Company were
pledged as collateral; due 1994 to 1998........... 2,511,000 2,523,000 1,956,000
Purchase money and working capital note payable to
vendor; interest payable monthly at the Chase
Manhattan Bank's prime rate plus 2% (9.25% total
interest rate at June 30, 1994); all of the assets
and license of Minnesota 5 RSA and partnership
interest in KETS Partnership were pledged as
collateral; due April 30, 1997.................... 3,500,000 3,500,000
Subordinated seller and other notes with interest
rates ranging from 7% to 10%, maturing to 2002.... 5,846,000 6,592,000 1,011,000
----------- ----------- ----------
59,590,000 57,823,000 8,197,000
Less current portion................................ 593,000 239,000 3,146,000
----------- ----------- ----------
$ 58,997,000 $ 57,584,000 $ 5,051,000
=========== =========== ==========
</TABLE>
These loans were substantially refinanced with borrowings of the Company
concurrent with the Business Combination in July 1994.
The aggregate amounts of principal maturities of long-term debt as of June
30, 1994 prior to the refinancing which occurred concurrent with the Business
Combination were as follows:
<TABLE>
<CAPTION>
TWELVE MONTH PERIODS
ENDING JUNE 30,
--------------------
<S> <C>
1995..................................... $ 593,000
1996..................................... 2,788,000
1997..................................... 13,330,000
1998..................................... 9,973,000
1999..................................... 10,054,000
Thereafter............................... 22,852,000
--------------------
$ 59,590,000
=================
</TABLE>
F-38
<PAGE> 154
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT: -- (CONTINUED)
Total interest paid in cash amounted to $437,000 and $88,000 (unaudited)
for the six months ended June 30, 1994 and 1993, respectively, and $739,000 and
$57,000 for the year ended December 31, 1993 and the period from October 6, 1992
to December 31, 1992, respectively.
5. COMMITMENTS:
Operating leases:
The Partnership had operating leases principally for facilities, cell
sites, and office space and other operating agreements with remaining terms of
between one and fourteen years. Some leases had options for additional periods.
Certain leases provided for payment by the lessee of taxes, maintenance and
insurance.
Future minimum payments required under operating leases and agreements that
had initial or remaining noncancellable terms in excess of one year at June 30,
1994, are summarized below:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
Remainder of 1994............................... $ 351,000
1995............................................ 639,000
1996............................................ 398,000
1997............................................ 341,000
1998............................................ 195,000
Thereafter...................................... 177,000
----------
$2,101,000
==========
</TABLE>
Total rent expense amounted to $421,000 and $264,000 (unaudited) for the
six months ended June 30, 1994 and 1993, respectively, and $591,000 and $59,000
for the year ended December 31, 1993, and the period from October 6, 1992 to
December 31, 1992, respectively.
F-39
<PAGE> 155
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ACQUISITIONS:
The following table summarizes the cellular market acquisitions of the
Partnership for the six months ended June 30, 1994, the year ended December 31,
1993, and the period from October 6, 1992 (inception) to December 31, 1992.
<TABLE>
<CAPTION>
SIX MONTHS OCTOBER 6, 1992
ENDED JUNE YEAR ENDED (INCEPTION) TO
30, DECEMBER 31, DECEMBER 31,
1994 1993 1992
---------- ------------ ---------------
<S> <C> <C> <C>
Asset Purchases:
Grand Forks, ND MSA................................ October
North Dakota 2 RSA................................. October
CIS-2 (Bismarck, ND MSA -- 75.2% and
Montana 2 RSA)................................... November
Colorado 8 RSA..................................... November
Montana 10 RSA..................................... November
CIS-1 (Rapid City, SD MSA, Montana 8 RSA,
and South Dakota 6 RSA).......................... December
CIS-3 (South Dakota 5 RSA)......................... December
Montana 1 RSA...................................... December
Montana 6 RSA...................................... December
Montana 9 RSA...................................... December
North Dakota 1 RSA................................. January
North Dakota 4 RSA................................. January
North Dakota 5 RSA................................. February
GCC Trade (Montana 4 RSA,
Montana 7 RSA and Wyoming 2 RSA)................. March
Minnesota 1 and 2 RSAs............................. May
Minnesota 5 RSA.................................... May
Montana 5 RSA -- (99%)............................. June
Colorado 5 RSA..................................... September
Washington 7 RSA................................... June
Stock Purchases:
CIS-2 (Great Falls, MT MSA -- 54.8%)............... November
CIS-1 (Billings, MT MSA -- 63.5%).................. December
</TABLE>
Purchase price including cash paid and liabilities assumed at closing are
as follows:
<TABLE>
<S> <C> <C> <C>
Cash paid at closing............................. $1,359,000 $11,208,000 $23,867,000
Liabilities assumed.............................. 16,717,000 5,823,000
---------- ----------- -----------
$1,359,000 $27,925,000 $29,690,000
========== =========== ===========
</TABLE>
All of the acquisitions were accounted for using the purchase method. The
results of operations from the properties acquired are included in the
consolidated statements of operations from the date of acquisition. Results of
operations prior to the date of acquisition were not significant in relation to
the Partnership's results of operations.
F-40
<PAGE> 156
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ACQUISITIONS: -- (CONTINUED)
During the six months ended June 30, 1994, the Partnership purchased
minority interests in the Billings, MT MSA and Great Falls, MT MSA from minority
partners for a total cash purchase price of $250,000.
During 1993, the Partnership purchased minority interests in the Bismarck,
ND MSA, Billings, MT MSA and Great Falls, MT MSA from minority partners for a
total cash purchase price of $437,000.
The September 1993 acquisition of Colorado 5 was a non-cash transaction as
the $1.7 million purchase price was directly applied to the loan agreement with
AT&T Credit Corporation.
During 1992, the Partnership purchased a number of cellular systems and
assets from subsidiaries of Cellular Information Systems, Inc. ("CIS"). Those
purchases occurred in November and December 1992 and are aggregated for the
purposes of this disclosure.
In December 1992, the Partnership purchased an additional 47.8% of Hood
River Cellular Telephone Company (Oregon 2 RSA) in exchange for 50 Class A LP
units and $8,000 in cash paid to the Partnership.
7. RELATED PARTY TRANSACTIONS:
General Cellular Corporation:
John W. Stanton was Chief Executive Officer of both MCLP and GCC. GCC owned
a 9.9% interest in PN Cellular Limited Partnership (MCLP's general partner) and
had subscribed for 300 limited partnership units in MCLP. MCLP owned 40% of SCI
which owned approximately 4.7% of the stock of GCC. During 1993, MCLP purchased
a direct interest in GCC representing approximately a 0.65% ownership interest.
MCLP exchanged the Rapid City, SD MSA market and the South Dakota 5 and
South Dakota 6 RSA markets that it acquired from CIS for GCC's Wyoming 2,
Montana 4 and Montana 7 RSA markets, GCC's minority interests in the Billings
and Great Falls, MT MSA markets and a cash payment of approximately $1,300,000.
No gain or loss was recorded on the transaction.
In 1993, MCLP sold certain decommissioned cellular equipment to GCC for a
cash price of $976,000.
McCaw Cellular Communications, Inc. ("McCaw"):
Mr. Stanton was a director of McCaw, now known as AT&T Wireless Services,
Inc., until May 1994. During 1992 and 1993, the Partnership and its predecessors
entered into a series of agreements with McCaw to purchase services in six of
MCLP's markets utilizing McCaw facilities located in Oregon, Idaho and Colorado.
Services provided included leasing switch capacity, roamer coordination and
billing. The majority of the agreements had a five-year term with options to
renew. The total amounts paid by the Partnership and its predecessors for
services rendered by McCaw during the six months ended June 30, 1994, the year
ended December 31, 1993 and the period from October 6, 1992, to December 31,
1992, were approximately $200,000, $524,000 and $262,000, respectively.
F-41
<PAGE> 157
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. RELATED PARTY TRANSACTIONS: -- (CONTINUED)
Reimbursement to Mr. Stanton/Ms. Gillespie:
During 1992, Mr. Stanton and Theresa Gillespie advanced funds to the
Partnership and its predecessors. Pursuant to the Partnership Agreement, MCLP
agreed to repay Mr. Stanton and Ms. Gillespie $3,412,000. As of December 31,
1992, Mr. Stanton and Ms. Gillespie were still owed $1,618,000. During 1992,
interest was accrued, but not paid, at the rate of 5.5%. In January 1993, the
$1,618,000 was repaid, plus accrued interest in the amount of $27,000.
GS Capital Partners, L.P. ("GS Capital"):
GS Capital was the largest limited partner in MCLP. Pursuant to the
Partnership Agreement, GS Capital loaned the Partnership $250,000 at an interest
rate of 10%. The principal and accrued interest was payable on December 31,
2002. At June 30, 1994, and December 31, 1993 and 1992, approximately $48,000,
$32,000 and $6,000, respectively, in interest had accrued on the loan. This note
was converted to equity in connection with the Business Combination.
The Goldman Sachs Group, L.P.:
In connection with the Business Combination, the Partnership granted
partnership interests to The Goldman Sachs Group, L.P. valued at $343,000 in
payment of a fee for advisory services.
Interest Rate Cap Transactions:
During 1993, the Partnership purchased interest rate protection through
interest rate cap transactions. These purchases were made from two affiliates of
MCLP partners. One purchase was executed with Goldman, Sachs & Co. pursuant to
which Goldman, Sachs & Co. was paid $126,000. The other transactions were with
Toronto Dominion Bank at a total cost of $420,000. The cost of the interest rate
caps is recorded as a prepaid expense and amortized over the term of the
contract, generally four to five years.
F-42
<PAGE> 158
[back cover page of prospectus]
WESTERN WIRELESS CORPORATION
All tendered Original Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent
for the Exchange Offer is
HARRIS TRUST COMPANY OF CALIFORNIA
c/o Harris Trust Company of New York
By Facsimile:
(212) 701-7636
or (212) 701-7640
Attention: Reorganization Department
Confirm by telephone:
(212) 701-7624
By Registered or Certified Mail:
Harris Company of California
c/o Harris Trust Company of New York
Wall Street Station
P.O. Box 1023
New York, NY 10268-1023
Attention: Reorganization Department
By Hand:
Harris Trust Company of California
c/o Harris Trust Company of New York
Receive Window
77 Water Street, 5th Floor
New York, NY 10005
Attention: Reorganization Department
By Overnight Courier:
Harris Trust Company of California
c/o Harris Trust Company of New York
77 Water Street
New York, NY 10005
Attention: Reorganization Department
<PAGE> 159
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 23B.08.510 of the Revised Code of Washington authorizes Washington
corporations to indemnify their officers and directors under certain
circumstances against expenses and liabilities incurred in legal proceedings
involving such persons because of their being or having been an officer or
director. The Company's Articles of Incorporation and Bylaws require
indemnification of the Company's officers and directors to the fullest extent
permitted by Washington law. The Company also maintains directors' and officers'
liability insurance.
The Company's By-laws and Articles of Incorporation provide that the
Company shall, to the full extent permitted by the Washington Business
Corporation Act (the "Washington Business Act") of the State of Washington, as
amended from time to time, indemnify all directors and officers of the Company.
In addition, the Company's Articles of Incorporation contains a provision
eliminating the personal liability of directors to the Company or its
shareholders for monetary damages arising out of a breach of fiduciary duty.
Under Washington law, this provision eliminates the liability of a director for
breach of fiduciary duty but does not eliminate the personal liability of any
director for (i) acts or omissions of a director that involve intentional
misconduct or a knowing violation of law, (ii) conduct in violation of Section
23B.08.310 of the Revised Code of Washington (which section relates to unlawful
distributions) or (iii) any transaction from which a director personally
received a benefit in money, property or services to which the director was not
legally entitled.
The Company has entered into separate indemnification agreements with each
of its directors and executive officers, which agreements will supersede prior
indemnification agreements entered into by the Company with each of its
directors and executive officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)Exhibits:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- ---------------------------------------------------------------------------
<S> <C> <C>
3.1++ -- Amended and Restated Articles of Incorporation of the Registrant...........
3.2++ -- Bylaws of the Registrant...................................................
4.1 -- Form of Indenture relating to the 10 1/2% Senior Subordinated Notes Due
2007.......................................................................
4.2** -- Indenture between Western Wireless Corporation and Harris Trust Company of
California, dated May 22, 1996.............................................
5.1 -- Opinion of Preston Gates & Ellis...........................................
8.1 -- Opinion of Preston Gates & Ellis as to certain tax matters (see Exhibit
5.1).......................................................................
10.1++ -- Loan Agreement between Western PCS II Corporation and Northern Telecom
Inc., dated June 30, 1995..................................................
10.2++ -- PCS 1900 Project and Supply Agreement between Western PCS Corporation and
Northern Telecom Inc., dated June 30, 1995.................................
10.3++ -- Purchase Agreement between Motorola Nortel Communications Co. and General
Cellular Corporation, dated July 29, 1993..................................
10.4++ -- Loan Agreement among Western Wireless Corporation and The Toronto-Dominion
Bank, Barclays Bank, PLC, and Morgan Guaranty Trust Company of New York, as
Managing Agents for the Various Lenders, dated June 30, 1995...............
10.5++ -- First Amendment to Loan Agreement by and among Western Wireless
Corporation, The Toronto-Dominion Bank, Barclays Bank, PLC, and Morgan
Guaranty Trust Company of New York, as Managing Agents for the Various
Lenders, dated January 11, 1996............................................
10.6++ -- Supply Contract by and between Western PCS Corporation and Nokia
Telecommunications Inc., dated December 14, 1995...........................
</TABLE>
II-1
<PAGE> 160
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- ---------------------------------------------------------------------------
<S> <C> <C>
10.7++ -- Purchase and Sale Agreement, Nokia Mobile Phones, Inc. and Western Wireless
Corporation, dated November 10, 1995.......................................
10.8++ -- Western Wireless Corporation, 1994 Management Incentive Stock Option Plan,
approved, as adopted and amended, by Shareholders November 16, 1995,
together with form of Stock Option Agreement for offers thereunder.........
10.9++ -- Stockholders Agreement by and among Western Wireless Corporation and
certain of its shareholders, dated July 29, 1994...........................
10.10++ -- First Amendment to Stockholders Agreement by and among Western Wireless
Corporation and certain of its shareholders, Adding as a Party Western PCS
Corporation, dated November 30, 1994.......................................
10.11++ -- Waiver Agreement by and among Western Wireless Corporation, Western PCS
Corporation and certain of Western Wireless Corporation's shareholders,
dated November 30, 1994....................................................
10.12++ -- Waiver Agreement by and among Western Wireless Corporation, Western PCS
Corporation and certain of Western Wireless Corporation's shareholders,
dated February 15, 1996....................................................
10.13++ -- Voting Agreement by and among certain shareholders of Western Wireless
Corporation, dated July 29, 1994...........................................
10.14++ -- Voting Agreement by and among Western Wireless Corporation and certain of
its shareholders...........................................................
10.15++ -- Lease Agreement by and between WWC Holding Co., Inc., successor in interest
to MARKETS Cellular Limited Partnership, and WRC Properties, Inc., dated
May 1, 1994................................................................
10.16++ -- Lease Agreement by and between Western Wireless Corporation and Department
of Natural Resources, dated August 25, 1995................................
10.17++ -- First Amendment to Lease Agreement by and between Western Wireless
Corporation and Department of Natural Resources, dated February 28, 1996...
10.18++ -- Form of Cellular One Group License Agreement...............................
10.19++ -- Asset Purchase Agreement between Western PCS III License Corporation as
Buyer and GTE Mobilnet Incorporated as Seller, dated January 16, 1996......
10.20++ -- Purchase and Sale Agreement by and between Robert O. Tyler, Esq., as
Trustee, Seller, and GCC License Corporation, Purchaser, dated December 22,
1995.......................................................................
10.21++ -- Agreement for Purchase and Sale of Autoplex Cellular Equipment, Software
and Services by and among American Telephone and Telegraph Company, WWC
Holding Co., Inc., successor to MARKETS Cellular Limited Partnership and
MCII General Partnership, dated March 17, 1993.............................
10.22++ -- Agreement and Plan of Reorganization by and among Palouse Paging, Inc., the
Shareholders of 100% of the Stock of Palouse Paging, Inc., Western Paging I
Corporation and Western Wireless Corporation, dated February 5, 1996.......
10.23++ -- First Amendment to Agreement and Plan of Reorganization by and among
Western Paging I Corporation, the former Shareholders of 100% of the Stock
of Palouse Paging, Inc. and Western Wireless Corporation...................
10.24++ -- Agreement and Plan of Reorganization by and among Sawtooth Paging, Inc.,
the Shareholders of 52.93% of the Stock of Sawtooth Paging, Inc., Western
Paging II Corporation and Western Wireless Corporation, dated February 5,
1996.......................................................................
10.25++ -- Employment Agreement by and between John W. Stanton and Western Wireless
Corporation, dated March 12, 1996..........................................
10.26++ -- Employment Agreement by and between Robert R. Stapleton and Western
Wireless Corporation, dated March 12, 1996.................................
10.27++ -- Employment Agreement by and between Mikal J. Thomsen and Western Wireless
Corporation, dated March 12, 1996..........................................
10.28++ -- Employment Agreement by and between Theresa E. Gillespie and Western
Wireless Corporation, dated March 12, 1996.................................
</TABLE>
II-2
<PAGE> 161
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- ---------------------------------------------------------------------------
<S> <C> <C>
10.29++ -- Employment Agreement by and between Alan R. Bender and Western Wireless
Corporation, dated March 12, 1996..........................................
10.30++ -- Employment Agreement by and between Cregg B. Baumbaugh and Western Wireless
Corporation, dated March 12, 1996..........................................
10.31++ -- Form of Registrant's Restrictive Covenant and Confidentiality Agreement....
10.32++ -- Form of Director and Officer Indemnification Agreement.....................
10.33++ -- Western PCS Corporation Series A Preferred Stock Purchase Agreement among
Western Wireless Corporation, Western PCS Corporation and the Purchasers
listed therein, dated April 10, 1995.......................................
10.34++ -- Second Amendment to Loan Agreement by and among Western Wireless
Corporation, The Toronto-Dominion Bank, Barclays Bank, PLC, and Morgan
Guaranty Trust Company of New York, as Managing Agents for the Various
Lenders, dated.............................................................
10.35++ -- Subscription and Put and Call Agreement with respect to shares of Common
Stock of Western Wireless International Corporation, dated as of January 1,
1996.......................................................................
10.36++ -- PCS Block "C" Organization and Financing Agreement by and among Western PCS
BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS
Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation and
Providence Media Partners L.P. dated as of November 5, 1995................
10.37++ -- Limited Partnership Agreement by and between Cook Inlet PV/SS PCS Partners,
L.P. and Western PCS BTA I Corporation dated as of November 5, 1995........
10.38++ -- First Amendment to Block "C" Organization and Financing Agreement and Cook
Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement by and
among Western PCS BTA I Corporation, Western Wireless Corporation, Cook
Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS
Corporation and Providence Media Partners L.P. dated as of April 8, 1996...
10.39++ -- Amended and Restated Loan Agreement among Western Wireless Corporation and
The Toronto-Dominion Bank, Barclays Bank, PLC, and Morgan Guaranty Trust
Company of New York, as Managing Agents for the Various Lenders, dated May
6, 1996....................................................................
10.40 -- Second Amendment to Block "C" Organization and Financing Agreement and Cook
Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement by and
among Western PCS BTA I Corporation, Western Wireless Corporation, Cook
Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS
Corporation and Providence Media Partners L.P. dated as of June 27, 1996...
10.41 -- Third Amendment to Block "C" Organization and Financing Agreement and Cook
Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement and
First Amendment to Technical Services Agreement by and among Western PCS
BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS
Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation,
Providence Media Partners L.P. and Cook Inlet Western Wireless PV/SS PCS,
L.P., dated July 30, 1996..................................................
10.42 -- General Agreement for Purchase of Cellular Systems between Lucent
Technologies Inc. and Western Wireless Corporation, dated September 16,
1996.......................................................................
10.43 -- Amendment No. 1 to PCS 1900 Supply Agreement between Western PCS
Corporation and Northern Telecom Inc., dated July 25, 1996.................
10.44 -- Amendment No. 2 to PCS 1900 Supply Agreement between Western PCS
Corporation and Northern Telecom Inc., dated July 25, 1996.................
10.45 -- Agreement of Exchange Agent between Harris Trust Company of California and
Western Wireless Corporation, dated October 25, 1996.......................
</TABLE>
II-3
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- ---------------------------------------------------------------------------
<S> <C> <C>
10.46 -- Purchase Agreement between Western Wireless Corporation and Goldman, Sachs
& Co., Donaldson, Lufkin & Jenrette Securities Corporation, Salomon
Brothers Inc and Toronto Dominion Securities (USA) Inc., dated October 18,
1996.......................................................................
10.47 -- Exchange and Registration Rights Agreement between Western Wireless
Corporation and Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette
Securities Corporation, Salomon Brothers Inc and Toronto Dominion
Securities (USA) Inc., dated October 24, 1996..............................
12.1 -- Computation of Ratio of Earnings to Fixed Charges..........................
21++ -- List of material subsidiaries..............................................
23.1 -- Consent of Arthur Andersen LLP.............................................
23.2 -- Consent of Preston Gates & Ellis (see Exhibit 5.1).........................
24.1 -- Power of Attorney (See II-6)...............................................
25.1 -- Statement of Eligibility of Trustee........................................
99.1 -- Form of Letter of Transmittal for 10 1/2% Senior Subordinated Notes Due
2007.......................................................................
</TABLE>
- ---------------
** Incorporated herein by reference to the exhibit filed with the Company's
Registration Statement on Form S-1 (Commission File No. 333-2688).
++ Incorporated herein by reference to the exhibit filed with the Company's
Registration Statement on Form S-1 (Commission File No. 333-2432).
(b) Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts and Reserves (see
F-26)
ITEM 17. UNDERTAKINGS
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 Securities Act and will be governed by the
adjudication of such issue.
With respect to the Securities registered on this form pursuant to Rule
415, the undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
II-4
<PAGE> 163
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized on this 25th day of October, 1996.
WESTERN WIRELESS CORPORATION
By /s/ ALAN R. BENDER
------------------------------------
Alan R. Bender
Senior Vice President, General
Counsel
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, John W. Stanton and Alan
R. Bender or any of them, with full power to act alone, his true and lawful
attorneys-in-fact, with full power of substitution, and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact or any of them may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on October 25, 1996 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ---------------------------------------------
<C> <S>
/s/ JOHN W. STANTON Chairman, Chief Executive Officer and
- --------------------------------------------- Director (Principal Executive Officer)
John W. Stanton
/s/ THERESA E. GILLESPIE Chief Financial Officer (Principal Financial
- --------------------------------------------- Officer)
Theresa E. Gillespie
/s/ NASTASHIA S. PRESS Principal Accounting Officer
- ---------------------------------------------
Nastashia S. Press
/s/ DAVID A. BAYER Director
- ---------------------------------------------
David A. Bayer
/s/ JOHN L. BUNCE, JR. Director
- ---------------------------------------------
John L. Bunce, Jr.
/s/ MITCHELL R. COHEN Director
- ---------------------------------------------
Mitchell R. Cohen
/s/ JONATHAN M. NELSON Director
- ---------------------------------------------
Jonathan M. Nelson
/s/ TERENCE M. O'TOOLE Director
- ---------------------------------------------
Terence M. O'Toole
</TABLE>
II-6
<PAGE> 165
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
EXHIBITS
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
WESTERN WIRELESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 166
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------ --------
<S> <C> <C> <C>
3.1++ -- Amended and Restated Articles of Incorporation of the
Registrant........................................................
3.2++ -- Bylaws of the Registrant..........................................
4.1 -- Form of Indenture relating to the 10 1/2% Senior Subordinated
Notes Due 2007....................................................
4.2** -- Indenture between Western Wireless Corporation and Harris Trust
Company of California, dated May 22, 1996.........................
5.1 -- Opinion of Preston Gates & Ellis..................................
8.1 -- Opinion of Preston Gates & Ellis as to certain tax matters (See
Exhibit 5.1)......................................................
10.1++ -- Loan Agreement between Western PCS II Corporation and Northern
Telecom Inc., dated June 30, 1995.................................
10.2++ -- PCS 1900 Project and Supply Agreement between Western PCS
Corporation and Northern Telecom Inc., dated June 30, 1995........
10.3++ -- Purchase Agreement between Motorola Nortel Communications Co. and
General Cellular Corporation, dated July 29, 1993.................
10.4++ -- Loan Agreement among Western Wireless Corporation and The
Toronto-Dominion Bank, Barclays Bank, PLC, and Morgan Guaranty
Trust Company of New York, as Managing Agents for the Various
Lenders, dated June 30, 1995......................................
10.5++ -- First Amendment to Loan Agreement by and among Western Wireless
Corporation, The Toronto-Dominion Bank, Barclays Bank, PLC, and
Morgan Guaranty Trust Company of New York, as Managing Agents for
the Various Lenders, dated January 11, 1996.......................
10.6++ -- Supply Contract by and between Western PCS Corporation and Nokia
Telecommunications Inc., dated December 14, 1995..................
10.7++ -- Purchase and Sale Agreement, Nokia Mobile Phones, Inc. and Western
Wireless Corporation, dated November 10, 1995.....................
10.8++ -- Western Wireless Corporation, 1994 Management Incentive Stock
Option Plan, approved, as adopted and amended, by Shareholders
November 16, 1995, together with form of Stock Option Agreement
for offers thereunder.............................................
10.9++ -- Stockholders Agreement by and among Western Wireless Corporation
and certain of its shareholders, dated July 29, 1994..............
10.10++ -- First Amendment to Stockholders Agreement by and among Western
Wireless Corporation and certain of its shareholders, Adding as a
Party Western PCS Corporation, dated November 30, 1994............
10.11++ -- Waiver Agreement by and among Western Wireless Corporation,
Western PCS Corporation and certain of Western Wireless
Corporation's shareholders, dated November 30, 1994...............
10.12++ -- Waiver Agreement by and among Western Wireless Corporation,
Western PCS Corporation and certain of Western Wireless
Corporation's shareholders, dated February 15, 1996...............
10.13++ -- Voting Agreement by and among certain shareholders of Western
Wireless Corporation, dated July 29, 1994.........................
10.14++ -- Voting Agreement by and among Western Wireless Corporation and
certain of its shareholders.......................................
10.15++ -- Lease Agreement by and between WWC Holding Co., Inc., successor in
interest to MARKETS Cellular Limited Partnership, and WRC
Properties, Inc., dated May 1, 1994...............................
10.16++ -- Lease Agreement by and between Western Wireless Corporation and
Department of Natural Resources, dated August 25, 1995............
</TABLE>
<PAGE> 167
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------ --------
<S> <C> <C> <C>
10.17++ -- First Amendment to Lease Agreement by and between Western Wireless
Corporation and Department of Natural Resources, dated February
28, 1996..........................................................
10.18++ -- Form of Cellular One Group License Agreement......................
10.19++ -- Asset Purchase Agreement between Western PCS III License
Corporation as Buyer and GTE Mobilnet Incorporated as Seller,
dated January 16, 1996............................................
10.20++ -- Purchase and Sale Agreement by and between Robert O. Tyler, Esq.,
as Trustee, Seller, and GCC License Corporation, Purchaser, dated
December 22, 1995.................................................
10.21++ -- Agreement for Purchase and Sale of Autoplex Cellular Equipment,
Software and Services by and among American Telephone and
Telegraph Company, WWC Holding Co., Inc., successor to MARKETS
Cellular Limited Partnership and MCII General Partnership, dated
March 17, 1993....................................................
10.22++ -- Agreement and Plan of Reorganization by and among Palouse Paging,
Inc., the Shareholders of 100% of the Stock of Palouse Paging,
Inc., Western Paging I Corporation and Western Wireless
Corporation, dated February 5, 1996...............................
10.23++ -- First Amendment to Agreement and Plan of Reorganization by and
among Western Paging I Corporation, the former Shareholders of
100% of the Stock of Palouse Paging, Inc. and Western Wireless
Corporation.......................................................
10.24++ -- Agreement and Plan of Reorganization by and among Sawtooth Paging,
Inc., the Shareholders of 52.93% of the Stock of Sawtooth Paging,
Inc., Western Paging II Corporation and Western Wireless
Corporation, dated February 5, 1996...............................
10.25++ -- Employment Agreement by and between John W. Stanton and Western
Wireless Corporation, dated March 12, 1996........................
10.26++ -- Employment Agreement by and between Robert R. Stapleton and
Western Wireless Corporation, dated March 12, 1996................
10.27++ -- Employment Agreement by and between Mikal J. Thomsen and Western
Wireless Corporation, dated March 12, 1996........................
10.28++ -- Employment Agreement by and between Theresa E. Gillespie and
Western Wireless Corporation, dated March 12, 1996................
10.29++ -- Employment Agreement by and between Alan R. Bender and Western
Wireless Corporation, dated March 12, 1996........................
10.30++ -- Employment Agreement by and between Cregg B. Baumbaugh and Western
Wireless Corporation, dated March 12, 1996........................
10.31++ -- Form of Registrant's Restrictive Covenant and Confidentiality
Agreement.........................................................
10.32++ -- Form of Director and Officer Indemnification Agreement............
10.33++ -- Western PCS Corporation Series A Preferred Stock Purchase
Agreement among Western Wireless Corporation, Western PCS
Corporation and the Purchasers listed therein, dated April 10,
1995..............................................................
10.34++ -- Second Amendment to Loan Agreement by and among Western Wireless
Corporation, The Toronto-Dominion Bank, Barclays Bank, PLC, and
Morgan Guaranty Trust Company of New York, as Managing Agents for
the Various Lenders, dated........................................
10.35++ -- Subscription and Put and Call Agreement with respect to shares of
Common Stock of Western Wireless International Corporation, dated
as of January 1, 1996.............................................
</TABLE>
<PAGE> 168
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------ --------
<S> <C> <C> <C>
10.36++ -- PCS Block "C" Organization and Financing Agreement by and among
Western PCS BTA I Corporation, Western Wireless Corporation, Cook
Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications,
Inc., SSPCS Corporation and Providence Media Partners L.P. dated
as of November 5, 1995............................................
10.37++ -- Limited Partnership Agreement by and between Cook Inlet PV/SS PCS
Partners, L.P. and Western PCS BTA I Corporation dated as of
November 5, 1995..................................................
10.38++ -- First Amendment to Block "C" Organization and Financing Agreement
and Cook Inlet, Western Wireless PV/SS PCS, L.P. Limited
Partnership Agreement by and among Western PCS BTA I Corporation,
Western Wireless Corporation, Cook Inlet PV/SS PCS Partners L.P.,
Cook Inlet Telecommunications, Inc., SSPCS Corporation and
Providence Media Partners L.P. dated as of April 8, 1996..........
10.39++ -- Amended and Restated Loan Agreement among Western Wireless
Corporation and The Toronto-Dominion Bank, Barclays Bank, PLC, and
Morgan Guaranty Trust Company of New York, as Managing Agents for
the Various Lenders, dated May 6, 1996............................
10.40 -- Second Amendment to Block "C" Organization and Financing Agreement
and Cook Inlet Western Wireless PV/SS PCS, L.P. Limited
Partnership Agreement by and among Western PCS BTA I Corporation,
Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P.,
Cook Inlet Telecommunications, Inc., SSPCS Corporation and
Providence Media Partners L.P. dated as of June 27, 1996..........
10.41 -- Third Amendment to Block "C" Organization and Financing Agreement
and Cook Inlet Western Wireless PV/SS PCS, L.P. Limited
Partnership Agreement and First Amendment to Technical Services
Agreement by and among Western PCS BTA I Corporation, Western
Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook
Inlet Telecommunications, Inc., SSPCS Corporation, Providence
Media Partners L.P. and Cook Inlet Western Wireless PV/SS PCS,
L.P., dated as of July 30, 1996...................................
10.42 -- General Agreement for Purchase of Cellular Systems between Lucent
Technologies Inc. and Western Wireless Corporation, dated
September 16, 1996................................................
10.43 -- Amendment No. 1 to PCS 1900 Supply Agreement between Western PCS
Corporation and Northern Telecom Inc., dated July 25, 1996........
10.44 -- Amendment No. 2 to PCS 1900 Supply Agreement between Western PCS
Corporation and Northern Telecom Inc., dated July 25, 1996........
10.45 -- Agreement of Exchange Agent between Harris Trust Company of
California and Western Wireless Corporation, dated October 25,
1996..............................................................
10.46 -- Purchase Agreement between Western Wireless Corporation, Goldman,
Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation,
Salomon Brothers Inc and Toronto Dominion Securities (USA) Inc.,
dated October 23, 1996............................................
10.47 -- Exchange and Registration Rights Agreement between Western
Wireless Corporation, Goldman, Sachs & Co., Donaldson, Lufkin &
Jenrette Securities Corporation, Salomon Brothers Inc and Toronto
Dominion Securities (USA) Inc., dated October 24, 1996............
12.1 -- Computation of Ratio of Earnings to Fixed Charges.................
21++ -- List of material subsidiaries.....................................
23.1 -- Consent of Arthur Andersen LLP....................................
23.2 -- Consent of Preston Gates & Ellis (see Exhibit 5.1)................
</TABLE>
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------ --------
<S> <C> <C> <C>
24.1 -- Power of Attorney (See II-6)......................................
25.1 -- Statement of Eligibility of Trustee...............................
99.1 -- Form of Letter of Transmittal for 10 1/2% Senior Subordinated
Notes Due 2007....................................................
</TABLE>
- ---------------
** Incorporated herein by reference to the exhibit filed with the Company's
Registration Statement No. 333-2688.
++ Incorporated herein by reference to the exhibit filed with the Company's
Registration Statement on Form S-1 (Commission File No. 333-2432).
<PAGE> 170
(ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS)
$200,000,000
LOGO
WESTERN WIRELESS CORPORATION
10 1/2% SENIOR SUBORDINATED NOTES DUE 2007
------------------------
THE 10 1/2% SENIOR SUBORDINATED NOTES DUE 2007 ARE SENIOR UNSECURED
OBLIGATIONS OF THE COMPANY AND ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE PRIOR
PAYMENT IN FULL OF ALL SENIOR INDEBTEDNESS AND SENIOR IN RIGHT OF PAYMENT TO ANY
CURRENT OR FUTURE SUBORDINATED INDEBTEDNESS OF THE COMPANY. IN ADDITION, ALL
EXISTING AND FUTURE INDEBTEDNESS AND OTHER LIABILITIES OF THE COMPANY'S
SUBSIDIARIES WILL BE EFFECTIVELY SENIOR IN RIGHT OF PAYMENT TO THE NOTES. THE
COMPANY HAS NOT ISSUED, AND DOES NOT HAVE ANY FIRM ARRANGEMENT TO ISSUE, ANY
SIGNIFICANT INDEBTEDNESS TO WHICH THE NOTES WOULD BE SENIOR. AT JUNE 30, 1996,
SENIOR INDEBTEDNESS AGGREGATED APPROXIMATELY $243.8 MILLION. THE NOTES RANK PARI
PASSU WITH THE COMPANY'S 10 1/2% SENIOR SUBORDINATED NOTES DUE 2006.
The Notes are redeemable at the option of the Company under certain
circumstances described herein. See "Description of the Notes."
SEE "RISK FACTORS" BEGINNING ON PAGE 17 HEREOF FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus has been prepared for and is to be used by Goldman, Sachs &
Co. in connection with offers and sales of the Exchange Notes related to
market-making transactions, at prevailing market prices, related prices or
negotiated prices. The Company will not receive any of the proceeds of such
sales. Goldman, Sachs & Co. may act as principal or agent in such transactions.
The closing of the Company's Exchange Offer resulting in the issue of the
Exchange Notes occurred on . See "Plan of Distribution."
GOLDMAN, SACHS & CO.
------------------------
The date of this Prospectus is October , 1996.
<PAGE> 171
(ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS)
PLAN OF DISTRIBUTION
This Prospectus may be used by Goldman Sachs in connection with offers and
sales related to market-making transactions in the Exchange Notes. Goldman Sachs
may act as principal or agent in such transactions, including as agent for the
counterparty when acting as principal or as agent for both counterparties, and
may receive compensation in the form of discounts and commissions, including
from both counterparties when they act as agent for both. Such sales will be
made at prevailing market prices at the time of sale, at prices related thereto
or at negotiated prices.
For a description of certain relationships and transactions between Goldman
Sachs and their affiliates and the Company, see "Management," "Certain
Transactions" and "Principal Shareholders."
The Company has been advised by Goldman Sachs that, subject to applicable
laws and regulations, Goldman Sachs currently intend to make a market in the
Exchange Notes. However, they are not obligated to do so and any market-making
may be discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act. There can be no assurance that an active trading market will
develop or be sustained. See "Risk Factors -- Absence of Prior Market for Notes;
Possible Volatility of Note Price."
Goldman Sachs may not confirm sales to any accounts over which they
exercise discretionary authority without the prior specific written approval by
the customer.
Settlement for the Notes will be made in immediately available funds, and
all secondary trading will settle in immediately available funds.
The Company has agreed to indemnify Goldman Sachs against certain
liabilities including liabilities under the Securities Act.
113
<PAGE> 172
(ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS)
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... 2
Prospectus Summary......................... 5
Risk Factors............................... 17
The Exchange Offer......................... 28
The Company................................ 35
Use of Proceeds............................ 35
Capitalization............................. 36
Selected Consolidated Financial Data....... 37
Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................... 39
Business................................... 51
Management................................. 76
Principal Shareholders..................... 82
Certain Transactions....................... 85
Description of Senior Subordinated Notes... 88
Description of Indebtedness................ 109
Legal Matters.............................. 112
Experts.................................... 112
Plan of Distribution....................... 113
Index to Consolidated Financial
Statements............................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$200,000,000
WESTERN WIRELESS
CORPORATION
10 1/2% SENIOR SUBORDINATED
NOTES DUE 2007
------------------
LOGO
------------------
GOLDMAN, SACHS & CO.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 1
EXHIBIT 4.1
================================================================================
Western Wireless Corporation
TO
Harris Trust Company of California
Trustee
________________
Indenture
Dated as of October 24, 1996
________________
$200,000,000
10-1/2% Senior Subordinated Notes Due 2007
================================================================================
<PAGE> 2
.....................................
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of October 24, 1996
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
Section 310 (a) (1) .......................................... 609
(a) (2) .......................................... 609
(a) (3) .......................................... Not
Applicable
(a) (4) .......................................... Not
Applicable
(b) .......................................... 608
610
Section 311 (a) .......................................... 613 (a)
(b) .......................................... 613 (b)
(b) (2) .......................................... 703 (a) (2)
703 (b)
Section 312 (a) .......................................... 701
702 (a)
(b) .......................................... 702 (b)
(c) .......................................... 702 (c)
Section 313 (a) .......................................... 703 (a)
(b) .......................................... 703 (b)
(c) .......................................... 703 (a)
703 (b)
(d) .......................................... 703 (c)
Section 314 (a) .......................................... 704
(b) .......................................... Not
Applicable
(c) (1) .......................................... 102
(c) (2) .......................................... 102
(c) (3) .......................................... Not
Applicable
(d) .......................................... Not
Applicable
(e) .......................................... 102
Section 315 (a) .......................................... 601 (a)
(b) .......................................... 602
703 (a) (6)
(c) .......................................... 601 (b)
(d) .......................................... 601 (c)
(d) (1) .......................................... 601 (a) (1)
(d) (2) .......................................... 601 (c) (2)
(d) (3) .......................................... 601 (c) (3)
(e) .......................................... 514
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
Section 316 (a) ............................................. 101
(a) (1) (A) ............................................. 502
512
(a) (1) (B) ............................................. 513
(a) (2) ............................................. Not
Applicable
(b) ............................................. 508
Section 317 (a) (1) ............................................. 503
(a) (2) ............................................. 504
(b) ............................................. 1003
Section 318 (a) ............................................. 107
</TABLE>
______________
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
-ii-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
ARTICLE ONE
Definitions and Other Provisions
of General Application
<TABLE>
<S> <C>
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2006 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Additional Step-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate and Related Person Proceeds . . . . . . . . . . . . . . . . . . . . 3
Agent Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Applicable Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Asset Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Lease Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Income Tax Expense . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . 6
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Cumulative EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Cumulative Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . 6
Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Designated Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 7
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exchange and Registration Rights Agreement . . . . . . . . . . . . . . . . . . 7
Exchange Registration Statement . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Incur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Indebtedness to EBITDA Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Initial Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Initial Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Initial Regulation S Securities . . . . . . . . . . . . . . . . . . . . . . . 10
Interest Hedge Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Make-Whole Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Net Available Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
NORTEL Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Offer to Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Original Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
pari passu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Payment Blockage Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Permitted Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Permitted Joint Venture Investment . . . . . . . . . . . . . . . . . . . . . . 16
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Purchase Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Purchase Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Qualified Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Qualified Capital Stock Proceeds . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
Redeemable Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Registered Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Registration Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Regulation S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Regulation S Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Regulation S Global Security . . . . . . . . . . . . . . . . . . . . . . . . . 19
Regulation S Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Regulation S Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Reinvestment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Related Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Resale Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . 19
Restricted Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Restricted Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Restricted Securities Certificate . . . . . . . . . . . . . . . . . . . . . . 20
Restricted Securities Legend . . . . . . . . . . . . . . . . . . . . . . . . . 20
Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Sale and Leaseback Transaction . . . . . . . . . . . . . . . . . . . . . . . . 20
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Securities Act Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Securities Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Security Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Security Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Senior Nonmonetary Default . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Senior Payment Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Special Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Statistical Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Step-Down Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Step-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Successor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 23
Unrestricted Securities Certificate . . . . . . . . . . . . . . . . . . . . . 23
Unrestricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Voting Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Wholly Owned Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . 24
Wireless Communications Business . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . 24
SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . 25
SECTION 104. Acts of Holders; Record Date . . . . . . . . . . . . . . . . . . . . 26
SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . . 27
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . 28
SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . . . . . 28
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ARTICLE TWO
Security Forms
<TABLE>
<S> <C> <C>
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . 34
SECTION 204. Form of Trustee's Certificate of Authentication . . . . . . . . . . . 39
</TABLE>
ARTICLE THREE
The Securities
<TABLE>
<S> <C> <C>
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . . 41
SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 305. Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 306. Registration, Registration of Transfer and Exchange Generally;
Certain Transfers and Exchanges; Securities Act Legends . . . . . . . 45
SECTION 307. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . 51
SECTION 308. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . 52
SECTION 309. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 310. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 311. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
ARTICLE FOUR
Satisfaction and Discharge
<TABLE>
<S> <C> <C>
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . 54
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
ARTICLE FIVE
Remedies
<TABLE>
<S> <C> <C>
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . 59
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . 60
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . 61
SECTION 505. Trustee May Enforce Claims Without Possession of Securities . . . . . 62
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . . . . . 62
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest. . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . 64
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . 64
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . 64
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . 66
</TABLE>
ARTICLE SIX
The Trustee
<TABLE>
<S> <C> <C>
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . 66
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . . . . . 69
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . 69
SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . . . . . . 70
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . 70
SECTION 610. Resignation and Removal; Appointment of Successor . . . . . . . . . . 71
SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . 72
SECTION 612. Merger, Conversion, Consolidation or Succession to Business . . . . . 73
SECTION 613. Preferential Collection of Claims Against Company . . . . . . . . . . 73
SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . 73
</TABLE>
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
<TABLE>
<S> <C> <C>
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . . . . . 76
SECTION 702. Preservation of Information; Communications to Holders . . . . . . . 76
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
<TABLE>
<S> <C> <C>
SECTION 801. Company May Consolidate, Etc. Only on Certain Terms . . . . . . . . . 77
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
ARTICLE NINE
Supplemental Indentures
<TABLE>
<S> <C> <C>
SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . . . . . 79
SECTION 902. Supplemental Indentures with Consent of Holders . . . . . . . . . . . 80
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . 81
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . 81
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . 82
SECTION 906. Reference in Securities to Supplemental Indentures . . . . . . . . . 82
SECTION 907. Notice of Supplemental Indenture . . . . . . . . . . . . . . . . . . 82
</TABLE>
ARTICLE TEN
Covenants
<TABLE>
<S> <C> <C>
SECTION 1001. Payment of Principal, Premium and Interest . . . . . . . . . . . . . 82
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . 83
SECTION 1003. Money for Security Payments to be Held in Trust . . . . . . . . . . . 83
SECTION 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 1005. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 1006. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . 85
SECTION 1007. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 1008. Limitation on Consolidated Indebtedness . . . . . . . . . . . . . . . 86
SECTION 1009. Limitation on Preferred Stock of Restricted Subsidiaries . . . . . . 89
SECTION 1010. Limitation on Certain Indebtedness . . . . . . . . . . . . . . . . . 89
SECTION 1011. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . 90
SECTION 1012. Limitations Concerning Distributions and Transfers
By Restricted Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 92
SECTION 1013. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 1014. Limitation on Transactions with Affiliates and Related Persons . . . 94
SECTION 1015. Limitation on Certain Asset Dispositions . . . . . . . . . . . . . . 94
SECTION 1016. Limitation on Issuances and Sales of Capital Stock
of Wholly Owned Restricted Subsidiaries . . . . . . . . . . . . . . . 97
SECTION 1017. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 1018. Statement by Officers as to Default; Compliance Certificates . . . . 100
SECTION 1019. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . 101
SECTION 1020. Provision of Financial Information . . . . . . . . . . . . . . . . . 101
</TABLE>
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<PAGE> 11
ARTICLE ELEVEN
Redemption of Securities
<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 1102. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . 102
SECTION 1104. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . 102
SECTION 1105. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . 103
SECTION 1107. Securities Payable on Redemption Date . . . . . . . . . . . . . . . . 104
SECTION 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . 104
</TABLE>
ARTICLE TWELVE
Subordination of Securities
<TABLE>
<S> <C> <C>
SECTION 1201. Securities Subordinate to Senior Indebtedness . . . . . . . . . . . . 104
SECTION 1202. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . . . . . . 105
SECTION 1203. No Payment When Senior Indebtedness in Default . . . . . . . . . . . 107
SECTION 1204. Payment Permitted If No Default . . . . . . . . . . . . . . . . . . . 108
SECTION 1205. Subrogation to Rights of Holders of Senior Indebtedness . . . . . . . 108
SECTION 1206. Provisions Solely to Define Relative Rights . . . . . . . . . . . . . 109
SECTION 1207. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . 109
SECTION 1208. No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . 109
SECTION 1209. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 1210. Reliance on Judicial Order or Certificate of Liquidating Agent . . . 111
SECTION 1211. Trustee Not Fiduciary for Holders of Senior Debt . . . . . . . . . . 111
SECTION 1212. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights . . . . . . . . . . . . . . . . . . 112
SECTION 1213. Article Applicable to Paying Agents . . . . . . . . . . . . . . . . . 112
SECTION 1214. Defeasance of this Article Twelve . . . . . . . . . . . . . . . . . . 112
</TABLE>
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<PAGE> 12
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
<TABLE>
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<S> <C>
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance . . . . 113
SECTION 1302. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 1303. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 1304. Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . 114
SECTION 1305. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions . . . . . . . . . . . . . . . 116
SECTION 1306. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
ANNEXES
ANNEX A Form of Regulation S Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
ANNEX B Form of Restricted Securities Certificate . . . . . . . . . . . . . . . . . . . . . . B-1
ANNEX C Form of Unrestricted Securities Certificate . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
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<PAGE> 13
INDENTURE, dated as of October 24, 1996, between Western
Wireless Corporation, a corporation duly organized and existing under the laws
of the State of Washington (herein called the "Company"), having its principal
office at 2001 NW Sammamish Road, Issaquah, Washington 98027, and Harris Trust
Company of California, a trust company duly organized and existing under the
laws of the State of California, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
its 10-1/2% Senior Subordinated Notes Due 2007 (the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
<PAGE> 14
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles (whether or not such is indicated
herein), and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such accounting
principles as are generally accepted at the date of such computation;
(4) unless otherwise specifically set forth herein, all
calculations or determinations of a Person shall be performed or made
on a consolidated basis in accordance with generally accepted
accounting principles but shall not include the accounts of
Unrestricted Subsidiaries, except to the extent of dividends and
distributions actually paid to the Company or one of its Wholly Owned
Restricted Subsidiaries; and
(5) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in
that Article.
"2006 Notes" means the 10-1/2% Senior Subordinated Notes Due
2006 of the Company issued pursuant to the Indenture, dated as of May 22, 1996,
between the Company and the Trustee.
"Act," when used with respect to any Holder, has the meaning
specified in Section 104.
"Additional Step-Up" has the meaning specified in the form of
the Securities set forth in Section 202.
"Administrative Agent" means the Person or Persons designated
as such under the Credit Facility.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with re-
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<PAGE> 15
spect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Affiliate and Related Person Proceeds" means any cash payment
received by the Company or any Restricted Subsidiary from any Affiliate or
Related Person from any transaction permitted under Section 1014.
"Agent Member" means any member of, or participant in, the
Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, Euroclear and Cedel,
in each case to the extent applicable to such transaction and as in effect from
time to time.
"Asset Disposition" by any Person means any transfer,
conveyance, sale, lease or other disposition by such Person or any of its
Restricted Subsidiaries (including a consolidation or merger or other sale of
any such Restricted Subsidiaries with, into or to another Person in a
transaction in which such Restricted Subsidiary ceases to be a Restricted
Subsidiary, but excluding a disposition by a Subsidiary of such Person to such
Person or a Wholly Owned Restricted Subsidiary of such Person or by such Person
to a Wholly Owned Restricted Subsidiary of such Person) of (i) shares of
Capital Stock (other than directors' qualifying shares) or other ownership
interests of a Subsidiary of such Person, (ii) substantially all of the assets
of such Person or any of its Subsidiaries representing a division or line of
business or (iii) other assets or rights of such Person or any of its
Subsidiaries having a Fair Market Value greater than $100,000.
"Authenticating Agent" means any Person authorized by the
Trustee to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors,
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<PAGE> 16
to be in full force and effect on the date of such certification and delivered
to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York City,
the State of Washington or the State of California are authorized or obligated
by law or executive order to close.
"Capital Lease Obligation" means that portion of any
obligation of a Person as lessee under a lease which is required to be
capitalized on the balance sheet of such lessee in accordance with generally
accepted accounting principles.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of
corporate stock of such Person.
"Cedel" means Cedel Bank, S.A. (or any successor securities
clearing agency).
"Change of Control" has the meaning specified in Section 1017.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its
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<PAGE> 17
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated Income Tax Expense" of any Person means for any
period the provision for income taxes of such Person and its Consolidated
Restricted Subsidiaries for such period.
"Consolidated Indebtedness" of any Person means at any date
the Indebtedness of such Person and its Consolidated Restricted Subsidiaries at
such date.
"Consolidated Interest Expense" of any Person means for any
period the interest expense included in an income statement (taking into
account the effect of any Interest Hedge Agreements but without deduction of
interest income) of such Person and its Consolidated Restricted Subsidiaries
for such period, including without limitation or duplication (or, to the extent
not so included, with the addition of), (i) the portion of any rental
obligation in respect of any Capital Lease Obligation allocable to interest
expense in accordance with generally accepted accounting principles; (ii) the
amortization of Indebtedness discounts; (iii) any payments or fees with respect
to letters of credit, bankers acceptances or similar facilities; (iv) fees with
respect to Interest Hedge Agreements; (v) the portion of any rental obligations
in respect of any Sale and Leaseback Transaction allocable to interest expense
(determined as if such were treated as a Capital Lease Obligation); and (vi)
Preferred Stock dividends declared and payable in cash.
"Consolidated Net Income" of any Person means for any period
the net income (or loss) of such Person for such period determined on a
consolidated basis in accordance with generally accepted accounting principles;
provided that there shall be excluded therefrom (to the extent included and
without duplication) (i) the net income (or loss) of any Person acquired by
such Person or a Restricted Subsidiary of such Person after the date of this
Indenture in a pooling-of-interests transaction for any period prior to the
date of such transaction, (ii) the net income (or loss) of any Person that is
not a Consolidated Restricted Subsidiary of such Person except to the extent of
the amount of dividends or other distributions actually paid to such Person by
such other Person during such period, (iii) gains or losses from sales of
assets other than sales of assets acquired and held for resale in the ordinary
course of business and (iv) all extraordinary gains and extraordinary losses.
-5-
<PAGE> 18
"Consolidated Net Worth" of any Person means the consolidated
shareholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles; provided, that, with
respect to the Company, adjustments following the date of the Indenture to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person and its Subsidiaries shall not be given effect to.
"Consolidated Restricted Subsidiary" of any Person means all
other Persons that would be accounted for as consolidated Persons in such
Person's financial statements in accordance with generally accepted accounting
principles other than Unrestricted Subsidiaries.
"Corporate Trust Office" means the principal office of the
Trustee in Los Angeles, California at which at any particular time its
corporate trust business shall be administered or such other location
designated by the Trustee in a report pursuant to Section 703(a).
"corporation" means a corporation, association, company,
joint-stock company, partnership or business trust.
"Credit Facility" means the Loan Agreement, dated as of May 6,
1996, among the Company, The Toronto-Dominion Bank, Barclays Bank, PLC and The
Morgan Guaranty Trust Company of New York, as Managing Agents, and the other
financial institutions named therein, as it may be amended, supplemented,
restated or otherwise modified from time to time.
"Cumulative EBITDA" means EBITDA of the Company and its
Consolidated Restricted Subsidiaries for the period beginning on the first day
of the fiscal quarter immediately following the date of this Indenture, through
and including the end of the last fiscal quarter preceding the date of any
proposed Restricted Payment.
"Cumulative Interest Expense" means the total amount of
Consolidated Interest Expense of the Company and its Consolidated Restricted
Subsidiaries for the period beginning on the first day of the fiscal quarter
immediately following the date of this Indenture, through and including the end
of the last fiscal quarter preceding the date of any proposed Restricted
Payment.
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<PAGE> 19
"Defaulted Interest" has the meaning specified in Section 308.
"Depositary" means a clearing agency registered under the
Exchange Act that is designated to act as Depositary for the Securities until a
successor Depositary shall have become such pursuant to the applicable
provisions of the Indenture, and thereafter "Depositary" shall mean such
successor Depositary. The Depositary initially is DTC.
"Designated Senior Indebtedness" means the Indebtedness under
the Credit Facility.
"DTC" means The Depository Trust Company, a New York
corporation.
"EBITDA" of any Person means for any period the Consolidated
Net Income for such period increased by the sum of (i) Consolidated Interest
Expense of such Person for such period, plus (ii) Consolidated Income Tax
Expense of such Person for such period, plus (iii) the consolidated
depreciation and amortization expense included in the income statement of such
Person and its Consolidated Restricted Subsidiaries for such period, plus (iv)
all other non-cash charges and expenses that were deducted in determining
Consolidated Net Income for such period, minus (v) all non-cash revenues and
gains to the extent included in Consolidated Net Income for such period.
"Euroclear" means the Euroclear Clearance System (or any
successor securities clearing agency).
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" refers to the Securities Exchange Act of 1934
as it may be amended and any successor act thereto.
"Exchange Offer" means an offer made pursuant to an effective
registration statement under the Securities Act by the Company to exchange
securities substantially identical to Outstanding Securities (except for the
differences provided for herein) for Outstanding Securities.
"Exchange and Registration Rights Agreement" means the
Exchange and Registration Rights Agreement, dated as of October 24, 1996,
between the Company and Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette
Securities Corporation,
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<PAGE> 20
Salomon Brothers Inc and Toronto Dominion Securities (USA) Inc., as such
agreement may be amended from time to time.
"Exchange Registration Statement" means a registration
statement of the Company under the Securities Act registering Exchange
Securities for distribution pursuant to the Exchange Offer.
"Exchange Securities" means the Securities issued pursuant to
the Exchange Offer or sold pursuant to the Resale Registration Statement and
their Successor Securities.
"Expiration Date" has the meaning specified in the definition
of Offer to Purchase.
"Fair Market Value" means, with respect to any assets or
Person, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value will be determined (i) if such Person or assets has a Fair Market
Value of less than $ 5 million, by any officer of the Company and evidenced by
an Officers' Certificate, dated within 30 days of the relevant transaction, or
(ii) if such Person or assets has a Fair Market Value of $5 million or more, by
a majority of the Board of Directors of the Company and evidenced by a Board
Resolution, dated within 30 days of the relevant transaction
"Global Security" means a Security that evidences all or part
of the Securities of any series and bears the applicable legend set forth in
Section 202.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing any Indebtedness of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including, without limitation, any obligation of such Person, (i) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (ii) to purchase property,
securities or services for the purpose of assuring the holder of such
Indebtedness of the payment of such Indebtedness or (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have
meanings correlative to the foregoing); provided, however, that the Guaranty by
any
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<PAGE> 21
Person shall not include endorsements by such Person for collection or deposit,
in either case, in the ordinary course of business.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, Guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to
generally accepted accounting principles or otherwise, of any such Indebtedness
or other obligation on the balance sheet of such Person (and "Incurrence,"
"Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the
foregoing); provided, however, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such
time becoming Indebtedness shall not be deemed an Incurrence of such
Indebtedness.
"Indebtedness" means (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such
Person and whether or not contingent, (i) every obligation of such Person for
money borrowed, (ii) every obligation of such Person evidenced by bonds,
debentures, notes or similar instruments, including obligations Incurred in
connection with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business), (v) every
Capital Lease Obligation of such Person, (vi) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of
determination, (vii) every obligation to pay rent or other payment amounts of
such Person with respect to any Sale and Leaseback Transaction to which such
Person is a party, (viii) every obligation of the type referred to in Clauses
(i) through (vii) of another Person and all dividends of another Person the
payment of which, in either case, such Person has Guaranteed or is responsible
or liable, directly or indirectly, as obligor, Guarantor or otherwise and (ix)
the liquidation value of Preferred Stock issued pursuant to Clause (v) of
Section 1009.
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<PAGE> 22
"Indebtedness to EBITDA Ratio" of any Person means at any date
the ratio of Consolidated Indebtedness outstanding on such date to EBITDA for
the four full fiscal quarters immediately preceding such date; provided,
however, that, in the event such Person or any of its Restricted Subsidiaries
has acquired a Person during or after such period in a pooling-of-interests
transaction, such computation shall be made on a pro forma basis as if the
transaction had taken place on the first day of such period.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Investors" means John W. Stanton and Theresa E.
Gillespie and their Affiliates, Hellman & Friedman Capital Partners II, L.P.
and its Affiliates, The Goldman Sachs Group, L.P. and its Affiliates and
Providence Media Partners, L.P. and its Affiliates.
"Initial Purchasers" means Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation, Salomon Brothers Inc and Toronto
Dominion Securities (USA) Inc.
"Initial Regulation S Securities" means the Securities sold by
the Initial Purchasers in the initial offering contemplated by the Purchase
Agreement in reliance on Regulation S.
"Interest Hedge Agreements" means any interest rate swap, cap,
collar, floor, caption or swaption agreements, or any similar arrangements
designed to hedge the risk of variable interest rate volatility or to reduce
interest costs, arising at any time between the Company or any Restricted
Subsidiary, on the one hand, and any Person (other than an Affiliate of the
Company or any Restricted Subsidiary), on the other hand, as such agreement or
arrangement may be modified, supplemented and in effect from time to time.
"Interest Payment Date" means the Stated Maturity of an
instalment of interest on the Securities.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature
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<PAGE> 23
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Make-Whole Amount" on any date in respect of any Security
means the excess, if any, of (i) the aggregate present value as of such date of
each dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to such date) that would have been payable in
respect of each such dollar if such redemption or payment had not been made,
determined by discounting, on a semi-annual basis, such principal and interest
at the Reinvestment Rate (determined on the third Business Day preceding the
date on which notice of redemption or payment is made) from the respective
dates on which principal and interest would have been payable if such
redemption or payment had not been made, over (ii) the aggregate principal
amount of such Security being redeemed or paid.
"Maturity" means, when used with respect to any Security, the
date on which the principal of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Available Proceeds" from any Asset Disposition means the
aggregate amount of cash (including any other consideration that is converted
into cash) received by the Company or a Restricted Subsidiary in respect of
such an Asset Disposition, less the sum of (i) all fees, commissions and other
expenses Incurred in connection with such Asset Disposition, including the
amount of income taxes required to be paid by the Company or a Restricted
Subsidiary in connection therewith and (ii) the aggregate amount of cash so
received which is used to retire any existing Indebtedness of the Company or a
Restricted Subsidiary which is required to be repaid in connection therewith.
"NORTEL Facility" means the Loan Agreement, dated June 30,
1995, between Western PCS II Corporation and Northern Telecom Inc., as such
agreement may be amended, supplemented, restated or otherwise modified from
time to time.
"Offer" has the meaning specified in the definition of Offer
to Purchase.
"Offer to Purchase" means a written offer (the "Offer") sent
by the Company by first class mail, postage prepaid, to each Holder at his
address appearing in the
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<PAGE> 24
Security Register on the date of the Offer offering to purchase up to the
principal amount of Securities specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration
date (the "Expiration Date") of the Offer to Purchase which, subject to any
contrary requirements of applicable law, shall be not less than 30 days nor
more than 60 days after the date of such Offer to Purchase and a settlement
date (the "Purchase Date") for purchase of Securities within five Business Days
after the Expiration Date. The Company shall notify the Trustee at least 15
Business Days (or such shorter period as is acceptable to the Trustee) prior to
the mailing of the Offer of the Company's obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company. The
Offer shall contain information concerning the business of the Company and its
Subsidiaries which the Company in good faith believes will enable such Holders
to make an informed decision with respect to the Offer to Purchase (which at a
minimum will include (i) the most recent annual and quarterly financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the documents required to be filed with the
Trustee pursuant to Section 704 (which requirements may be satisfied by
delivery of such documents together with the Offer), (ii) a description of
material developments in the Company's business subsequent to the date of the
latest of such financial statements referred to in Clause (i) (including a
description of the events requiring the Company to make the Offer to Purchase),
(iii) if applicable, appropriate pro forma financial information concerning the
Offer to Purchase and the events requiring the Company to make the Offer to
Purchase and (iv) any other information required by applicable law to be
included therein. The Offer shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Offer to
Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the
Offer to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding
Securities offered to be purchased by the Company pursuant to the
Offer to Purchase (including, if less than 100%, the manner by which
such has been
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<PAGE> 25
determined pursuant to the Section hereof requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each
$1,000 aggregate principal amount of Securities accepted for payment
(as specified pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount;
(6) the place or places where Securities are to be
surrendered for tender pursuant to the Offer to Purchase;
(7) that on the Purchase Date the Purchase Price will
become due and payable upon each Security accepted for payment
pursuant to the Offer to Purchase and that interest thereon shall
cease to accrue on and after the Purchase Date;
(8) that each Holder electing to tender a Security
pursuant to the Offer to Purchase will be required to surrender
such Security at the place or places specified in the Offer prior to
the close of business on the Expiration Date (such Security being, if
the Company or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory
to the Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing);
(9) that Holders will be entitled to withdraw all or any
portion of Securities tendered if the Company (or its Paying Agent)
receives, not later than the close of business on the Expiration Date,
a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security the Holder
tendered, the certificate number of the Security the Holder tendered
and a statement that such Holder is withdrawing all or a portion of
his tender;
(10) that (a) if Securities in an aggregate principal
amount less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase all such Securities and (b) if Securities in an
aggregate
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<PAGE> 26
principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall
purchase Securities having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Securities in denominations of $1,000
or integral multiples thereof shall be purchased); and
(11) that in case of any Holder whose Security is purchased
only in part, the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the
Security so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by two
officers at least one of whom shall be the principal executive officer,
principal accounting officer or principal financial officer of the Company and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be reasonably acceptable to the
Trustee and delivered to the Trustee.
"Original Securities" means all Securities other than Exchange Securities.
"Other Securities" means the Securities sold by the Initial
Purchasers in the initial offering contemplated by the Purchase Agreement in
reliance on an exemption from the registration requirements of the Securities
Act other than Rule 144A and Regulation S.
"Outstanding," when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in
the necessary amount has been theretofore
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<PAGE> 27
deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the Holders of
such Securities; provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been
made; and
(iii) Securities which have been paid pursuant to Section 307 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such Securities
and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"pari passu," when used with respect to the ranking of any
Indebtedness of any Person in relation to other Indebtedness of such Person,
means that each such Indebtedness (a) either (i) is not subordinated in right
of payment to any other Indebtedness of such Person or (ii) is subordinate in
right of payment to the same Indebtedness of such Person as is the other and is
so subordinate to the same extent and (b) is not subordinate in right of
payment to the other or to any Indebtedness of such Person as to which the
other is not so subordinate.
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<PAGE> 28
"Paying Agent" means any Person authorized by the Company to
pay the principal of (and premium, if any) or interest on any Securities on
behalf of the Company.
"Payment Blockage Period" has the meaning specified in Section
1203.
"Permitted Joint Venture" means, as applied to any Person, any
corporation or other entity (a) engaged in the acquisition, ownership,
operation and management of assets in the Wireless Communications Business, (b)
over which such Person is responsible (either directly or through a services
agreement) for day-to-day operations or otherwise has operational and
managerial control, (c) of which more than forty percent (40%) of the
outstanding Capital Stock (other than directors' qualifying shares) having
ordinary Voting Power to elect its board of directors, regardless of the
existence at the time of a right of the holders of any class or classes of
securities of such corporation to exercise such Voting Power by reason of the
happening of any contingency, in the case of a corporation, or more than forty
percent (40%) of the outstanding ownership interests, in the case of an entity
other than a corporation, is at the time owned directly or indirectly by such
Person, or by one or more Subsidiaries of such Person, or by such Person and by
one or more Subsidiaries of such Person and (d) with respect to which such
Person has the right or option to acquire all of the outstanding Capital Stock
or ownership interests not owned by such Person.
"Permitted Joint Venture Investment" means (i) any payment on
account of the purchase, redemption, retirement or acquisition of (A) any
shares of Capital Stock or other ownership interests of a Permitted Joint
Venture or (B) any option, warrant or other right to acquire shares of Capital
Stock or ownership interests of a Permitted Joint Venture or (ii) any loan,
advance, lease, capital contribution to, or investment in, or payment of a
Guaranty of any obligation of a Permitted Joint Venture; provided that such
loan, advance, lease, capital contribution, investment or payment provides for
a return that is senior in right of payment to any return on the Capital Stock
or ownership interests of such Permitted Joint Venture; provided, further, that
not less than 75% of the aggregate Permitted Joint Venture Investments in any
Permitted Joint Venture shall be Permitted Joint Venture Investments described
in Clause (ii).
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated orga-
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<PAGE> 29
nization or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 307 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Preferred Stock," as applied to the Capital Stock of any
Person, means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Proceeding" has the meaning specified in Section 1202.
"Purchase Agreement" means the Purchase Agreement, dated as of
October 18, 1996, between the Company and the Initial Purchasers, as such
agreement may be amended from time to time.
"Purchase Amount" has the meaning specified in the definition
of Offer to Purchase.
"Purchase Date" has the meaning specified in the definition of
Offer to Purchase.
"Purchase Price" has the meaning specified in the definition
of Offer to Purchase.
"Qualified Capital Stock" means, with respect to any Person,
any and all shares of Capital Stock issued by such Person after the date of
this Indenture other than Redeemable Stock.
"Qualified Capital Stock Proceeds" means, with respect to any
Person, (a) in the case of any sale of Qualified Capital Stock, the aggregate
net cash proceeds received by such Person, after payment of expenses,
commissions and the like Incurred by such Person in connection therewith, and
net of Indebtedness that such Person Incurred, Guaranteed or otherwise became
liable for in connection with the issuance or acquisition of such Capital
Stock; and (b) in the case of any exchange,
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<PAGE> 30
exercise, conversion or surrender of any Preferred Stock or Indebtedness of
such Person or any Subsidiary issued for cash after the date of this Indenture
for or into shares of Qualified Capital Stock of such Person, the liquidation
value of the Preferred Stock or the net book value of such Indebtedness as
adjusted on the books of such Person to the date of such exchange, exercise,
conversion or surrender, plus any additional amount paid by the securityholders
to such Person upon such exchange, exercise, conversion or surrender and less
any and all payments made to the securityholders, and all other expenses,
commissions and the like Incurred by such Person or any Subsidiary in
connection therewith.
"Redeemable Stock" of any Person means any equity security of
such Person that by its terms or otherwise is required to be redeemed prior to
the final Stated Maturity of the Securities or is redeemable at the option of
the holder thereof at any time prior to the final Stated Maturity of the
Securities.
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Securities" means the Exchange Securities and all
other Securities sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act, together with their respective
Successor Securities.
"Registration Default" has the meaning specified in the form
of the Securities set forth in Section 202.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 15 or July 15 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (or
any successor provision), as it may be amended from time to time.
"Regulation S Certificate" means a certificate substantially
in the form set forth in Annex A.
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<PAGE> 31
"Regulation S Global Security" has the meaning specified in
Section 201.
"Regulation S Legend" means a legend substantially in the form
of the legend required in the form of Security set forth in Section 202 to be
placed upon a Regulation S Global Security.
"Regulation S Securities" means all Securities required
pursuant to Section 306(c) to bear a Regulation S Legend. Such term includes
the Regulation S Global Security.
"Reinvestment Rate" means the arithmetic mean of the yields
under the respective heading "Week Ending" published in the most recent
Statistical Release under the caption "Treasury Constant Maturities" for the
maturity (rounded to the nearest month) corresponding to the remaining life to
maturity, as of the payment date of the principal being redeemed or paid. If
no maturity exactly corresponds to such maturity, yields for the two published
maturities most closely corresponding to such maturity shall be calculated
pursuant to the immediately preceding sentence and the Reinvestment Rate shall
be interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of the relevant periods to the nearest month. For the purpose
of calculating the Reinvestment Rate, the most recent Statistical Release
published prior to the date of determination of the Make-Whole Amount shall be
used.
"Related Person" of any Person means any other Person owning
(a) 5% or more of the outstanding Common Stock of such Person or (b) 5% or more
of the Voting Power of such Person.
"Resale Registration Statement" means a shelf registration
statement under the Securities Act filed by the Company, if required by, and
meeting the requirements of, the Exchange and Registration Rights Agreement,
registering Original Securities for resale.
"Restricted Global Security" has the meaning specified in
Section 201.
"Restricted Payments" has the meaning specified in Section
1011.
"Restricted Period" means the period of 41 consecutive days
beginning on and including the later of (i) the day on which Securities are
first offered to persons
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<PAGE> 32
other than distributors (as defined in Regulation S) in reliance on Regulation
S and (ii) the day on which the closing of the offering of Securities pursuant
to the Purchase Agreement occurs.
"Restricted Securities" means all Securities required pursuant
to Section 306(c) to bear a Restricted Securities Legend. Such term includes
the Restricted Global Security.
"Restricted Securities Certificate" means a certificate
substantially in the form set forth in Annex B.
"Restricted Securities Legend" means a legend substantially in
the form of the legend required in the form of Security set forth in Section
202 to be placed upon a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of
such Person other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Rule 144A Securities" means the Securities purchased by the
Initial Purchasers from the Company pursuant to the Purchase Agreement, other
than the Other Securities and the Initial Regulation S Securities.
"Sale and Leaseback Transaction" of any Person means an
arrangement with any lender or investor or to which such lender or investor is
a party providing for the leasing by such Person of any property or asset of
such Person which has been or is being sold or transferred by such Person more
than 270 days after the acquisition thereof or the completion of construction
or commencement of operation thereof to such lender or investor or to any
person to whom funds have been or are to be advanced by such lender or investor
on the security of such property or asset. The stated maturity of such
arrangement shall be the date of the last payment of rent or any other amount
due under such arrangement prior to the first date on which such arrangement
may be terminated by the lessee without payment of a penalty.
"Securities" means securities designated in the first
paragraph of the RECITALS OF THE COMPANY and includes the Exchange Securities.
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<PAGE> 33
"Securities Act Legend" means a Restricted Securities Legend
or a Regulation S Legend.
"Securities Payment" has the meaning set forth in Section
1202.
"Security Registrar" and "Security Register" have the
respective meanings specified in Section 306.
"Senior Indebtedness" means the principal of (and premium, if
any) and interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post-petition interest is allowed in such proceeding) on (i)
Indebtedness of the Company created pursuant to the Credit Facility and all
other obligations thereunder or under the notes, security documents, pledge
agreements, Interest Hedge Agreements or other agreements or instruments
executed in connection therewith, (ii) Indebtedness of the Company created
pursuant to any vendor financing Incurred for the acquisition, construction or
improvement by the Company or any Restricted Subsidiary of assets in the
Wireless Communications Business, (iii) all other Indebtedness of the Company
referred to in the definition of Indebtedness other than Clauses (iv), (vi) and
(ix) thereof (and Clause (viii) thereof to the extent applicable to
Indebtedness Incurred under Clauses (iv) and (vi) thereof), whether Incurred on
or prior to the date of this Indenture or thereafter Incurred, other than the
Securities, and (iv) amendments, renewals, extensions, modifications,
refinancings and refundings of any such Indebtedness; provided, however, the
following shall not constitute Senior Indebtedness: (A) any Indebtedness owed
to a Person when such Person is a Restricted Subsidiary of the Company, (B) any
Indebtedness which by the terms of the instrument creating or evidencing the
same is not superior in right of payment to the Securities, (C) any
Indebtedness Incurred in violation of this Indenture (but, as to any such
Indebtedness, no such violation shall be deemed to exist for purposes of this
clause (C) if the holder(s) of such Indebtedness or their representative and
the Trustee shall have received an Officers' Certificate of the Company to the
effect that the Incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness, that the Incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate this Indenture) or (D) any Indebtedness which is
subordinated in right or payment in respect to any other Indebtedness of the
Company.
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<PAGE> 34
"Senior Nonmonetary Default" has the meaning specified in
Section 1203.
"Senior Payment Default" has the meaning specified in Section
1203.
"Special Interest" has the meaning specified in the form of
the Securities set forth in Section 202.
"Stated Maturity," when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the date on which the principal of such Security or such installment of
interest is due and payable.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities, or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be
designated by the Company.
"Step-Down Date" has the meaning specified in the form of the
Securities set forth in Section 202.
"Step-Up" has the meaning specified in the form of the
Securities set forth in Section 202.
"Subsidiary" of any Person means (i) any corporation of which
more than fifty percent (50%) of the outstanding Capital Stock (other than
directors' qualifying shares) having ordinary Voting Power to elect its board
of directors, regardless of the existence at the time of a right of the holders
of any class or classes of securities of such corporation to exercise such
Voting Power by reason of the happening of any contingency, or any entity other
than a corporation of which more than fifty percent (50%) of the outstanding
ownership interests, is at the time owned directly or indirectly by such
Person, or by one or more Subsidiaries of such Person, or by such Person and
one or more Subsidiaries of such Person, or (ii) any other entity which is
directly or indirectly controlled or capable of being controlled by such
Person, or by one or more Subsidiaries of such Person, or by such Person and
one or more Subsidiaries of such Person, including Permitted Joint Ventures.
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<PAGE> 35
"Successor Security" of any particular Security means every
Security issued after, and evidencing all or a portion of the same debt as that
evidenced by, such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 307 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed, except as
provided in Section 905; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means,
to the extent required by any such amendment, the Trust Indenture Act of 1939
as so amended.
"U.S. Government Obligations" has the meaning specified in
Section 1304.
"Unrestricted Securities Certificate" means a certificate
substantially in the form set forth in Annex C.
"Unrestricted Subsidiary" of any Person means (i) any
Subsidiary of such Person that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of any Person may designate any Restricted Subsidiary to
be an Unrestricted Subsidiary unless such Subsidiary owns any Common Stock or
Preferred Stock of, or owns or holds any Lien on any property of, such Person
or any Restricted Subsidiary; provided that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, the Fair Market Value of the Subsidiary at the time
of such designation would be permitted as an investment under Section 1011.
The Board of Directors of any Person may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary of such Person; provided that immediately after
giving effect to such designation (x) such Person would be permitted to Incur
$1.00 of additional Indebtedness pursuant to the first paragraph of Section
1008 and (y) no Event of Default or
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<PAGE> 36
event which with notice or lapse of time or both would become an Event of
Default has occurred and is continuing. Any such designation by the Board of
Directors shall be evidenced by a Board Resolution submitted to the Trustee.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Power" of any Person means the aggregate number of
votes of all classes of Capital Stock of such Person which ordinarily has
voting power for the election of directors of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person or by such Person and one or more Wholly
Owned Restricted Subsidiaries of such Person.
"Wireless Communications Business" means the provision of
wireless communications services and other related services.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in
the form of an Officers' Certificate, if to be given by an officer of the
Company, or an Opinion of Counsel, if to be given by counsel, and shall comply
with the requirements of the Trust Indenture Act and any other requirement set
forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as in its
reasonable judgment is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of
each such individual, such condition or covenant has been complied
with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one document, but
one such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon
which his certificate or opinion is based are erroneous. Any such certificate
or opinion of counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Company stating that the information with respect to such factual
matters is in the possession of the Company, unless such counsel knows that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
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<PAGE> 38
SECTION 104. Acts of Holders; Record Date.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given
or taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
received by the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Section 601) conclusive in favor
of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee reasonably deems
sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote
on any action, authorized or permitted to be given or taken by Holders. If not
set by the Company prior to the first solicitation of a Holder made by any
Person in respect of any such action, or, in the case of any such vote, prior
to such vote, the record date for any such action or vote shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation or vote, as
the case may be. With regard to any record date, only the Holders on such date
(or their duly designated proxies)
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<PAGE> 39
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any Security shall bind
every future Holder of the same Security and the Holder of every Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Trust Officer, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company, Attention: Chief Executive Officer,
addressed to it at the address of its principal office specified in
the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company with a
copy to its General Counsel.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the
Security Register, not later than the latest date (if any), and not earlier
than the earliest date (if any), prescribed for the giving of such notice. In
any case where
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<PAGE> 40
notice to Holders is given by mail, neither the failure to mail such notice,
nor any defect in any notice so mailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be part
of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the provision of this
Indenture shall be deemed to apply.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining
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<PAGE> 41
provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Indebtedness (subject to Article
Thirteen hereof) and the Holders of Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Purchase Date or Stated Maturity of any Security shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date, Redemption Date
or Purchase Date, or at the Stated Maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date, Purchase Date or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities and the Trustee's certificates of
authentication shall be in substantially the forms set forth in this Article,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any securities
exchange or as may,
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consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Securities may be listed, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
Upon their original issuance, Rule 144A Securities shall be
issued in the form of one or more Global Securities registered in the name of
DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian
for DTC, for credit by DTC to the respective accounts of beneficial owners of
the Securities represented thereby (or such other accounts as they may direct).
Such Global Securities, together with their Successor Securities which are
Global Securities other than the Regulation S Global Security, are collectively
herein called the "Restricted Global Security".
Upon their original issuance, Initial Regulation S Securities
shall be issued in the form of one or more Global Securities registered in the
name of DTC, as Depositary, or its nominee and deposited with the Trustee, as
custodian for DTC, for credit by DTC to the respective accounts of beneficial
owners of the Securities represented thereby (or such other accounts as they
may direct), provided that upon such deposit all such Securities shall be
credited to or through accounts maintained at DTC by or on behalf of Euroclear
or Cedel. Such Global Securities, together with their Successor Securities
which are Global Securities other than the Restricted Global Security, are
collectively herein called the "Regulation S Global Security".
Upon their original issuance, Other Securities shall not be
issued in the form of a Global Security or in any other form intended to
facilitate book-entry trading in beneficial interests in such Securities.
SECTION 202. Form of Face of Security.
[IF THE SECURITY IS A RESTRICTED SECURITY, THEN INSERT -- THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR (1) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A
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<PAGE> 43
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(B) BY SUBSEQUENT INVESTORS AS SET FORTH IN (A) ABOVE AND, IN ADDITION, TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.]
[IF THE SECURITY IS A REGULATION S SECURITY, THEN INSERT --
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, OR DELIVERED IN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON,
UNLESS THIS SECURITY IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
[IF THE SECURITY IS A GLOBAL SECURITY, THEN INSERT -- THIS
SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.
THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY
REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[IF THE SECURITY IS A GLOBAL SECURITY AND THE DEPOSITORY TRUST
COMPANY IS TO BE THE DEPOSITARY THEREFOR, THEN INSERT -- UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
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<PAGE> 44
10-1/2% SENIOR SUBORDINATED NOTES DUE 2007
No. __________ $________
[If Restricted Global Security - CUSIP Number 95988E AB 1]
[If Regulation S Global Security - CUSIP Number U95995 AA 1]
[If Non-Global Security - CUSIP Number 95988E AC 9]
Western Wireless Corporation, a corporation duly organized and
existing under the laws of Washington (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _____________, or registered assigns,
the principal sum of ________ Dollars [IF THE SECURITY IS A GLOBAL SECURITY,
THEN INSERT -- , or such other principal amount (which, when taken together
with the principal amounts of all other Outstanding Securities, shall not
exceed $200,000,000 in the aggregate at any time) as may be set forth in the
records of the Trustee hereinafter referred to in accordance with the
Indenture,] on February 1, 2007, and to pay interest thereon from October 24,
1996 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semi-annually on February 1 and August 1 in each
year, commencing February 1, 1997, at the rate of 10-1/2% per annum, until the
principal hereof is paid or made available for payment, and (to the extent that
the payment of such interest shall be legally enforceable) at the rate of
12-1/2% per annum on any overdue principal and premium, if any, and on any
overdue installment of interest until paid [IF THE SECURITY IS AN ORIGINAL
SECURITY, THEN INSERT -- , provided that if (i) the Company has not filed an
Exchange Registration Statement under the Securities Act registering a security
substantially identical to this Security for distribution pursuant to an
Exchange Offer or, if applicable, a Resale Registration Statement registering
this Security for resale, in either case by November 23, 1996, (ii) either the
Exchange Registration Statement or, if applicable, the Resale Registration
Statement has not become or been declared effective by January 7, 1997, (iii)
the expiration of the Exchange Offer has not occurred within 45 days after the
date on which the Exchange Registration Statement has become or been declared
effective initially or (iv) either the Exchange Registration Statement or, if
applicable, the Resale Registration Statement is filed and declared effective
but shall thereafter cease to be effective (except as specifically permitted
pursuant to the agreement referred to below) without being succeeded
immediately by an additional registration statement filed and declared
effective, in each case (i) through (iv) upon the terms and conditions set
forth in the Exchange and
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<PAGE> 45
Registration Rights Agreement (each such event referred to in clauses (i)
through (iv), a "Registration Default"; provided that no more than one
Registration Default shall be deemed to be in effect at any one time), then
interest will accrue (in addition to the stated interest on this Security) (the
"Step-Up") at a rate of 0.5% per annum on the principal amount of the
Securities for the period from the occurrence of the Registration Default until
such time (the "Step-Down Date") as no Registration Default is in effect and,
provided, further, that for each 90-day period that the Registration Default
continues, the per annum rate of such Special Interest shall increase (each
such increase, an "Additional Step-Up") by an additional 0.5% per annum,
provided that such rate shall in no event exceed 2.0% per annum in the
aggregate until the Step-Down Date (after which the interest rate will be
restored to its initial rate). The Company shall provide the Trustee with
written notice of the date of any Registration Default and the Step-Down Date.
Interest accruing as a result of the Step-Up or an Additional Step-Up is
referred to herein as "Special Interest." The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be January 15 or July
15 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date [IF THE SECURITY IS AN ORIGINAL SECURITY, THEN INSERT --,
provided that any accrued and unpaid interest (including Special Interest) on
this Security upon the issuance of an Exchange Security in exchange for this
Security shall cease to be payable to the Holder hereof and shall be payable on
the next Interest Payment Date for such Exchange Security to the Holder thereof
on the related Regular Record Date]. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of (and premium, if any) and interest
on this Security will be made at the Corporate
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Trust Office or at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, New York City, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated:
Western Wireless Corporation
[Seal]
By___________________________
Title:
Attest:
______________________________
Title:
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities
of the Company designated as its 10-1/2% Senior Subordinated Notes Due 2007
(herein called the "Securities"), limited in aggregate principal amount to
$200,000,000, issued and to be issued under an Indenture, dated as of October
24, 1996 (herein called the "Indenture"), between the Company and Harris Trust
Company of California, as Trustee (herein called the "Trustee," which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures
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<PAGE> 47
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the holders of Senior Indebtedness and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
Prior to February 1, 2002, the Securities may be redeemed at
any time at the option of the Company, in whole or from time to time in part,
at a redemption price equal to the sum of (i) the principal amount of the
Securities to be redeemed together with accrued interest thereon to but
excluding the date fixed for redemption and (ii) the Make-Whole Amount, if
any, with respect to the Securities or portion thereof being redeemed.
On or after February 1, 2002, the Securities may be redeemed
at any time at the option of the Company, in whole or from time to time in
part, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed during the 12-month period beginning February 1
of the years indicated,
<TABLE>
<CAPTION> Redemption
Year Price
---- ----------
<S> <C>
2002 105.25%
2003 103.50%
2004 101.75%
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to but
excluding the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.
Notwithstanding the previous two paragraphs, on or before
February 1, 1999, the Company may at its option, apply Qualified Capital Stock
Proceeds and Affiliate and Related Person Proceeds to redeem up to $66 million
in aggregate principal amount of Securities at 110.5% (expressed as a
percentage of principal amount) together with accrued interest to but excluding
the date fixed for redemption.
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<PAGE> 48
Notice of any optional redemption of any Securities (or
portion thereof) will be given to the Holders at their addresses appearing in
the Security Register not less than 30 nor more than 60 days prior to the date
fixed for redemption.
The Securities do not have the benefit of any sinking fund
obligations.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Security in part only, a new Security or Securities for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each Holder
of this Security, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
so provided and (c) appoints the Trustee his attorney-in-fact for any and all
such purposes.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture provides that, subject to certain conditions, if
(i) certain Net Available Proceeds are available to the Company as a result of
Asset Dispositions or (ii) a Change of Control occurs, the Company shall be
required to make an Offer to Purchase for Securities.
The Indenture contains provisions for defeasance at any time
of (i) the entire indebtedness of this Security or (ii) certain restrictive
covenants and Events of Default with respect to this Security, in each case
upon compliance with certain conditions set forth therein.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities
under the Indenture at any time by the Company and the Trustee with the consent
of the Holders of a majority in aggregate principal amount of the Securities at
the time Outstanding. The Indenture also
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<PAGE> 49
contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Securities at the time Outstanding, on behalf
of the Holders of all the Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and rate,
and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the Corporate Trust Office or at the office or agency of the
Company in the Borough of Manhattan, New York City, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof subject to
a minimum initial purchase amount of $100,000 for Other Securities. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities are exchangeable for a like aggregate principal amount of Securities
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any
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<PAGE> 50
agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not
this Security be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.
Interest on this Security shall be computed on the basis of a
360-day year of twelve 30-day months; provided, however, that any Special
Interest on Original Securities shall be computed on the basis of a 365- or
366- day year, as the case may be, and the number of days actually elapsed.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and
construed in accordance with the laws of the State of New York.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its
entirety by the Company pursuant to Section 1015 or 1017 of the Indenture,
check the box:
[ ]
If you want to elect to have only a part of this Security
purchased by the Company pursuant to Section 1015 or 1017 of the Indenture,
state the amount: $
Dated: Your Signature:_____________________________
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee:__________________________________________________________
(Signature must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or
trust company)
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SECTION 204. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within-mentioned Indenture.
HARRIS TRUST COMPANY OF CALIFORNIA,
as Trustee
By _______________________________,
Authorized Officer
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $200,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
304, 305, 306, 307, 906 or 1108 or in connection with an Offer to Purchase
pursuant to Section 1015 or 1017.
The Securities shall be known and designated as the "10-1/2%
Senior Subordinated Notes Due 2007" of the Company. Their Stated Maturity
shall be February 1, 2007 and they shall bear interest at the rate of 10-1/2%
per annum, from October 24, 1996 or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, as the case may be,
payable semi-annually on February 1 and August 1, commencing on February 1,
1997, to the Holders of record on the immediately preceding January 15 and July
15, until the principal thereof is paid or made available for payment;
provided, however, with respect to Original Securities that if a Registration
Default occurs (provided that no more than one Registration Default shall be
deemed to be in effect at any one time), then a Step-Up will occur for the
period from the occurrence of the Registration Default until the Step-Down Date
and, provided, further, that for each 90-day period that the Registration
Default continues, an Additional Step-Up shall occur, provided that such rate
shall in no event exceed 2.0% per annum in the aggregate until the Step-Down
Date (after which the interest rate will be restored to its initial rate). The
Company shall provide the Trustee with written
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notice of the date of any Registration Default and the Step-Down Date. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, which
shall be January 15 or July 15 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date. Accrued Special Interest, if
any, shall be paid in cash in arrears semi-annually on February 1 and August 1
in each year and the amount of accrued Special Interest shall be determined on
the basis of the number of days actually elapsed and computed as provided in
Section 311.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the Corporate Trust Office or at the office or
agency of the Company in the City and State of New York maintained for such
purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
The Securities shall be subject to repurchase by the Company
pursuant to an Offer to Purchase as provided in Sections 1015 and 1017.
The Securities shall be redeemable as provided in Article
Eleven.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article Twelve.
The Securities shall be subject to defeasance at the option of
the Company as provided in Article Thirteen.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiples
thereof subject to a minimum initial purchase amount of $100,000 for Other
Securities.
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SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its President or one of its Vice Presidents, under
its corporate seal reproduced thereon attested by its Secretary, one of its
Assistant Secretaries or its Chief Financial Officer. The signature of any of
these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities; and the Trustee in
accordance with such Company Order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
At any time and from time to time after the execution and
delivery of this Indenture and after the effectiveness of a registration
statement under the Securities Act with respect thereto, the Company may
deliver Exchange Securities executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Exchange Securities and a like principal amount of Original
Securities for cancellation in accordance with Section 310 of this Indenture,
and the Trustee in accordance with the Company Order shall authenticate and
deliver such Securities. Prior to authenticating such Exchange Securities, and
accepting any additional responsibilities under this Indenture in relation to
such Securities, the Trustee shall be entitled to receive, if requested, and
(subject to Section 601) shall be fully protected in relying upon, an Opinion
of Counsel stating in substance
(a) that all conditions hereunder precedent to the
authentication and delivery of such Exchange Securities have been
complied with and that such Exchange Securities, when such Securities
have been duly authenticated and delivered by the Trustee (and
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subject to any other conditions specified in such Opinion of Counsel),
have been duly issued and delivered and will constitute valid and
legally binding obligations of the Company, respectively, enforceable
in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles; and
(b) that the issuance of the Exchange Securities in
exchange for Original Securities has been effected in compliance with
the Securities Act.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to
Section 1002, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like
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principal amount of definitive Securities of authorized denominations. Until
so exchanged the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. Global Securities.
(a) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated by the Company for
such Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (i) such Depositary (A) has notified the Company that it
is unwilling or unable to continue as Depositary for such Global Security or
(B) has ceased to be a clearing agency registered as such under the Exchange
Act, (ii) there shall have occurred and be continuing an Event of Default with
respect to such Global Security, (iii) the Company executes and delivers to the
Trustee a Company Order stating that it elects to cause the issuance of the
Securities in certificated form and that all Global Securities shall be
exchanged in whole for Securities that are not Global Securities (in which case
such exchange shall be effected by the Trustee) or (iv) pursuant to the
following sentence. All or any portion of a Global Security may be exchanged
for a Security that has a like aggregate principal amount and is not a Global
Security, upon 20 days' prior request made by the Depositary or its authorized
representative to the Trustee.
(c) If any Global Security is to be exchanged for other
Securities or cancelled in whole, it shall be surrendered by or on behalf of
the Depositary or its nominee to the Trustee, as Security Registrar, for
exchange or cancellation as provided in this Article Three. If any Global
Security is to be exchanged for other Securities or cancelled in part, or if
another Security is to be exchanged in whole or in part for a beneficial
interest in any Global Security, then either (i) such Global Security shall be
so surrendered for exchange or cancellation as provided in this Article Three
or (ii) the principal amount thereof shall be reduced or increased by an amount
equal to the portion
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thereof to be so exchanged or cancelled, or equal to the principal amount of
such other Security to be so exchanged for a beneficial interest therein, as
the case may be, by means of an appropriate adjustment made on the records of
the Trustee, as Security Registrar, whereupon the Trustee, in accordance with
the Applicable Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon any
such surrender or adjustment of a Global Security, the Trustee shall, subject
to Section 305(b) and as otherwise provided in this Article Three, authenticate
and deliver any Securities issuable in exchange for such Global Security (or
any portion thereof) to or upon the order of, and registered in such names as
may be directed by, the Depositary or its authorized representative. Upon the
request of the Trustee in connection with the occurrence of any of the events
specified in the preceding paragraph, the Company shall promptly make available
to the Trustee a reasonable supply of Securities that are not in the form of
Global Securities. The Trustee shall be entitled to rely upon any order,
direction or request of the Depositary or its authorized representative which
is given or made pursuant to this Article Three if such order, direction or
request is given or made in accordance with the Applicable Procedures.
(d) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security or any portion thereof, whether pursuant to this Article Three,
Section 906, 1015, 1017 or 1108 or otherwise, shall be authenticated and
delivered in the form of, and shall be, a Global Security, unless such Security
is registered in the name of a Person other than the Depositary for such Global
Security or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes
under the Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable
Procedures. Accordingly, any such owner's beneficial interest in a Global
Security will be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Agent Members.
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SECTION 306. Registration, Registration of Transfer and Exchange Generally;
Certain Transfers and Exchanges; Securities Act Legends.
(a) Registration, Registration of Transfer and Exchange
Generally. The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers and exchanges of
Securities. The Trustee is hereby appointed "Security Registrar" for the
purpose of registering Securities and transfers and exchanges of Securities as
herein provided. Such Security Register shall distinguish between Original
Securities and Exchange Securities.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations, of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.
At the option of the Holder, Securities may be exchanged for
new Securities of any authorized denominations, of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and (except for the differences between Original
Securities and Exchange Securities provided for herein) entitled to the same
benefits under this Indenture, as the Securities surrendered upon such
registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
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executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 305, 306, 906, 1015,
1017 or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 1104 and ending at the close
of business on the day of such mailing, or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
(b) Certain Transfers and Exchanges. Notwithstanding any
other provision of this Indenture or the Securities, transfers and exchanges of
Securities and beneficial interests in a Global Security of the kinds specified
in this Section 306(b) shall be made only in accordance with this Section
306(b).
(i) Restricted Global Security to Regulation S Global
Security. If the owner of a beneficial interest in the Restricted
Global Security wishes at any time to transfer such interest to a
Person who wishes to take delivery thereof in the form of a beneficial
interest in the Regulation S Global Security, such transfer may be
effected only in accordance with the provisions of this Clause (b)(i)
and Clause (b)(vii) below and subject to the Applicable Procedures.
Upon receipt by the Trustee, as Security Registrar, of (A) an order
given by the Depositary or its authorized representative directing
that a beneficial interest in the Regulation S Global Security in a
specified principal amount be credited to a specified Agent Member's
account and that a beneficial interest in the Restricted Global
Security in an equal principal amount be debited from another
specified Agent Member's account and (B) a Regulation S Certificate,
in the form of Annex A hereto, duly executed by the owner of such
beneficial interest in the Restricted Global Security or his attorney
duly authorized in writing, then the Trustee, as Security Registrar
but subject to Clause (b)(vii) below, shall reduce the principal
amount of
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the Restricted Global Security and increase the principal amount of
the Regulation S Global Security by such specified principal amount as
provided in Section 305(c).
(ii) Regulation S Global Security to Restricted Global
Security. If the owner of a beneficial interest in the Regulation S
Global Security wishes at any time to transfer such interest to a
Person who wishes to take delivery thereof in the form of a beneficial
interest in the Restricted Global Security, such transfer may be
effected only in accordance with this Clause (b)(ii) and subject to
the Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Restricted
Global Security in a specified principal amount be credited to a
specified Agent Member's account and that a beneficial interest in the
Regulation S Global Security in an equal principal amount be debited
from another specified Agent Member's account and (B) if such transfer
is to occur during the Restricted Period, a Restricted Securities
Certificate, in the form of Annex B hereto, duly executed by the owner
of such beneficial interest in the Regulation S Global Security or his
attorney duly authorized in writing, then the Trustee, as Security
Registrar, shall reduce the principal amount of the Regulation S
Global Security and increase the principal amount of the Restricted
Global Security by such specified principal amount as provided in
Section 305(c).
(iii) Restricted Non-Global Security to Restricted
Global Security or Regulation S Global Security. If the Holder of a
Restricted Security (other than a Global Security) wishes at any time
to transfer all or any portion of such Security to a Person who wishes
to take delivery thereof in the form of a beneficial interest in the
Restricted Global Security or the Regulation S Global Security, such
transfer may be effected only in accordance with the provisions of
this Clause (b)(iii) and Clause (b)(vii) below and subject to the
Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) such Security as provided in Section 306(a) and
instructions satisfactory to the Trustee directing that a beneficial
interest in the Restricted Global Security or Regulation S Global
Security in a specified principal amount not greater than the
principal amount of such Security be credited to a specified Agent
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Member's account and (B) a Restricted Securities Certificate, if the
specified account is to be credited with a beneficial interest in the
Restricted Global Security, or a Regulation S Certificate, if the
specified account is to be credited with a beneficial interest in the
Regulation S Global Security, in either case satisfactory to the
Trustee and duly executed by such Holder or his attorney duly
authorized in writing, then the Trustee, as Security Registrar but
subject to Clause (b)(vii) below, shall cancel such Security (and
issue a new Security in respect of any untransferred portion thereof)
as provided in Section 306(a) and increase the principal amount of the
Restricted Global Security or the Regulation S Global Security, as the
case may be, by the specified principal amount as provided in Section
305(c).
(iv) Regulation S Non-Global Security to Restricted
Global Security or Regulation S Global Security. If the Holder of a
Regulation S Security (other than a Global Security) wishes at any
time to transfer all or any portion of such Security to a Person who
wishes to take delivery thereof in the form of a beneficial interest
in the Restricted Global Security or the Regulation S Global Security,
such transfer may be effected only in accordance with this Clause
(b)(iv) and Clause (b)(vii) below and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Security Registrar, of
(A) such Security as provided in Section 306(a) and instructions
satisfactory to the Trustee directing that a beneficial interest in
the Restricted Global Security or Regulation S Global Security in a
specified principal amount not greater than the principal amount of
such Security be credited to a specified Agent Member's account and
(B) if the transfer is to occur during the Restricted Period and the
specified account is to be credited with a beneficial interest in the
Restricted Global Security, a Restricted Securities Certificate, in
the form of Annex B hereto, duly executed by such Holder or his
attorney duly authorized in writing, then the Trustee, as Security
Registrar but subject to Clause (b)(vii) below, shall cancel such
Security (and issue a new Security in respect of any untransferred
portion thereof) as provided in Section 306(a) and increase the
principal amount of the Restricted Global Security or the Regulation S
Global Security, as the case may be, by the specified principal amount
as provided in Section 305(c).
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(v) Non-Global Security to Non-Global Security. A
Security that is not a Global Security may be transferred, in
whole or in part, to a Person who takes delivery in the form of another
Security that is not a Global Security as provided in Section 3.06(a),
provided that, if the Security to be transferred in whole or in part is
a Restricted Security, or is a Regulation S Security and the transfer
is to occur during the Restricted Period, then the Trustee shall have
received (A) a Restricted Securities Certificate, in the form of Annex
B hereto, duly executed by the transferor Holder or his attorney duly
authorized in writing, in which case the transferee Holder shall take
delivery in the form of a Restricted Security, or (B) a Regulation S
Certificate, satisfactory to the Trustee and duly executed by the
transferor Holder or his attorney duly authorized in writing, in which
case the transferee Holder shall take delivery in the form of a
Regulation S Security (subject in each case to Section 306(c)).
(vi) Exchanges between Global Security and Non-Global
Security. A beneficial interest in a Global Security may be exchanged
for a Security that is not a Global Security as provided in Section
305, provided that, if such interest is a beneficial interest in the
Restricted Global Security, or if such interest is a beneficial
interest in the Regulation S Global Security and such exchange is to
occur during the Restricted Period, then such interest shall be
exchanged for a Restricted Security (subject in each case to Section
306(c)). A Security that is not a Global Security may be exchanged
for a beneficial interest in a Global Security only if (A) such
exchange occurs in connection with a transfer effected in accordance
with Clause (b)(iii) or (iv) above or (B) such Security is a
Regulation S Security and such exchange occurs after the Restricted
Period.
(vii) Regulation S Global Security to be Held Through
Euroclear or Cedel during Restricted Period. The Company shall use
its best efforts to cause the Depositary to ensure that, until the
expiration of the Restricted Period, beneficial interests in the
Regulation S Global Security may be held only in or through accounts
maintained at the Depositary by Euroclear or Cedel (or by Agent
Members acting for the account thereof), and no person shall be
entitled to effect any transfer or exchange that would result in any
such interest being held otherwise than in or through such an account;
provided that this
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Clause (b)(vii) shall not prohibit any transfer or exchange of such an
interest in accordance with Clause (b)(ii) or (vi) above.
(c) Securities Act Legends. Rule 144A Securities, Other
Securities and their respective Successor Securities shall bear a Restricted
Securities Legend, and Initial Regulation S Securities and their Successor
Securities shall bear a Regulation S Legend, subject to the following:
(i) subject to the following Clauses of this Section
306(c), a Security or any portion thereof which is exchanged, upon
transfer or otherwise, for a Global Security or any portion thereof
shall bear the Securities Act Legend borne by such Global Security
while represented thereby;
(ii) subject to the following Clauses of this Section
306(c), a new Security which is not a Global Security and is issued in
exchange for another Security (including a Global Security) or any
portion thereof, upon transfer or otherwise, shall bear the Securities
Act Legend borne by such other Security, provided that, if such new
Security is required pursuant to Section 306(b)(v) or (vi) to be
issued in the form of a Restricted Security, it shall bear a
Restricted Securities Legend and, if such new Security is so required
to be issued in the form of a Regulation S Security, it shall bear a
Regulation S Legend;
(iii) Registered Securities shall not bear a Securities
Act Legend;
(iv) after October 24, 1999, a new Security which does
not bear a Securities Act Legend may be issued in exchange for or in
lieu of a Security (other than a Global Security) or any portion
thereof which bears such a legend if the Trustee has received an
Unrestricted Securities Certificate, in the form of Annex C hereto,
duly executed by the Holder of such legended Security or his attorney
duly authorized in writing, and after such date and receipt of such
certificate, the Trustee shall authenticate and deliver such a new
Security in exchange for or in lieu of such other Security as provided
in this Article Three;
(v) a new Security which does not bear a Securities
Act Legend may be issued in exchange for or in lieu of a Security
(other than a Global Security) or any portion thereof which bears such
a legend if, in
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the Company's judgment, placing such a legend upon such new Security
is not necessary to ensure compliance with the registration
requirements of the Securities Act, and the Trustee, at the direction
of the Company, shall authenticate and deliver such a new Security as
provided in this Article Three; and
(vi) notwithstanding the foregoing provisions of this
Section 306(c), a Successor Security of a Security that does not bear
a particular form of Securities Act Legend shall not bear such form of
legend unless the Company has reasonable cause to believe that such
Successor Security is a "restricted security" within the meaning of
Rule 144, in which case the Trustee, at the direction of the Company,
shall authenticate and deliver a new Security bearing a Restricted
Securities Legend in exchange for such Successor Security as provided
in this Article Three.
SECTION 307. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Security of like tenor and principal amount and bearing
a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
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expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 308. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the
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proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in
this Clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be
not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first-class postage prepaid, to each
Holder at his address as it appears in the Security Register, not less
than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to
the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 309. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 308) interest on such Security and for
all other purposes
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whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the
Security Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 310. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange or for credit against any Offer to
Purchase pursuant to Section 1015 or 1017 shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be disposed of
as directed by a Company Order.
SECTION 311. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months; provided, however, that any Special
Interest on Original Securities shall be computed on the basis of a 365- or
366-day year, as the case may be, and the number of days actually elapsed.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to any surviving rights of registration of
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transfer or exchange of Securities herein expressly provided for), and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture
(including, but not limited to, Article Twelve hereof), when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 307 and (ii) Securities for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest to the date of
such deposit (in the case of Securities which have become due
and payable) or to the Stated Maturity or Redemption Date, as
the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided
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for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article Four, the obligations of the Company to the Trustee under Section
607, the obligations of the Trustee to any Authenticating Agent under Section
614 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of Clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of the principal of (or premium,
if any, on) any Security at its Maturity; or
(2) default in the payment of any interest upon any Security
when it becomes due and payable, and continuance of such default for a
period of 30 days; or
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(3) failure, on the applicable Purchase Date, to purchase
Securities required to be purchased by the Company pursuant to an
Offer to Purchase as to which an Offer has been mailed to Holders; or
(4) default in the performance, or breach, of Section 801; or
(5) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with), and continuance of such
default or breach for a period of 30 days after there has been given,
by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(6) a default or defaults under any bond(s), debenture(s),
note(s) or other evidence(s) of Indebtedness by the Company or any
Restricted Subsidiary of the Company or under any mortgage(s),
indenture(s) or instrument(s) under which there may be issued or by
which there may be secured or evidenced any Indebtedness of such type
by the Company or any such Restricted Subsidiary with a principal
amount then outstanding, individually or in the aggregate, in excess
of $5 million, whether such Indebtedness now exists or shall hereafter
be created, which default or defaults shall constitute a failure to
pay any portion of the principal of such Indebtedness at final
maturity after the expiration of any applicable grace period with
respect thereto or shall have resulted in such Indebtedness becoming
or being declared due and payable prior to the date on which it would
otherwise have become due and payable; or
(7) a final judgment or final judgments for the payment of
money are entered against the Company or a Restricted Subsidiary in an
aggregate amount in excess of $5 million by a court or courts of
competent jurisdiction, which judgments remain undischarged or
unbonded for a period (during which execution shall not be effectively
stayed) of 60 days after the right to appeal all such judgments has
expired; or
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(8) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company or any
Restricted Subsidiary of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudging the Company or any such Restricted Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or
in respect of the Company or any such Restricted Subsidiary under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
of the Company or any such Restricted Subsidiary or of any substantial
part of the property of the Company or any such Restricted Subsidiary,
or ordering the winding up or liquidation of the affairs of the
Company or any such Restricted Subsidiary, and the continuance of any
such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or
(9) the commencement by the Company or any Restricted
Subsidiary of the Company of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated
a bankrupt or insolvent, or the consent by the Company or any such
Restricted Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Restricted Subsidiary of the Company in
an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding
against the Company or any Restricted Subsidiary of the Company, or
the filing by the Company or any such Restricted Subsidiary of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by the Company or
any such Restricted Subsidiary to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the
Company or any Restricted Subsidiary of the Company or of any
substantial part of the property of the Company or any Restricted
Subsidiary of the Company, or the making by the Company or any
Restricted Subsidiary of the Company of an assignment for the benefit
of creditors, or the admission by the Company or any such Restricted
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iary in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company or
any such Restricted Subsidiary in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(8) or (9)) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Securities may declare the principal of all the Securities
to be due and payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders), and upon any such declaration such
principal and any accrued interest shall become immediately due and payable.
If an Event of Default specified in Section 501(8) or (9) occurs, the principal
of and any accrued interest on the Securities then Outstanding shall ipso facto
become immediately due and payable without any declaration or other Act on the
part of the Trustee or any Holder.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such
declaration of acceleration (including any Securities required
to have been purchased on the Purchase Date pursuant to an
Offer to Purchase made by the Company) and, to the extent that
payment of such interest is lawful, interest thereon at the
rate provided by the Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate provided by
the Securities, and
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(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof or, with
respect to any Security required to have been purchased pursuant to an
Offer to Purchase made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, and subject to Article Twelve,
pay to it, for the benefit of the Holders of such Securities, the whole amount
then due and payable on such Securities for principal (and premium, if any) and
interest, and, to the extent that payment of such interest shall be legally
enforceable, interest on any overdue principal (and premium, if any) and on any
overdue interest, at the rate provided by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree
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and may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or
any other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and, subject to Article Twelve, to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make
such payments to the Trustee and, in the event that the Trustee shall consent
to the making of such payments directly to the Holders, to pay to the Trustee
any amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of the Holders,
vote for the election of a trustee in bankruptcy or similar official and may be
a member of the creditors' committee.
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SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Twelve, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the extent provided in Article Twelve, to the
holders of Senior Indebtedness in accordance with Article Twelve; and
THIRD: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a
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receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60- day period by the Holders of
a majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Section 308) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date or, in the case of an Offer to Purchase made by the Company and
required to be accepted as to such Security, on the Purchase Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
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SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 307, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for
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any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 601, the Trustee
shall have the right to decline to follow any such direction if the
Trustee, being advised by counsel, shall determine that the action or
proceeding so directed may not lawfully be taken or if the Trustee in
good faith shall determine that the action or proceedings so directed
might involve the Trustee in personal liability or if the Trustee in
good faith shall so determine that the actions or forebearances
specified in or pursuant to such direction shall be unduly prejudicial
to the interest of holders of the Securities not joining in the giving
of said direction, it being understood that the Trustee shall have no
duty to ascertain whether or not such actions or forebearances are
unduly prejudicial to such holders.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of
the Outstanding Securities may on behalf of the Holders of all the Securities
waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any)
or interest on any Security (including any Security which is required
to have been purchased pursuant to an Offer to Purchase which has been
made by the Company), or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
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SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, and may assess
costs against any such party litigant, in the manner and to the extent provided
in the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the
Company.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
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SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4), no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would
become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, Officers' Certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) before the Trustee acts or refrains from acting, the Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
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offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document unless
requested to do so by the Holders of not less than a majority in principal
amount of the Securities then outstanding, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder;
(i) the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the
part of the Company, except as otherwise provided herein, but the Trustee may
require of the Company full information and advice as to the performance of the
covenants, conditions and agreements contained herein and shall be entitled in
connection herewith to examine the books, records and premises of the Company;
and
(j) except for (i) a default under Sections 501(1), (2) or (3)
hereof, or (ii) any other event of which the Trustee has "actual knowledge" and
which event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not be
deemed to have notice of any default or Event of Default unless specifically
notified in writing of such event by the Company or the Holders of not less
than 25% in aggregate principal amount of the Securities then outstanding; as
used herein, the term "actual knowledge"
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means the actual fact or statement of knowing, without any duty to make any
investigation with regard thereto.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time, and the Trustee shall
be entitled to, reasonable compensation for all services rendered by it
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the
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Trustee in accordance with any provision of this Indenture, including costs of
collection (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or willful misconduct; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or willful
misconduct on its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against or investigating any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The obligations of the Company under this Section shall
survive the satisfaction and discharge of this Indenture. As security for the
performance of such obligations of the Company, the Trustee shall have a claim
prior to the Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the payment of principal of
(and premium, if any) and interest on particular Securities. When the Trustee
incurs expenses or renders services in connection with an Event of Default
specified in Article Five hereof, the expenses (including reasonable fees and
expenses of its counsel) and the compensation for the services in connection
therewith are intended to constitute expense of administration under any
applicable bankruptcy law.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act to act as such
and has (or in the case of a Person included in a bank holding company system,
the related bank holding company shall have) a combined capital and surplus of
at least $50,000,000 and its Corporate Trust Office in New York City or Los
Angeles. If such Person publishes reports of condition at least annually,
pursuant
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to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 611.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section
609 and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
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then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money
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held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
of claims against the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents
which shall be authorized to act on behalf of the Trustee to authenticate
Securities issued upon original issue and upon exchange, registration of
transfer, partial conversion or partial redemption or pursuant to Section 307,
and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory
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for all purposes as if authenticated by the Trustee hereunder. Wherever
reference is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication and delivery on behalf of
the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having (or in the case of a
corporation included in a bank holding company system, the related bank holding
company having) a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the
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Company and shall mail written notice of such appointment by first-class mail,
postage prepaid, to all Holders as their names and addresses appear in the
Security Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section, and
the Trustee shall be entitled to be reimbursed for such payments, subject to
the provisions of Section 607.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternative certificate of authentication in the
following form:
This is one of the Securities described in the within-mentioned Indenture.
HARRIS TRUST COMPANY OF CALIFORNIA,
As Trustee
By___________________________,
As Authenticating Agent
By___________________________
Authorized Officer
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ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee
(a) semi-annually, not more than 15 days after each
Regular Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of
such Regular Record Date, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than
15 days prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other
Holders with respect to their rights under this Indenture or under the
Securities and the corresponding rights and duties of the Trustee, shall be
provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any agent of either of them shall be held accountable by reason
of any disclosure of information as to the names and addresses of Holders made
pursuant to the Trust Indenture Act.
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SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other reports, and
such summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc. Only on Certain Terms.
The Company (a) shall not consolidate with or merge into any
other Person; (b) shall not permit any other Person to consolidate with or
merge into the Company; and (c) shall not, directly or indirectly, transfer,
convey, sell, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety; unless, in any such transaction:
(1) immediately after giving effect to such transaction and
treating any Indebtedness Incurred by the Company or a Restricted
Subsidiary of the Company as a result of such transaction as having
been Incurred by the Company or such Restricted Subsidiary at the time
of such transaction, no Event of Default, and no
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event which, after notice or lapse of time, or both, would become an
Event of Default, shall have happened and be continuing;
(2) in the case the Company shall consolidate with or merge
into another Person or shall directly or indirectly transfer, convey,
sell, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by transfer, conveyance, sale, lease or other disposition all
or substantially all of the properties and assets of the Company as an
entirety (for purposes of this Article Eight, a "Successor Company")
shall be a corporation, partnership or trust, shall be organized and
validly existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly assume
by an indenture supplemental hereto executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of (and premium, if any) and interest on all
the Securities and the performance of every covenant of this Indenture
on the part of the Company to be performed or observed;
(3) immediately after giving effect to such transaction,
the Consolidated Net Worth of the Company or, if applicable, the
Successor Company shall be equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction;
(4) immediately after giving effect to such transaction, and
treating any Indebtedness Incurred by the Company or any Restricted
Subsidiary as a result of such transaction as having been Incurred at
the time of such transaction, the Company or the Successor Company
would be permitted to Incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph under Section 1008;
(5) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer, lease or disposition and,
if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, complies with this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with, and, with respect to such
Officer's Certificate, setting forth the manner of determination
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of the Consolidated Net Worth and the ability to Incur Indebtedness in
accordance with Clause (4) of Section 801, the Company or, if
applicable, of the Successor Company as required pursuant to the
foregoing.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any transfer, conveyance, sale, lease or
other disposition of all or substantially all of the properties and assets of
the Company as an entirety in accordance with Section 801, the Successor
Company shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except
in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the
benefit of the Holders, or to surrender any right or power herein
conferred upon the Company; or
(3) to secure the Securities pursuant to the requirements
of Section 1013 or otherwise; or
(4) to comply with any requirements of the Commission in
order to effect and maintain the
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qualification of this Indenture under the Trust Indenture Act; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture, provided such
action pursuant to this Clause (5) shall not adversely affect the
interests of the Holders in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or
any instalment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
thereon, or change the place of payment where, or the coin or currency
in which, any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date or, in the case of
an Offer to Purchase which has been made, on or after the applicable
Purchase Date), or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
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(3) modify any of the provisions of this Section, Section
513 or Section 1019, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Security affected thereby, or
(4) modify any of the provisions of this Indenture
relating to the subordination of the Securities in a manner adverse to
the Holders, or
(5) following the mailing of an Offer with respect to an
Offer to Purchase pursuant to Sections 1015 or 1017, modify the
provisions of this Indenture with respect to such Offer to Purchase in
a manner adverse to such Holder, or
(6) modify any of the provisions of Section 1010.
Notice shall be given to all Holders and the Trustee at least
10 Business Days prior to the adoption of any proposed amendment pursuant to
this Section 902. It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by, and that all conditions precedent have
been met under, this Indenture. The Trustee may, but shall not be obligated
to, enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated
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and delivered hereunder shall be bound thereby. No such supplemental indenture
shall directly or indirectly modify the provisions of Article Twelve in any
manner which might terminate or impair the rights of the Senior Indebtedness
pursuant to such subordination provisions.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Company, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
SECTION 907. Notice of Supplemental Indenture.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to Section 902, the Company shall transmit
to the Holders a notice setting forth the substance of such supplemental
indenture.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
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SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, New
York City, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, New York
City) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 1003. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (and premium, if any)
or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of (and premium, if any) or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum
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to be held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on Securities in trust
for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Securities) in the making of any
payment of principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee
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or such Paying Agent, before being required to make any such repayment, may at
the expense of the Company cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in New York City, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 1004. Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors in good faith shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and that the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 1005. Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Restricted Subsidiary of the
Company to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, as determined by the Board of
Directors in good faith, desirable in the conduct of its business or the
business of any Restricted Subsidiary and not disadvantageous in any material
respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes,
assessments and governmental charges levied
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or imposed upon the Company or any of its Restricted Subsidiaries or upon the
income, profits or property of the Company or any of its Restricted
Subsidiaries, and (2) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of the Company
or any of its Restricted Subsidiaries; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings.
SECTION 1007. Maintenance of Insurance.
The Company shall, and shall cause its Restricted Subsidiaries
to, keep at all times all of their properties which are of an insurable nature
insured against loss or damage with insurers believed by the Company to be
responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice.
SECTION 1008. Limitation on Consolidated Indebtedness.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness unless the Company's
Indebtedness to EBITDA Ratio at the end of the fiscal quarter immediately
preceding the Incurrence of such Indebtedness, after giving pro forma effect to
the Incurrence of such Indebtedness and any other Indebtedness Incurred since
such date and the receipt and application of the proceeds thereof, would be
less than 9 to 1 for the period ending June 30, 2001 and 7 to 1 thereafter.
Notwithstanding the foregoing paragraph, the Company and/or
any Restricted Subsidiary of the Company, as the case may be, may Incur the
following Indebtedness:
(i) Indebtedness evidenced by the Securities or
otherwise arising under this Indenture;
(ii) Indebtedness of the Company or any Restricted
Subsidiary, as the case may be, that is outstanding or
committed at the date hereof under the Credit Facility
(including any letters of credit issued thereunder) and the
NORTEL Facility and any renewal, extension, refinancing or
refunding thereof in an amount which, together with any amount
remaining outstanding or
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committed under the Credit Facility and the NORTEL Facility,
does not exceed $950 million at any time outstanding; provided
that this Clause (ii) shall not prohibit the Company from
Incurring additional Indebtedness under the Credit Facility or
the NORTEL Facility otherwise permitted pursuant to this
Section 1008;
(iii) Indebtedness of the Company or any Restricted
Subsidiary of the Company that is outstanding or committed
prior to February 1, 2000 for the acquisition, construction or
improvement by the Company or any Restricted Subsidiary of
assets in the Wireless Communications Business; provided that
the amount of such Indebtedness at any time outstanding does
not exceed 100% of the Fair Market Value of such assets;
(iv) Indebtedness owed by the Company to any
Wholly Owned Restricted Subsidiary of the Company (provided
that such Indebtedness is at all times held by a Person which
is a Wholly Owned Restricted Subsidiary of the Company) or
Indebtedness owed by a Wholly Owned Restricted Subsidiary of
the Company to the Company or a Wholly Owned Restricted
Subsidiary of the Company (provided that such Indebtedness is
at all times held by the Company or a Person which is a Wholly
Owned Restricted Subsidiary of the Company); provided,
however, that for purposes of this Section 1008, upon either
(x) the transfer or other disposition by such Wholly Owned
Restricted Subsidiary or the Company of any Indebtedness so
permitted to a Person other than the Company or another Wholly
Owned Restricted Subsidiary of the Company or (y) the issuance
(other than directors' qualifying shares), sale, lease,
transfer or other disposition of shares of Capital Stock
(including by consolidation or merger) of such Wholly Owned
Restricted Subsidiary to a Person other than the Company or
another such Wholly Owned Restricted Subsidiary, the
provisions of this Clause (iv) shall no longer be applicable
to such Indebtedness and such Indebtedness shall be deemed to
have been Incurred at the time of such transfer or other
disposition;
(v) Indebtedness of the Company or any Restricted
Subsidiary of the Company to renew, extend, refinance or
refund any Indebtedness of the Company or any Restricted
Subsidiary outstanding or committed on the date of renewal,
extension, refinancing or refunding other than Indebtedness
Incurred pursuant to Clause (ii) or (iv) above; provided,
however, that such
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Indebtedness does not exceed the principal amount of
outstanding or committed Indebtedness so renewed, extended,
refinanced or refunded plus financing fees and other expenses
Incurred in connection therewith; and provided further, that
Indebtedness the proceeds of which are used to refinance or
refund Indebtedness which is pari passu to the Securities or
Indebtedness which is subordinate in right of payment to the
Securities shall only be permitted if (A) in the case of any
refinancing or refunding of Indebtedness which is pari passu
to the Securities, the refinancing or refunding Indebtedness
is made pari passu to the Securities or subordinate to the
Securities, and, in the case of any refinancing or refunding
of Indebtedness which is subordinated to the Securities, the
refinancing or refunding Indebtedness is made subordinate to
the Securities to substantially the same extent as the
Indebtedness refinanced or refunded, (B) in either case, the
renewing, extending, refinancing or refunding Indebtedness by
its terms, or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, does not
provide for payments of principal of such Indebtedness at the
stated maturity thereof or by way of a sinking fund applicable
thereto or by way of any mandatory redemption, defeasance,
retirement or repurchase thereof by the Company (including any
redemption, retirement or repurchase which is contingent upon
events or circumstances, but excluding any retirement required
by virtue of acceleration of such Indebtedness upon an event
of default thereunder), in each case prior to the stated
maturity of the Indebtedness being renewed, extended,
refinanced or refunded;
(vi) Indebtedness Incurred by the Company or any
Restricted Subsidiary under Interest Hedge Agreements to hedge
permitted Indebtedness; and
(vii) Indebtedness of the Company or any Restricted
Subsidiary that is outstanding or committed prior to February
1, 2000 not otherwise permitted to be Incurred pursuant to
Clauses (i) through (vi) above, which, together with any other
outstanding Indebtedness Incurred pursuant to this Clause
(vii), has an aggregate principal amount not in excess of $50
million at any time outstanding or committed.
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SECTION 1009. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary of the
Company to create or issue any Preferred Stock except:
(i) Preferred Stock outstanding on the date of this
Indenture;
(ii) Preferred Stock issued to and held by the Company or any
Wholly Owned Restricted Subsidiary of the Company (provided that
such Preferred Stock is at all times held by the Company or a Person
which is a Wholly Owned Restricted Subsidiary of the Company);
(iii) Preferred Stock issued by a Person prior to the time
such Person became a direct or indirect Restricted Subsidiary of the
Company;
(iv) Preferred Stock issued by a Restricted Subsidiary the
proceeds of which are used to refinance any outstanding
Preferred Stock of a Restricted Subsidiary, in an aggregate liquidation
preference not to exceed the liquidation preference of the Preferred
Stock so refinanced plus the amount of any financing fees and other
expenses incurred in connection with such refinancing, and provided
such refinancing Preferred Stock by its terms, or by the terms of any
agreement or instrument pursuant to which such Preferred Stock is
issued, does not provide for payments of liquidation value at the
stated maturity of such Preferred Stock or by way of a sinking fund
applicable to such Preferred Stock or by way of any mandatory
redemption, defeasance, retirement or repurchase of such Preferred
Stock by the Company (including any redemption, retirement or
repurchase which is contingent upon events or circumstances) prior to
the stated maturity of the Preferred Stock being refinanced; and
(v) Preferred Stock issued by a Restricted Subsidiary with
a cumulative liquidation preference in an amount which could have been
Incurred at the time of such issuance as Indebtedness under Section
1008.
SECTION 1010. Limitation on Certain Indebtedness.
The Company shall not Incur or suffer to exist any
Indebtedness (other than the Securities) that would rank
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subordinate in right of payment to any other Indebtedness of the Company unless
the Indebtedness so Incurred is either (i) pari passu Indebtedness or (ii)
subordinate in right of payment to the Securities.
SECTION 1011. Limitation on Restricted Payments.
The Company (i) shall not, and shall not permit any Restricted
Subsidiary of the Company to, directly or indirectly, declare or pay any
dividend, or make any distribution, of any kind or character (whether in cash,
property or securities) in respect of any class of its or such Restricted
Subsidiary's Capital Stock or to the holders of any class of its or such
Restricted Subsidiary's Capital Stock (excluding any dividends or distributions
payable solely in shares of its or such Restricted Subsidiary's Capital Stock
or in options, warrants or other rights to acquire its or such Restricted
Subsidiary's Capital Stock and other than any declaration or payment of a
dividend or other distribution by a Restricted Subsidiary to the Company or
another Restricted Subsidiary), (ii) shall not, and shall not permit any
Restricted Subsidiary of the Company, directly or indirectly, to purchase,
redeem or otherwise acquire or retire for value (a) any Capital Stock of the
Company or any Related Person (other than a Restricted Subsidiary) of the
Company or (b) any options, warrants or rights to purchase or acquire shares of
Capital Stock of the Company or such Restricted Subsidiary or any Related
Person (other than a Restricted Subsidiary) of the Company or such Restricted
Subsidiary, in each case other than pursuant to the cashless exercise of
options, (iii) shall not make, or permit any Restricted Subsidiary of the
Company to make, any loan, advance, capital contribution to, or investment in,
or payment of a Guaranty of any obligation of, or purchase, redemption or other
acquisition of any shares of capital stock or any Indebtedness of, any
Affiliate or Related Person (other than a Restricted Subsidiary or other than
any loan, advance, capital contribution to, or investment in, the Company or
another Restricted Subsidiary by a Restricted Subsidiary, or any payment by any
Restricted Subsidiary of any loan, advance or other Indebtedness or other
amount owed by a Restricted Subsidiary to the Company or another Restricted
Subsidiary) and (iv) shall not, and shall not permit any Restricted Subsidiary
of the Company to, redeem, defease (including, but not limited to, legal or
covenant defeasance), repurchase, retire or otherwise acquire or retire for
value prior to any scheduled maturity, repayment or sinking fund payment,
Indebtedness of the Company or such Restricted Subsidiary (other than the
Securities) which is subordinate in right of payment to the Securities (the
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transactions described in Clauses (i) through (iv) being referred to herein as
"Restricted Payments"), if at the time thereof and giving effect thereto:
(1) an Event of Default, or an event that with the lapse
of time or the giving of notice, or both, would constitute an Event of
Default, shall have occurred and is continuing;
(2) the Company would not be permitted to Incur an
additional $1.00 of Indebtedness pursuant to the first paragraph of
Section 1008; and
(3) the aggregate of all Restricted Payments made on or after
the date of this Indenture exceeds the sum of:
(A) Cumulative EBITDA less 1.6 times Cumulative
Interest Expense; and
(B) 100% of the aggregate Affiliate and Related
Person Proceeds and Qualified Capital Stock Proceeds of the
Company after the date of this Indenture.
The foregoing provision shall not be violated, so long as no
Event of Default or event which with notice or lapse of time or both would
become an Event of Default has occurred and is continuing (other than in the
case of Clause (ii) as to which it shall not be a requirement that no Event of
Default or event which with notice or lapse of time or both would become an
Event of Default has occurred and is continuing), by reason of (i) the payment
of any dividend within 60 days after declaration thereof if at the declaration
date such payment would have complied with the foregoing provision; (ii) any
refinancing of any Indebtedness otherwise permitted under Clause (ii) or (v) of
Section 1008; (iii) Permitted Joint Venture Investments; (iv) the payment of
scheduled dividends on, or the redemption of, Preferred Stock permitted to be
created or issued pursuant to Section 1009; or (v) Restricted Payments, in
addition to Restricted Payments permitted pursuant to Clauses (i) through (iv)
of this paragraph, not in excess of $25 million in the aggregate after the date
of this Indenture.
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SECTION 1012. Limitations Concerning Distributions and Transfers By
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, create or otherwise cause or suffer to exist any
consensual restriction or prohibition on the ability of any Restricted
Subsidiary of the Company (i) to pay, directly or indirectly, dividends or make
any other distributions in respect of its Capital Stock or any other ownership
interest or participation in, or measured by, its profits, to the Company or
any Restricted Subsidiary of the Company or pay any Indebtedness or other
obligation owed to the Company or any Restricted Subsidiary of the Company;
(ii) to make loans or advances to the Company or any Restricted Subsidiary of
the Company; or (iii) to transfer any of its property or assets to the Company
or any Restricted Subsidiary of the Company, except, in any such case, any
restriction or prohibition:
(a) pursuant to any agreement in effect on the date of this
Indenture, or
(b) pursuant to an agreement entered into after the date
of this Indenture relating to any Indebtedness the Incurrence of which
is permitted under this Indenture, provided, however, that the
provisions contained in such agreement relating to such encumbrance or
restriction are, taken as a whole, no more restrictive in any material
respect than those contained in the NORTEL Facility or are no more
restrictive in any material respect than those contained in this
Indenture, or
(c) pursuant to an agreement relating to any Indebtedness of
such Restricted Subsidiary which was outstanding or committed prior to
the date on which such Restricted Subsidiary was acquired by the
Company other than in anticipation of becoming a Restricted
Subsidiary, or
(d) pursuant to an agreement effecting a renewal, extension,
refinancing or refunding of any agreement described in Clauses (a)
through (c) above; provided, however, that the provisions contained in
such renewal, extension, refinancing or refunding agreement relating
to such encumbrance or restriction are no more restrictive in any
material respect than the provisions contained in the agreement the
subject thereof.
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SECTION 1013. Limitation on Liens.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary of the Company to, Incur or suffer to exist any Lien on
or with respect to any property or assets now owned or hereafter acquired to
secure any Indebtedness that is pari passu or subordinated to the Securities
without making, or causing such Restricted Subsidiary to make, effective
provision for securing the Securities (i) equally and ratably with such
Indebtedness as to such property for so long as such Indebtedness will be so
secured or (ii) in the event such Indebtedness is Indebtedness of the Company
which is subordinate in right of payment to the Securities, prior to such
Indebtedness as to such property for so long as such Indebtedness will be so
secured.
The foregoing restrictions will not apply to:
(i) Liens in respect of Indebtedness existing at the date
of this Indenture;
(ii) Liens in favor of the Company or Liens in favor of a
Wholly Owned Restricted Subsidiary of the Company on the assets or
Capital Stock of another Wholly Owned Restricted Subsidiary of the
Company;
(iii) Liens to secure Indebtedness outstanding or committed
for the purpose of financing all or any part of the purchase
price or the cost of construction or improvement of the equipment or
other property subject to such Liens; provided, however, that (a) the
principal amount of any Indebtedness secured by such a Lien does not
exceed 100% of such purchase price or cost, (b) such Lien does not
extend to or cover any other property other than such item of property
and any improvements on such item and (c) the Incurrence of such
Indebtedness is otherwise permitted by Section 1008;
(iv) Liens on property existing immediately prior to the time
of acquisition thereof (and not Incurred in anticipation of the
financing of such acquisition); or
(v) Liens to secure Indebtedness to extend, renew, refinance
or refund (or successive extensions, renewals, refinancings or
refundings), in whole or in part, Indebtedness secured by any Lien
referred to in the foregoing Clauses (i), (iii) and (iv) so long as
such Lien does not extend to any other property and the principal
amount of Indebtedness so secured is not
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increased except as otherwise permitted under Clause (ii) or (v) of
Section 1008.
SECTION 1014. Limitation on Transactions with Affiliates and Related
Persons.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, directly or indirectly, enter into any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property, the rendering of any service) involving aggregate
consideration in excess of $1 million, with or to any Affiliate or Related
Person (other than a Restricted Subsidiary), unless a majority of the
disinterested members of the Board of Directors of the Company shall determine,
evidenced by a Board Resolution that:
(1) such transaction is in the best interests of the
Company or such Restricted Subsidiary; and
(2) such transaction is on terms no less favorable to the
Company or such Restricted Subsidiary than those that could be
obtained in a comparable arm's length transaction with a third party
at the time.
SECTION 1015. Limitation on Certain Asset Dispositions.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary of the Company to, make any Asset Disposition in one or
more related transactions that would result in aggregate net proceeds in excess
of $10 million unless
(i) the consideration received at the time of such Asset
Disposition is at least equal to the Fair Market Value of the assets
as determined by the Board of Directors and evidenced by a Board
Resolution,
(ii) (x) at least 85% of the consideration received
consists of cash or readily marketable cash equivalents or the
assumption of Indebtedness of the Company or any Restricted Subsidiary
or (y) so long as no Event of Default or event which with notice or
lapse of time would become an Event of Default has occurred and is
continuing, the consideration paid to the Company or such Restricted
Subsidiary is substantially comparable in type to the assets being
sold as determined by the Board of Directors of the Company
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(which determination will be evidenced by a Board Resolution) and
(iii) 100% of the Net Available Proceeds from such
disposition (including from the sale of any marketable cash
equivalents received therein) are applied by the Company (or the
Restricted Subsidiary, as the case may be) (A) first, to repayment (in
whole or in part) of Senior Indebtedness (or Indebtedness of such
Restricted Subsidiary, as the case may be); (B) second, to make any
offer to purchase required for the Company's 10 1/2% Senior
Subordinated Notes Due 2006; (C) third, to the extent Net Available
Proceeds are not required to be applied to Senior Indebtedness or
Indebtedness of such Restricted Subsidiary as specified in Clause (A)
or to be applied to an offer to purchase as specified in Clause (B),
to make an Offer to Purchase any Outstanding Securities at a purchase
price equal to 100% of their principal amount plus accrued interest to
but excluding the date of purchase (provided, however, that
installments of interest whose Stated Maturity is on or prior to the
Purchase Date shall be payable to the Holders of such Securities, or
one or more Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 308) and any other offer to purchase required
under the terms of Indebtedness that is pari passu to the Securities,
on a pro rata basis; and (D) fourth, to the extent of any remaining
Net Available Proceeds following completion of the offers to purchase
referred to in subclauses (B) and (C) above, to the repayment, within
five Business Days after the Purchase Date of such Offer to Purchase,
of other Indebtedness of the Company or a Restricted Subsidiary.
Notwithstanding Clause (iii) above, the Company will not be
required to repay Senior Indebtedness or Indebtedness of such Restricted
Subsidiary then Outstanding, to make an offer to purchase any of the Company's
outstanding 10 1/2% Senior Subordinated Notes Due 2006 or to make an Offer to
Purchase any Outstanding Securities or to repay any other Indebtedness with the
proceeds of any Asset Disposition to the extent that the Net Available Proceeds
are invested within 365 days of such Asset Disposition in assets or an entity
in the Wireless Communications Business or the Company or a Restricted
Subsidiary shall have entered into a binding agreement to invest in such assets
and such investment shall have been consummated within eighteen months of such
Asset Disposition.
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(b) In the event that the Company is required to
repurchase or to redeem Securities pursuant to Clause (a)(iii) above, the
Company will mail the Offer for an Offer to Purchase required pursuant to
Section 1015(a) not more than 30 days after the expiration of the 365-day or
18-month period referred to in Section 1015(a). The aggregate principal amount
of the Securities to be offered to be purchased pursuant to the Offer to
Purchase shall equal the Net Available Proceeds available therefor pursuant to
Clause (iii)(C) of Section 1015(a) (rounded down to the next lowest integral
multiple of $1,000). Each Holder shall be entitled to tender all or any
portion of the Securities owned by such Holder pursuant to the Offer to
Purchase, subject to the requirement that any portion of a Security tendered
must be tendered in an integral multiple of $1,000 principal amount.
The Company shall not be entitled to any credit against its
obligations under this Section 1015 for the principal amount of any Securities
acquired by the Company otherwise than pursuant to the Offer to Purchase
pursuant to this Section 1015.
(c) Not later than the date of the Offer with respect to
an Offer to Purchase pursuant to this Section 1015, the Company shall deliver
to the Trustee an Officers' Certificate as to (i) the Purchase Amount, (ii) the
allocation of the Net Available Proceeds from the Asset Disposition pursuant to
which such Offer is being made, including, if amounts are invested in assets or
an entity in the Wireless Communications Business, the actual assets or entity
acquired and (iii) the compliance of such allocation with the provisions of
Clause (a).
The Company and the Trustee shall perform their respective
obligations specified in the Offer to Purchase. On or prior to the Purchase
Date, the Company shall (i) accept for payment (on a pro rata basis, if
necessary) Securities or portions thereof tendered pursuant to the Offer, (ii)
deposit with the Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) money
sufficient to pay the purchase price of all Securities or portions thereof so
accepted and (iii) deliver or cause to be delivered to the Trustee all
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent (or the Company, if so acting) shall promptly mail or deliver to Holders
of Securities so accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to such
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Holders a new Security equal in principal amount to any unpurchased portion of
the Security surrendered. Any Security not accepted for payment shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Offer on or as soon as practicable
after the Purchase Date.
(d) Notwithstanding the foregoing, this Section 1015
shall not apply to any Asset Disposition which constitutes a transfer,
conveyance, sale, lease or other disposition of all or substantially all of the
Company's properties or assets within the meaning of Section 801 hereof.
SECTION 1016. Limitation on Issuances and Sales of
Capital Stock of Wholly Owned Restricted
Subsidiaries.
Subject to the requirements of Section 801 (if applicable),
the Company (i) shall not, and shall not permit any Wholly Owned Restricted
Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of such Wholly Owned Restricted Subsidiary or any other Wholly
Owned Restricted Subsidiary to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary) unless such transfer, conveyance, sale, lease or
other disposition is of all the Capital Stock of such Wholly Owned Restricted
Subsidiary and the Net Available Proceeds from such sale, assignment, transfer
or conveyance are applied in accordance with Section 1015 (including the
provisions thereof relating to the application of the Net Available Proceeds
therefrom) and (ii) shall not permit any Wholly Owned Restricted Subsidiary to
issue shares of its Capital Stock (other than directors' qualifying shares or
to the Company or a Wholly Owned Restricted Subsidiary of the Company), or
securities convertible into, or warrants, rights or options to subscribe for or
purchase shares of, its Capital Stock to any Person unless such issuance is of
all the Capital Stock of such Wholly Owned Restricted Subsidiary and the Net
Available Proceeds from such issuance are applied in accordance with Section
1015 (including the provisions thereof relating to the application of the Net
Available Proceeds therefrom).
SECTION 1017. Change of Control.
(a) Upon the occurrence of a Change in Control, each
Holder of a Security shall have the right to have such Security repurchased by
the Company on the terms and condi-
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tions set forth in this Section 1017 and this Indenture. Subject to the
limitations of Article Twelve and to the compliance by the Company with the
requirements of paragraph (d) of this Section 1017, the Company shall, within 30
days following the date of the consummation of a transaction resulting in a
Change of Control, mail to each Holder of Securities an Offer to Purchase all
Outstanding Securities at a purchase price equal to 101% of their aggregate
principal amount plus accrued interest, if any, to but excluding the Purchase
Date (provided, however, that installments of interest whose Stated Maturity is
on or prior to the Purchase Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 308). Each Holder shall be entitled to tender all or any
portion of the Securities owned by such Holder pursuant to the Offer to
Purchase, subject to the requirement that any portion of a Security tendered
must be tendered in an integral multiple of $1,000 principal amount.
(b) The Company and the Trustee shall perform their
respective obligations specified in the Offer to Purchase. Prior to the
Purchase Date, the Company shall (i) accept for payment Securities or portions
thereof tendered pursuant to the Offer, (ii) deposit with the Paying Agent (or,
if the Company is acting as its own Paying Agent, segregate and hold in trust
as provided in Section 1003) money sufficient to pay the purchase price of all
Securities or portions thereof so accepted and (iii) deliver or cause to be
delivered to the Trustee all Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment by
the Company. The Paying Agent shall promptly mail or deliver to Holders of
Securities so accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to such Holders a
new Security or Securities equal in principal amount to any unpurchased portion
of the Security surrendered as requested by the Holder. Any Security not
accepted for payment shall be promptly mailed or delivered by the Company to
the Holder thereof. The Company shall publicly announce the results of the
Offer on or as soon as practicable after the Purchase Date.
(c) "Change of Control" means (i) directly or indirectly a
sale, transfer or other conveyance of all or substantially all the assets of
the Company, on a consolidated basis, to any "person" or "group" (as such terms
are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether
or not applicable), excluding
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transfers or conveyances to or among the Company's Wholly Owned Restricted
Subsidiaries, as an entirety or substantially as an entirety in one transaction
or series of related transactions, in each case with the effect that any Person
or group of Persons that, as of the date of this Indenture, are not Initial
Investors or Affiliates of the Initial Investors own more than 50% of the total
Voting Power entitled to vote in the election of directors, managers or
trustees of the transferee entity immediately after such transaction, (ii) any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), other than the Initial
Investors (or any Person or group of Persons that, at the date of this
Indenture, are Affiliates of the Initial Investors), is or becomes the
"beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a Person shall be deemed
to have "beneficial ownership" of all shares that any such Person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the total Voting
Power of the Company or (iii) during any period of 24 consecutive months,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by
such Board or whose nomination for election by the stockholders of the Company
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved), cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
(d) Prior to the time required for the mailing of an Offer to
Purchase pursuant to paragraph (a), the Company will in good faith (i) seek to
obtain any required consent of holders of Senior Indebtedness so as to permit
the making of the Offer to Purchase and the purchase of Securities pursuant to
this Section 1017, or (ii) seek to repay all or a portion of the lenders under
the Credit Facility to the extent necessary (including, if necessary, payment
in full of such Indebtedness and payment of any prepayment premiums, fees,
expenses or penalties) to permit the making of the Offer to Purchase and the
purchase of Securities pursuant to this Section 1017 without such consent or
(iii) if such Indebtedness is not then prepayable to such extent, make an offer
to the lenders under the Credit Facility from which consent is required and
cannot be obtained to repay such Indebtedness in full for an amount equal to
the outstanding principal balance thereof and accrued interest to the date of
repayment, plus any fees, expenses and penalties required
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pursuant to the instruments governing such Indebtedness, plus, in the event
such Indebtedness is subsequently prepayable at a premium, the premium payable
when such Indebtedness is first prepayable, and repay any lender who accepts
such Offer. Following compliance by the Company with the requirements of the
foregoing sentence and assuming that the required consent has been obtained or
that the Indebtedness under the Credit Facility has been repaid, the Company
shall, within the time required for the mailing of an Offer with respect to an
Offer to Purchase pursuant to Clause (a), mail such Offer.
SECTION 1018. Statement by Officers as to Default; C
Compliance Certificates.
(a) The Company will deliver to the Trustee, within 90 days
after the end of each fiscal year, and within 60 days after the end of each
fiscal quarter (other than the fourth fiscal quarter), of the Company ending
after the date hereof an Officers' Certificate, stating whether or not to the
best knowledge of the signers thereof the Company is in default in the
performance and observance of any of the terms, provisions and conditions of
Section 801 or Sections 1004 to 1017, inclusive, and if the Company shall be in
default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as
possible and in any event within 10 days after the Company becomes aware or
should reasonably become aware of the occurrence of an Event of Default or an
event which, with notice or the lapse of time or both, would constitute an
Event of Default, an Officers' Certificate setting forth the details of such
Event of Default or default, the period of existence thereof and the action
which the Company proposes to take with respect thereto.
(c) The Company shall deliver to the Trustee within 90
days after the end of each fiscal year a written statement by the Company's
independent public accountants stating (A) that their audit examination has
included a review of the terms of this Indenture and the Securities as they
relate to accounting matters, and (B) whether, in connection with their audit
examination, any event which, with notice or the lapse of time or both, would
constitute an Event of Default has come to their attention and, if such a
default has come to their attention, specifying the nature and period of the
existence thereof.
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SECTION 1019. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Section 801 and Sections 1004 to 1017,
if before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance
with such covenant or condition, but no such waiver shall extend to or affect
such covenant or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such covenant or condition shall remain
in full force and effect; provided, however, with respect to an Offer to
Purchase as to which an Offer has been mailed, no such waiver may be made or
shall be effective against any Holder tendering Securities pursuant to such
Offer, and the Company may not omit to comply with the terms of such Offer as
to such Holder.
SECTION 1020. Provision of Financial Information.
If the Company at any time is not subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act (or any
successor provisions) at any time while any Securities constitute Restricted
Securities, it will take all actions necessary to permit resales of the
Original Securities (or any successor securities) to be made pursuant to Rule
144A, including furnishing to any holder of such a security (or a beneficial
interest therein), or to any prospective purchaser designated by such holder,
upon the request of such holder, such financial and other information as may be
required to be delivered under paragraph (d)(4) of Rule 144A to permit such
resales and that information that would be required if the Company were subject
to the informational requirements of Sections 13 or 15(d) of the Exchange Act.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
Subject to Article Twelve, the Securities may be redeemed at
the election of the Company, as a whole or from time to time in part, at the
Redemption Prices specified in
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the form of Security hereinbefore set forth together with accrued interest to
but excluding the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company, as
permitted by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant
to Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Securities
to be redeemed.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities
not previously called for redemption, by prorating, as nearly as may be
practicable, the principal amount of Securities to be redeemed. In any
proration pursuant to this Section, the Trustee shall make such adjustments,
reallocations and eliminations as it shall deem proper (and in compliance with
the requirements of the principal national securities exchange, if any, on
which the Securities are listed) to the end that the principal amount of
Securities so prorated shall be $1,000 or a multiple thereof, by increasing or
decreasing or eliminating the amount which would be allocable to any Holder on
the basis of exact proportion by an amount not exceeding $1,000.
The Trustee shall promptly notify the Company and each
Security Registrar in writing of the Securities selected for redemption and, in
the case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
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For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and that
interest thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Securities which are to be redeemed on that date.
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SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest to the Redemption Date; provided, however, that installments
of interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 308.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate provided
by the Security.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior Indebtedness.
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The Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Article (subject to
the provisions of Article Fourth and Article Thirteen), the payment of the
principal of (and premium, if any) and interest on each and all of the
Securities are hereby expressly made subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness.
SECTION 1202. Payment Over of Proceeds Upon Dissolution,
Etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company, then and in any such event specified in (a), (b) or (c) above (each
such event, if any, herein sometimes referred to as a "Proceeding") the holders
of Senior Indebtedness shall be entitled to receive payment in full of all
amounts due or to become due on or in respect of all Senior Indebtedness, or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Indebtedness,
before the Holders of the Securities are entitled to receive any payment or
distribution of any kind or character, whether in cash, property or securities,
on account of principal of (or premium, if any) or interest on or other
obligations in respect of the Securities or other Indebtedness of the Company
that is pari passu or subordinate in right of payment to the Securities or on
account of any purchase or other acquisition of Securities or such other
Indebtedness by the Company or any Subsidiary of the Company (all such
payments, distributions, purchases and acquisitions herein referred to,
individually and collectively, as a "Securities Payment"), and to that end the
holders of Senior Indebtedness shall be entitled to receive, for application to
the payment thereof, any Securities Payment which may be payable or deliverable
in respect of the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have received any
Securities Payment before
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all Senior Indebtedness is paid in full or payment thereof has been provided
for in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Indebtedness, and if such fact shall, at or prior to the time
of such Securities Payment, have been made known to the Trustee by delivery to
the Trustee of any notice set forth in Section 1209 or, as the case may be,
such Holder, then and in such event such Securities Payment shall be paid over
or delivered forthwith by the Trustee (if any notice set forth in Section 1209
has been delivered to the Trustee) or by the Holder to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company (which may be
the Administrative Agent) for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of stock or securities
of the Company provided for by a plan of reorganization or readjustment
authorized by an order or decree of a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law or of any other
corporation provided for by such plan of reorganization or readjustment which
stock or securities are subordinated in right of payment to all then
outstanding Senior Indebtedness to substantially the same extent as the
Securities are so subordinated as provided in this Article. The consolidation
of the Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the conveyance or transfer
of all or substantially all of its properties and assets as an entirety to
another Person upon the terms and conditions set forth in Article Eight shall
not be deemed a Proceeding for the purposes of this Section if the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance or transfer such properties and assets as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article Eight.
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SECTION 1203. No Payment When Senior Indebtedness in Default.
In the event that any Senior Payment Default (as defined
below) shall have occurred and be continuing, then no Securities Payment shall
be made unless and until such Senior Payment Default shall have been cured or
waived or shall have ceased to exist or all amounts then due and payable in
respect of Senior Indebtedness shall have been paid in full, or provision shall
have been made for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Indebtedness. "Senior Payment
Default" means any default in the payment of principal of (or premium, if any)
or interest on any Senior Indebtedness when due, whether at the Stated Maturity
of any such payment or by declaration of acceleration, call for redemption or
otherwise.
In the event that any Senior Nonmonetary Default (as defined
below) shall have occurred and be continuing, then, upon the receipt by the
Company and the Trustee of written notice of such Senior Nonmonetary Default
from an Administrative Agent or, if there is no outstanding Designated Senior
Indebtedness, any representative of a holder of Senior Indebtedness, no
Securities Payment shall be made during the period (the "Payment Blockage
Period") commencing on the date of such receipt of such written notice and
ending on the earlier of (i) the date on which such Senior Nonmonetary Default
shall have been cured or waived or shall have ceased to exist and any
acceleration of Senior Indebtedness shall have been rescinded or annulled or
the Senior Indebtedness to which such Senior Nonmonetary Default relates shall
have been discharged or (ii) the 179th day after the date of such receipt of
such written notice. No more than one Payment Blockage Period may be commenced
with respect to the Securities during any 360-day period and there shall be a
period of at least 181 consecutive days in each 360-day period when no Payment
Blockage Period is in effect. No Payment Blockage Period shall be in effect if
there is no payment blockage period in effect with respect to any outstanding
2006 Notes. For all purposes of this paragraph, no Senior Nonmonetary Default
that was known to the holders of Senior Indebtedness to exist or be continuing
on the date of commencement of any Payment Blockage Period shall be, or be
made, the basis for the commencement of a subsequent Payment Blockage Period by
an Administrative Agent for the Designated Senior Indebtedness unless such
Senior Nonmonetary Default shall have been cured for a period of not less than
90 consecutive days. "Senior Nonmonetary Default" means the occurrence or
existence and continuance of any event of default, or of any event which,
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after notice or lapse of time (or both), would become an event of default,
under the terms of any instrument pursuant to which any Senior Indebtedness is
outstanding, permitting (after notice or lapse of time or both) one or more
holders of such Senior Indebtedness (or a trustee or agent on behalf of the
holders thereof) to declare such Senior Indebtedness due and payable prior to
the date on which it would otherwise become due and payable, other than a
Senior Payment Default.
SECTION 1204. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent (a) the Company, at any
time except during the pendency of any Proceeding referred to in Section 1202
or under the conditions described in Section 1203, from making Securities
Payments, or (b) the application by the Trustee of any money deposited with it
hereunder to Securities Payments or the retention of such Securities Payment by
the Holders, if, at the time of such application by the Trustee, it had not
received any notice set forth in Section 1209.
SECTION 1205. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all amounts due or to become
due on or in respect of Senior Indebtedness, or the provision for such payment
in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Indebtedness, the Holders of the Securities shall be
subrogated to the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of (and premium, if any) and interest
on the Securities shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness of any
cash, property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Indebtedness by Holders of the Securities or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness and
the Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
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SECTION 1206. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders on the one hand and
the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional (and which, subject to the rights
under this Article of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company), to pay to the
Holders of the Securities the principal of (and premium, if any) and interest
on the Securities as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other
than the holders of Senior Indebtedness; or (c) prevent the Trustee or the
Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, under this Article of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to the Trustee or such
Holder.
SECTION 1207. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1208. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
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Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement
under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 1209. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities. Notwithstanding the provisions
of this Article or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts which would prohibit
the making of any payment to or by the Trustee in respect of the Securities,
unless and until the Trustee shall have received written notice thereof from
the Company or a holder of Senior Indebtedness or from any trustee or
Administrative Agent therefor; and, prior to the receipt of any such written
notice, the Trustee, subject to the provisions of Section 601, shall be
entitled in all respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided for in this
Section at least 5 Business Days prior to the date upon which by the terms
hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest
on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within 5 Business Days prior to such date.
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Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee or
Administrative Agent therefor) to establish that such notice has been given by
a holder of Senior Indebtedness (or a trustee or Administrative Agent
therefor). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1210. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to the provisions of Section
601, and the Holders of the Securities shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or
to the Holders of Securities, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article.
SECTION 1211. Trustee Not Fiduciary for Holders of Senior
Debt.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and it undertakes to perform and observe
only such of its covenants and obligations with respect to the Senior
Indebtedness as are specifically set forth in this Indenture, and no implied
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covenants or obligations with respect to the Senior Indebtedness shall be read
into this Indenture against the Trustee and the Trustee shall not be liable to
any such holders if it shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other Person cash, property
or securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article or otherwise.
SECTION 1212. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 607.
SECTION 1213. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 1212 shall not apply to the Company or
any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
SECTION 1214. Defeasance of this Article Twelve.
The subordination of the Securities provided by this Article
Twelve is expressly made subject to the provisions for defeasance or covenant
defeasance in Article Thirteen hereof and, anything herein to the contrary
notwithstanding, upon the effectiveness of any such defeasance or covenant
defeasance, the Securities then outstanding shall thereupon cease to be
subordinated pursuant to this Article Twelve.
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ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may at its option by Board Resolution, at any
time, elect to have either Section 1302 or Section 1303 applied to the
Outstanding Securities upon compliance with the conditions set forth below in
this Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section
1301 applicable to this Section, the Company shall be deemed to have been
discharged from its obligations with respect to the Outstanding Securities, and
the provisions of Article Twelve hereof shall cease to be effective, on the
date the conditions set forth below are satisfied (hereinafter, "defeasance").
For this purpose, such defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the Outstanding
Securities and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
such Securities to receive, solely from the trust fund described in Section
1304 and as more fully set forth in such Section, payments in respect of the
principal of (and premium, if any) and interest on such Securities when such
payments are due, (B) the Company's obligations with respect to such Securities
under Sections 304, 305, 306, 307, 1002 and 1003, (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (D) this Article
Thirteen. Subject to compliance with this Article Thirteen, the Company may
exercise its option under this Section 1302 notwithstanding the prior exercise
of its option under Section 1303.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section
1301 applicable to this Section, (i) the Company shall be released from its
obligations under Sections 1005
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through 1017, inclusive, and Clauses (3), (4) and (5) of Section 801, (ii) the
occurrence of an event specified in Sections 501(3), 501(4) (with respect to
Clauses (1), (3), (4) or (5) of Section 801), 501(5) (with respect to any of
Sections 1005 through 1017, inclusive), 501(6) and 501(7) shall not be deemed
to be an Event of Default and (iii) the provisions of Article Twelve hereof
shall cease to be effective on and after the date the conditions set forth
below are satisfied (hereinafter, "covenant defeasance"). For this purpose,
such covenant defeasance means that the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such Section, Clause or Article, whether directly or indirectly by
reason of any reference elsewhere herein to any such Section, Clause or Article
or by reason of any reference in any such Section, Clause or Article to any
other provision herein or in any other document, but the remainder of this
Indenture and such Securities shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant
Defeasance.
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the then Outstanding Securities:
(1) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 609 who shall agree to comply
with the provisions of this Article Thirteen applicable to it) as
trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms, without the need for reinvestment, will provide, not later than
one day before the due date of any payment, money in an amount, or (C)
a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of (and
premium, if any,) and each instalment of interest on the Securities on
the Stated Maturity of such principal or instalment of interest in
accordance
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<PAGE> 127
with the terms of this Indenture and of such Securities. For
this purpose, "U.S. Government Obligations" means securities that are
(x) direct obligations of the United States of America for the payment
of which its full faith and credit is pledged or (y) obligations of a
Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally Guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include
a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to
any such U.S. Government Obligation or a specific payment of principal
of or interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository receipt,
provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of
principal of or interest on the U.S. Government Obligation evidenced by
such depository receipt.
(2) In the case of an election under Section 1302, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since the
date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the
Outstanding Securities will not recognize gain or loss for Federal
income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred.
(3) In the case of an election under Section 1303, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the Outstanding Securities will not
recognize gain or loss for Federal income tax purposes as a result of
such deposit and covenant defeasance and will be subject to Federal
income tax on the same amount, in the same manner and at the same
times as
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<PAGE> 128
would have been the case if such deposit and covenant defeasance had
not occurred.
(4) The Company shall have delivered to the Trustee an
Officer's Certificate to the effect that the Securities, if then
listed on any securities exchange, will not be delisted as a result of
such deposit.
(5) Such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest as defined in Section
608 and for purposes of the Trust Indenture Act with respect to any
securities of the Company.
(6) No Event of Default or event which with notice or
lapse of time or both would become an Event of Default shall have
occurred and be continuing on the date of such deposit or, insofar as
subsections 501(8) and (9) are concerned, at any time during the
period ending on the 121st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied
until the expiration of such period).
(7) Such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company is a party or by
which it is bound.
(8) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with.
(9) Such defeasance or covenant defeasance shall not
result in the trust arising from such deposit constituting an
investment company as defined in the Investment Company Act of 1940,
as amended, or such trust shall be qualified under such act or exempt
from regulation thereunder.
SECTION 1305. Deposited Money and U.S. Government
Obligations to be Held in Trust; Other
Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee--collectively,
for purposes of
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<PAGE> 129
this Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Securities shall be held in trust and applied by the Trustee, in accordance
with the provisions of such Securities and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
its own Paying Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law. Money so held in trust shall
not be subject to the provisions of Article Twelve.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Section 1304 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance.
SECTION 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with Section 1302 or 1303 by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Thirteen until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1302 or 1303; provided, however, that if the Company makes any payment
of principal of (and premium, if any) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
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<PAGE> 130
of the Holders of such Securities to receive such payment from the money held
by the Trustee or the Paying Agent.
____________________
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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<PAGE> 131
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
WESTERN WIRELESS CORPORATION
By /s/ Alan Bender
---------------------
Attest:
/s/ Theresa Gillespie
- ------------------------
HARRIS TRUST COMPANY OF
CALIFORNIA
By /s/ Esther Cervantes
--------------------
Authorized Officer
Attest:
/s/ Michael O. Goedecke
- ------------------------
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<PAGE> 132
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK)
On the 24th day of October, 1996, before me personally came
Alan Bender, to me known, who, being by me duly sworn, did depose and say that
he is General Counsel and Senior Vice President of Western Wireless
Corporation, one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.
/s/
______________________________
STATE OF CALIFORNIA ) ss.:
COUNTY OF LOS ANGELES)
On the 24th day of October, 1996, before me personally
came Esther Cervantes, to me known, who, being by me duly sworn, did depose and
say that she is ___________________________________________________ of Harris
Trust Company of California, one of the corporations described in and which
executed the foregoing instrument; that [he -- she] knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that [he -- she] signed [his -- her] name thereto by like
authority.
/s/
______________________________
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<PAGE> 133
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to Section 306(b)(i), (iii) and (v)
of the Indenture)
Harris Trust Company of California,
as Trustee
601 South Figueroa, Suite 4900
Los Angeles, California 90017
Re: 10-1/2% Senior Subordinated Notes Due 2007
of Western Wireless Corporation
(the "Securities")
Reference is made to the Indenture, dated as of October 24,
1996 (the "Indenture"), from Western Wireless Corporation (the "Company") to
Harris Trust Company of California, as Trustee. Terms used herein and defined
in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act
of 1933 (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $____________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by a Global Security,
they are held through the Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form
of a Regulation S Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an
A-1
<PAGE> 134
effective registration statement under the Securities Act, it is being effected
in accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being
effected in accordance with Rule 904:
(A) the Owner is not a distributor of the
Securities, an affiliate of the Company or any such
distributor or a person acting on behalf of any of the
foregoing;
(B) the offer of the Specified Securities was not
made to a person in the United States;
(C) either:
(i) at the time the buy order was
originated, the Transferee was outside the United
States or the Owner and any person acting on its
behalf reasonably believed that the Transferee was
outside the United States, or
(ii) the transaction is being executed in, on
or through the facilities of the Eurobond market, as
regulated by the Association of International Bond
Dealers, or another designated offshore securities
market and neither the Owner nor any person acting on
its behalf knows that the transaction has been
prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in
the United States by or on behalf of the Owner or any
affiliate thereof;
(E) if the Owner is a dealer in securities or has
received a selling concession, fee or other renumeration in
respect of the Specified Securities, and the transfer is to
occur during the Restricted Period, then the requirements of
Rule 904(c)(1) have been satisfied; and
(F) the transaction is not part of a plan or
scheme to evade the registration requirements of the
Securities Act.
A-2
<PAGE> 135
(2) Rule 144 Transfers. If the transfer is being
effected pursuant to Rule 144:
(A) the transfer is occurring after October 24,
1998 and is being effected in accordance with the applicable
amount, manner of sale and notice requirements of Rule 144; or
(B) the transfer is occurring after October 24,
1999 and the Owner is not, and during the preceding three
months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
-----------------------------------
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this
certificate.)
By:
---------------------------------
Name:
Title:
(If the Undersigned is a
corporation, partnership or
fiduciary, the title of the person
signing on behalf of the
Undersigned must be stated.)
A-3
<PAGE> 136
ANNEX B -- Form of Restricted Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 306(b)(ii), (iii), (iv) and (v)
of the Indenture)
Harris Trust Company of California,
as Trustee
601 South Figueroa, Suite 4900
Los Angeles, California 90017
Re: 10-1/2% Senior Subordinated Notes Due 2007 of
Western Wireless Corporation
(the "Securities")
Reference is made to the Indenture, dated as of October 24,
1996 (the "Indenture"), from Western Wireless Corporation (the "Company") to
Harris Trust Company of California, as Trustee. Terms used herein and defined
in the Indenture or in Rule 144A or Rule 144 under the U.S. Securities Act of
1933 (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by a Global Security,
they are held through the Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form
of a Restricted Security or, if pursuant to Rule 144, in the form of a Security
bearing
B-1
<PAGE> 137
no Securities Act Legend pursuant to Section 306(c). In connection with such
transfer, the Owner hereby certifies that, unless such transfer is being
effected pursuant to an effective registration statement under the Securities
Act, it is being effected in accordance with Rule 144A or Rule 144 under the
Securities Act and all applicable securities laws of the states of the United
States and other jurisdictions. Accordingly, the Owner hereby further certifies
as:
(1) Rule 144A Transfers. If the transfer is being
effected in accordance with Rule 144A:
(A) the Specified Securities are being
transferred to a person that the Owner and any person acting
on its behalf reasonably believe is a "qualified institutional
buyer" within the meaning of Rule 144A, acquiring for its own
account or for the account of a qualified institutional buyer;
and
(B) the Owner and any person acting on its behalf
have taken reasonable steps to ensure that the Transferee is
aware that the Owner may be relying on Rule 144A in connection
with the transfer; and
(2) Rule 144 Transfers. If the transfer is being
effected pursuant to Rule 144:
(A) the transfer is occurring after October 24,
1998 and is being effected in accordance with the applicable
amount, manner of sale and notice requirements of Rule 144; or
(B) the transfer is occurring after October 24,
1999 and the Owner is not, and during the preceding three
months has not been, an affiliate of the Company.
B-2
<PAGE> 138
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
-----------------------------------
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this
certificate.)
By:
--------------------------------
Name:
Title:
(If the Undersigned is a
corporation, partnership or
fiduciary, the title of the person
signing on behalf of the
Undersigned must be stated.)
B-3
<PAGE> 139
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 306(c))
Harris Trust Company of California,
as Trustee
601 South Figueroa, Suite 4900
Los Angeles, California 90017
Re: 10-1/2% Senior Subordinated Notes Due 2007 of
Western Wireless Corporation
(the "Securities")
Reference is made to the Indenture, dated as of October 24,
1996 (the "Indenture"), from Western Wireless Corporation (the "Company") to
Harris Trust Company of California, as Trustee. Terms used herein and defined
in the Indenture or in Rule 144 under the U.S. Securities Act of 1933 (the
"Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by a Global Security,
they are held through the Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
exchanged for Securities bearing no Securities Act Legend pursuant to Section
306(c) of the Indenture. In connection with such exchange, the Owner hereby
certifies that the exchange is occurring after October 24, 1999 and
C-1
<PAGE> 140
the Owner is not, and during the preceding three months has not been, an
affiliate of the Company. The Owner also acknowledges that any future transfers
of the Specified Securities must comply with all applicable securities laws of
the states of the United States and other jurisdictions.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
----------------------------------
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this
certificate.)
By:
--------------------------------
Name:
Title:
(If the Undersigned is a
corporation, partnership or
fiduciary, the title of the person
signing on behalf of the
Undersigned must be stated.)
C-2
<PAGE> 1
EXHIBIT 5.1
October 25, 1996
Western Wireless Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Re: Registration Statement on Form S-4 of Western Wireless
Corporation
Ladies and Gentlemen:
We have acted as counsel to Western Wireless Corporation (the "Company")
in connection with the filing of the above-referenced Registration Statement
(the "Registration Statement") relating to the offer to exchange (the "Exchange
Offer") up to $200,000,000 principal amount of 10 1/2% Senior Subordinated
Notes Due 2007 (the "Exchange Notes") for up to $200,000,000 principal amount
of the Company's outstanding 10 1/2% Senior Subordinated Notes Due 2007 that
were issued and sold in a transaction exempt from regisration under the
Securities Act of 1933, as amended (the "Original Notes"). In connection
therewith, we have reviewed the Company's Articles of Incorporation, Bylaws,
minutes of appropriate meetings, the Indenture under which the Exchange Notes
will be issued (the "Indenture"), the Company's Offering Circular dated
October 18, 1996, and such other documents and matters we deemed appropriate.
Based on this review, it is our opinion that:
1. The Company is duly incorporated and validly existing under the laws of
the State of Washington.
2. The Exchange Notes have been duly authorized and, when (i) the
Company's Board of Directors shall have duly adopted final resolutions
authorizing the issuance and exchange of the Exchange Notes as contemplated by
the Registration Statement; and (ii) securities representing the Exchange Notes
shall have been duly authenticated in accordance with the terms of the
Indenture and duly delivered to the recipients thereof in accordance with the
terms of the Exchange Offer, will be legally issued, fully paid, non-assessable
and binding obligations of the Company and will be enforceable against the
Company in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance and
other similar laws affecting the enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
3. The material federal income tax consequence of participating in the
Exchange Offer is that the exchange of the Original Notes for Exchange Notes by
holders will not be a taxable exchange for federal income tax purposes, and
such holders will not recognize any taxable gain or loss or any interest income
as a result of such exchange. Our opinion is based on Treasury Regulation
Section 1.1001-3 and on statutory provisions, regulations promulgated thereunder
and interpretations thereof by the Internal Revenue Service and the courts
having jurisdiction over such matters all of which are subject to change either
prospectively or retroactively. Also, any variation or difference in the
relevant facts from those set forth in the Registration Statement may affect the
conclusions stated herein.
We do not find it necessary for the purposes of this opinion to cover, and
accordingly we express no opinion as to, the application of the securities or
blue sky laws of the various states to the sale of the Exchange Notes.
<PAGE> 2
October 25, 1996
Page 2
This opinion letter is limited to the matters stated herein and no
opinion is implied or may be inferred beyond the matters expressly stated.
This letter speaks only as of the date hereof and is limited to present
statutes, regulations and administrative and judicial interpretations. We
undertake no responsibility to update or supplement this letter after the date
hereof.
We consent to being named in the Registration Statement and related
Prospectus as counsel who are passing upon the legality of the Exchange Notes
for the Company and the taxability of the exchange and to the reference to our
name under the captions "Legal Matters" and "The Exchange Offer -- Federal
Income Tax Consequences" in such Prospectus. We further consent to your filing
copies of this opinion as an exhibit to the Registration Statement or any
amendment thereto. In giving such consents, we do not hereby admit that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
PRESTON GATES & ELLIS
By /s/ G. Scott Greenburg
------------------------
G. Scott Greenburg
<PAGE> 1
EXHIBIT 10.40
SECOND AMENDMENT TO
PCS BLOCK "C" ORGANIZATION AND FINANCING AGREEMENT
AND
COOK INLET WESTERN WIRELESS PV/SS PCS, L.P.
LIMITED PARTNERSHIP AGREEMENT
THIS SECOND AMENDMENT TO PCS BLOCK "C" ORGANIZATION AND FINANCING
AGREEMENT AND COOK INLET WESTERN WIRELESS PV/SS PCS, L.P. LIMITED PARTNERSHIP
AGREEMENT (the "Amendment") is entered into as of this 27th day of June, 1996,
by and among WESTERN PCS BTA I CORPORATION, a Delaware corporation ("Western
BTA"), WESTERN WIRELESS CORPORATION, a Delaware corporation ("WWC"), COOK INLET
PV/SS PCS PARTNERS, L.P., a Delaware limited partnership ("Control Group"), COOK
INLET TELECOMMUNICATIONS, INC., a Delaware corporation ("Cook Inlet"), SSPCS
CORPORATION, a Delaware corporation ("SSPCS"), and PROVIDENCE MEDIA PARTNERS
L.P., a Delaware limited partnership ("Providence").
RECITALS
A. Western BTA, WWC, Control Group, Cook Inlet, SSPCS and Providence
are parties to that certain PCS Block "C" Organization and Financing Agreement
dated November 5, 1995, as amended by that certain First Amendment to PCS BLOCK
"C" Organization and Financing Agreement and Cook Inlet Western Wireless PV/SS
PCS, L.P. Limited Partnership Agreement (the "First Amendment") dated April 8,
1996 (together, the "Organization and Financing Agreement"), whereby the parties
thereto specified certain terms with respect to the organization and financing
of Cook Inlet Western Wireless PV/SS PCS, L.P. and operation of the Systems, as
defined therein, and the terms of various contracts for use among the parties
thereto and others in connection with such organization, financing, and
operations.
B. Control Group and Western BTA are parties to that certain Cook Inlet
Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement dated November 5,
1996, as amended by the First Amendment (together, the "Limited Partnership
Agreement"), whereby the parties thereto formed Cook Inlet Western Wireless
PV/SS PCS, L.P. to apply to the FCC for the right to participate in the Auction
and to bid and acquire Licenses, as such terms are defined therein.
C. The FCC currently intends to, and in the future from time to time
may, reauction Licenses for which the previous high bidder or licensee thereof
has defaulted.
D. The parties hereto desire to amend, pursuant to the terms and
conditions of this Amendment, the Organization and Financing Agreement and the
Limited Partnership Agreement to clarify that such agreements also apply to any
such subsequent Auctions to which the parties desire to participate.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto hereby agree as follows:
1. The definition of "Auction" in Article I of the Organization and
Financing Partnership Agreement hereby is amended and restated as follows:
"Auction" means the auction conducted by the FCC described in
the Recitals to this Agreement, including any future or subsequent
Block C PCS auctions conducted by the FCC.
2. The definition of "Auction" in Article I of the Limited Partnership
Agreement hereby is amended and restated as follows:
"Auction" means the auction conducted by the FCC described in
the Recitals to this Agreement, including any future or subsequent
Block C PCS auctions conducted by the FCC.
3. Section 3.1 to the Limited Partnership Agreement hereby is amended
and restated as follows:
3.1 Required Capital Contributions. The required capital
contribution ("Required Capital Contribution Amount") to the capital of
the Partnership shall be 110% of the Required Down Payment for all
Licenses awarded to the Partnership at the Auction. Each Partner's
share of the Required Capital Contribution Amount shall be the Required
Capital Contribution Amount multiplied by that Partner's respective
Required Capital Contribution Amount Percentage, as set forth on
Schedule I. The amount of each contribution of each Partner shall be
recorded by the General Partner as a contribution to the capital of the
Partnership. Notwithstanding anything to the contrary, in no event
shall the Required Capital Contribution Amount for each Partner exceed
the amounts set forth on Schedule I.
4. Schedule I to the Limited Partnership Agreement hereby is amended
and restated in accordance with Schedule A attached hereto.
5. Except as modified by this Amendment, all respective provisions of
the Organization and Financing Agreement and the Limited Partnership Agreement
are unchanged and remain in full force and effect and are ratified and confirmed
by the parties hereto.
6. This Amendment may be signed in several counterparts, each of which
shall be deemed an original and all such counterparts together shall constitute
one and the same instrument.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
WESTERN PCS BTA I CORPORATION COOK INLET TELECOMMUNICATIONS, INC.
By /s/ Cregg B Baumbaugh By /s/ Steve Hillard
------------------------------ -------------------------------
Its Sr. Vice President Its Vice President
------------------------- --------------------------
WESTERN WIRELESS CORPORATION SSPCS CORPORATION
By /s/ Cregg B Baumbaugh By /s/ Meade Sutterfield
------------------------------ --------------------------------
Its Sr. Vice President Its President
------------------------------ ---------------------------
COOK INLET PV/SS PCS PARTNERS, L.P. PROVIDENCE MEDIA PARTNERS L.P.
By: Cook Inlet Telecommunications, Inc., By Providence Media GP Limited
its General Partner Partnership, its General Partner
By Providence Ventures L.P.,
its General Partner
By /s/ Mark Adolph By /s/ Jonathan M. Nelson
------------------------- -----------------------
Its Vice President Its
-------------------- -----------------
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<PAGE> 1
EXHIBIT 10.41
THIRD AMENDMENT TO
PCS BLOCK "C" ORGANIZATION AND FINANCING AGREEMENT
AND
COOK INLET WESTERN WIRELESS PV/SS PCS, L.P.
LIMITED PARTNERSHIP AGREEMENT
FIRST AMENDMENT TO
TECHNICAL SERVICES AGREEMENT
THIS THIRD AMENDMENT TO PCS BLOCK "C" ORGANIZATION AND FINANCING
AGREEMENT AND COOK INLET WESTERN WIRELESS PV/SS PCS, L.P. LIMITED PARTNERSHIP
AGREEMENT and THIS FIRST AMENDMENT TO TECHNICAL SERVICES AGREEMENT
(collectively, the "Amendment") is entered into and effective as of this 30th
day of July, 1996, by and among WESTERN PCS BTA I CORPORATION, a Delaware
corporation ("Western BTA"), WESTERN WIRELESS CORPORATION, a Washington
corporation ("WWC"), COOK INLET PV/SS PCS PARTNERS, L.P., a Delaware limited
partnership ("Control Group"), COOK INLET TELECOMMUNICATIONS, INC., a Delaware
corporation ("Cook Inlet"), SSPCS CORPORATION, a Delaware corporation ("SSPCS"),
PROVIDENCE MEDIA PARTNERS L.P., a Delaware limited partnership ("Providence"),
and COOK INLET WESTERN WIRELESS PV/SS PCS, L.P., a Delaware limited partnership
("Owner").
RECITALS
A. Western BTA, WWC's predecessor, Control Group, Cook Inlet, SSPCS and
Providence are parties to that certain PCS Block "C" Organization and Financing
Agreement dated November 5, 1995, as amended by that certain First Amendment to
PCS BLOCK "C" Organization and Financing Agreement and Cook Inlet Western
Wireless PV/SS PCS, L.P. Limited Partnership Agreement (the "First Amendment")
dated April 8, 1996 and that certain Second Amendment to PCS BLOCK "C"
Organization and Financing Agreement and Cook Inlet Western Wireless PV/SS PCS,
L.P. Limited Partnership Agreement (the "Second Amendment") dated June 27, 1996
(together, the "Organization and Financing Agreement"), whereby the parties
thereto specified certain terms with respect to the organization and financing
of Cook Inlet Western Wireless PV/SS PCS, L.P. and operation of the Systems, as
defined therein, and the terms of various contracts for use among the parties
thereto and others in connection with such organization, financing, and
operations.
B. Control Group and Western BTA are parties to that certain Cook Inlet
Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement dated November 5,
1996, as amended by the First Amendment and the Second Amendment (together, the
"Limited Partnership Agreement"), whereby the parties thereto formed Owner to
apply to the FCC for the right to participate in the Auction and to bid and
acquire Licenses, as such terms are defined therein.
<PAGE> 2
C. Owner and WWC's predecessor are parties to that certain Technical
Services Agreement effective November 5, 1996 (the "Technical Services
Agreement"), whereby Owner retained WWC to provide various technical and other
services with respect to the operations of the Systems, as such term is defined
therein.
D. The Federal Communications Commission (the "FCC") has announced that
it will conduct an auction (the "F Block Auction") for the issuance by the FCC
of Personal Communications Services ("PCS") licenses (the "F Block Licenses") to
provide radio telecommunications services using the 10 MHz band of spectrum in
the "F" block in various Basic Trading Areas ("BTAs"), and the parties desire
for Owner to bid on and acquire F Block Licenses for certain targeted BTAs.
E. The parties hereto desire to amend, pursuant to the terms and
conditions of this Amendment, the Organization and Financing Agreement, the
Limited Partnership Agreement and the Technical Services Agreement to provide
that such agreements also apply to the F Block Auction and any licenses awarded
thereunder.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto hereby agree as follows:
1. Recital A of the Organization and Financing Agreement hereby is
amended and restated as follows:
A. The Federal Communications Commission (the "FCC") has
announced that it will conduct one or more auctions (collectively, the
"Auction") for the issuance by the FCC of Personal Communications
Services ("PCS") licenses (the "Licenses") to provide radio
telecommunications services in various Basic Trading Areas, as
designated by the FCC ("BTAs"), using (1) the 30 MHz band of spectrum
in the "C" block (1895 - 1910 MHz/1975 - 1990 MHz) and (2) the 10 MHz
band of spectrum in the "F" block (1890 - 1895 MHz/1970 - 1975 MHz),
and Cook Inlet, SSPCS, Providence and Western BTA desire to assist
Control Group in acquiring Licenses for certain targeted BTAs.
2. The definition of "Auction" in Article I of the Organization and
Financing Agreement hereby is amended and restated as follows:
"Auction" means the "C" Block and "F" Block PCS auctions
conducted by the FCC, as described in the Recitals to this Agreement,
including any future or subsequent "C" Block or "F" Block PCS auctions
conducted by the FCC following the initial auctions.
3. The definition of "Licenses" in Article I of the Organization and
Financing Agreement hereby is amended and restated as follows:
"Licenses" means the licenses to be issued by the FCC to
provide radio telecommunications services with respect to various BTAs
using either the 30
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<PAGE> 3
MHz band of spectrum in the "C" block (1895 - 1910 MHz/1975 - 1990 MHz)
or the 10 MHz band of spectrum in the "F" block (1890 - 1895 MHz/1970 -
1975 MHz), as described in the Recitals to this Agreement.
4. Section 2.3 of the Organization and Financing Agreement hereby is
amended and restated as follows:
2.3 Bidding Protocol. At or after the Closing,
Control Group and Western BTA shall enter into a bidding protocol with
respect to the Auction for the C Block, which shall set forth the
markets on which Applicant shall bid and provide for bidding
procedures. Prior to the commencement of the Auction with respect to
the F Block, Control Group and Western BTA shall enter into a bidding
protocol with respect to such Auction, which shall set forth the
markets on which Applicant shall bid and provide for bidding
procedures.
5. Recital A of the Limited Partnership Agreement hereby is amended and
restated as follows:
A. The Federal Communications Commission (the "FCC") has
announced that it will conduct one or more auctions (collectively, the
"Auction") for the issuance by the FCC of Personal Communications
Services ("PCS") licenses (the "Licenses") to provide radio
telecommunications services in various Basic Trading Areas, as
designated by the FCC ("BTAs"), using (1) the 30 MHz band of spectrum
in the "C" block (1895 - 1910 MHz/1975 - 1990 MHz) and (2) the 10 MHz
band of spectrum in the "F" block (1890 - 1895 MHz/1970 - 1975 MHz),
and the Partnership desires to acquire Licenses for certain targeted
BTAs.
6. The definition of "Auction" in Article I of the Limited Partnership
Agreement hereby is amended and restated as follows:
"Auction" means the "C" Block and "F" Block PCS auctions
conducted by the FCC, as described in the Recitals to this Agreement,
including any future or subsequent "C" Block or "F" Block PCS auctions
conducted by the FCC following the initial auctions.
7. The definition of "License" in Article I of the Limited Partnership
Agreement hereby is amended and restated as follows:
"License" means a license issued by the FCC to provide radio
telecommunications services with respect to various BTAs using either
the 30 MHz band of spectrum in the "C" block (1895 - 1910 MHz/1975 -
1990 MHz) or the 10 MHz band of spectrum in the "F" block (1890 - 1895
MHz/1970 - 1975 MHz), as described in the Recitals to this Agreement,
and "Licenses" means more than one License.
8. Recital (i) of the Technical Services Agreement hereby is amended
and restated as follows:
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<PAGE> 4
(i) The Federal Communications Commission (the "FCC") has
announced that it will conduct one or more auctions (collectively, the
"Auction") for the issuance by the FCC of Personal Communications
Services ("PCS") licenses (the "Licenses") to provide radio
telecommunications services in various Basic Trading Areas, as
designated by the FCC ("BTAs"), using (1) the 30 MHz band of spectrum
in the "C" block (1895 - 1910 MHz/1975 - 1990 MHz) and (2) the 10 MHz
band of spectrum in the "F" block (1890 - 1895 MHz/1970 - 1975 MHz),
and the Owner desires to bid on and acquire Licenses for certain
targeted BTAs;
9. The definition of "Auction" in Article I of the Technical Services
Agreement hereby is amended and restated as follows:
"Auction" shall have the meaning set forth in the first
recital of this Agreement, namely, the "C" Block and "F" Block PCS
auctions conducted by the FCC, including any future or subsequent "C"
Block or "F" Block PCS auctions conducted by the FCC following the
initial auctions.
10. Except as modified by this Amendment, all respective provisions of
the Organization and Financing Agreement, the Limited Partnership Agreement and
the Technical Services Agreement are unchanged and remain in full force and
effect and are ratified and confirmed by the parties hereto.
11. This Amendment may be signed in several counterparts, each of which
shall be deemed an original and all such counterparts together shall constitute
one and the same instrument.
XXXXXXXXXXXXXXXXXXXXXXX
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<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
WESTERN PCS BTA I CORPORATION COOK INLET TELECOMMUNICATIONS, INC.
By /s/ Cregg B Baumbaugh By /s/ Craig Floerchinger
------------------------------ -------------------------------------
Its Sr. Vice President Its V.P. Assistant Secretary
------------------------- --------------------------------
WESTERN WIRELESS CORPORATION SSPCS CORPORATION
By /s/ Cregg B Baumbaugh By /s/ Meade Sutterfield
------------------------------ -------------------------------------
Its Sr. Vice President Its President
------------------------------ -------------------------------------
COOK INLET PV/SS PCS PARTNERS, L.P. PROVIDENCE MEDIA PARTNERS L.P.
By: Cook Inlet Telecommunications, Inc., By Providence Media GP Limited
its General Partner Partnership, its General Partner
By Providence Ventures L.P.,
its General Partner
By /s/ Craig Floerchinger By /s/ Jonathan M. Nelson
------------------------------ ------------------------
Its V.P. Assistant Secretary Its
------------------------- --------------------
COOK INLET WESTERN WIRELESS PV/SS PCS, L.P.
By: Cook Inlet PV/SS PCS Partners, L.P., its
General Partner
By: Cook Inlet Telecommunications, Inc.,
its General Partner
By /s/ Craig Floerchinger
------------------------------
Its V.P. Assistant Secretary
------------------------------
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<PAGE> 1
EXHIBIT 10.42
TABLE OF CONTENTS
GENERAL AGREEMENT FOR PURCHASE OF CELLULAR SYSTEMS
<TABLE>
PAGE
----
<S> <C> <C>
1. ARTICLE I GENERAL PROVISIONS APPLICABLE TO ENTIRE AGREEMENT............................................ 1
1.1. HEADINGS AND DEFINITIONS....................................................................... 1
1.2. TERM OF AGREEMENT.............................................................................. 5
1.3. SCOPE.......................................................................................... 5
1.4. PURCHASE OF SYSTEMS, PRODUCTS, SERVICES AND LICENSED MATERIALS................................. 7
1.5. ADDITIONS TO SYSTEMS........................................................................... 7
1.6. PLANNING INFORMATION........................................................................... 8
1.7. ORDERS......................................................................................... 8
1.8 ORDER ACCEPTANCE:.............................................................................. 8
1.9 CHANGES IN CUSTOMER'S ORDERS................................................................... 9
1.10 PRICING........................................................................................ 9
1.10.1 Special Discounts and Incentives...................................................... 10
1.11 INVOICES AND TERMS OF PAYMENT.................................................................. 17
1.11.1 Engineer, Furnish and Install (EF&I) Orders:...................................... 17
1.11.2 Early Payment Discounts:.............................................................. 18
1.11.3 Electronic Funds Transfer (EFT) Payments:............................................. 18
1.11.4 Payments By Check (Non-EFT):.......................................................... 18
1.12. DELIVERY AND INSTALLATION SCHEDULE............................................................. 19
1.13. TRANSPORTATION................................................................................. 19
1.14. PACKING, MARKING, AND SHIPPING:................................................................ 19
1.15. TITLE AND RISK OF LOSS:........................................................................ 20
1.16. COMPLIANCE WITH LAWS:.......................................................................... 20
1.17. TAXES:......................................................................................... 20
1.18. TRAINING:...................................................................................... 20
1.19. TERMINATION FOR CONVENIENCE:................................................................... 21
1.20. CANCELLATION FOR BREACH:....................................................................... 21
1.21. PATENTS, TRADEMARKS AND COPYRIGHTS:............................................................ 21
1.22. USE OF INFORMATION:............................................................................ 23
1.23. NOTICES:....................................................................................... 23
1.24. RIGHT OF ACCESS:............................................................................... 24
1.25. INDEPENDENT CONTRACTOR:........................................................................ 24
1.26. CUSTOMER'S REMEDIES:........................................................................... 24
1.27. FORCE MAJEURE:................................................................................. 25
1.28. ASSIGNMENT:.................................................................................... 25
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
1.29. PUBLICITY:..................................................................................... 26
1.30. APPLICABLE LAW:................................................................................ 26
1.31. SURVIVAL OF OBLIGATIONS:....................................................................... 26
1.32. SEVERABILITY:.................................................................................. 26
1.33. NON-WAIVER:.................................................................................... 27
1.34. CUSTOMER RESPONSIBILITY........................................................................ 27
1.35. PUBLICATION OF AGREEMENT....................................................................... 27
1.36. ARBITRATION:................................................................................... 27
1.37. DUTIES OF GOOD FAITH........................................................................... 29
2. ARTICLE II PROVISIONS APPLICABLE TO THE PURCHASE OF PRODUCTS........................................... 30
2.1. GENERAL:....................................................................................... 30
2.2. PRODUCT AVAILABILITY:.......................................................................... 30
2.3. DOCUMENTATION:................................................................................. 30
2.4. PRODUCT COMPLIANCES:........................................................................... 30
2.5. PRODUCT CHANGES:............................................................................... 31
2.6. CONTINUING PRODUCT SUPPORT - PARTS AND SERVICES:............................................... 31
2.7. SPECIFICATIONS:................................................................................ 32
2.8. CUSTOMER TECHNICAL SUPPORT:.................................................................... 32
2.9. PRODUCT WARRANTY:.............................................................................. 32
3. ARTICLE III............................................................................................. 36
3.1. GENERAL:....................................................................................... 36
3.2. LICENSE:....................................................................................... 36
3.3. TITLE, RESTRICTIONS AND CONFIDENTIALITY:....................................................... 36
3.4. CHANGES IN LICENSED MATERIALS:................................................................. 37
3.5. SOFTWARE MODIFICATION REQUESTS:................................................................ 37
3.6. MODIFICATION BY CUSTOMER:...................................................................... 37
3.7. RELATED DOCUMENTATION:......................................................................... 37
3.8. SOFTWARE WARRANTY:............................................................................. 37
3.9. TAXES APPLICABLE TO SOFTWARE:.................................................................. 38
3.10. LIMITED TRANSFERABILITY:....................................................................... 39
3.11. AVAILABILITY AND SUPPORT OF SOFTWARE FEATURES/UPDATES:......................................... 40
4. ARTICLE IV.............................................................................................. 41
4.1. GENERAL:....................................................................................... 41
4.2. ACCEPTANCE OF INSTALLATION:.................................................................... 41
4.3. CONDITIONS OF INSTALLATION AND OTHER SERVICES PERFORMED ON CUSTOMER'S SITE:.................... 41
4.3.1. ITEMS PROVIDED BY CUSTOMER............................................................ 41
4.3.2. ITEMS TO BE FURNISHED BY SELLER....................................................... 45
4.4. WORK DONE BY OTHERS:........................................................................... 46
4.5. SERVICES WARRANTIES:........................................................................... 46
5. ARTICLE V............................................................................................... 47
5.1. ENTIRE AGREEMENT:.............................................................................. 47
</TABLE>
<PAGE> 3
LIST OF ATTACHMENTS
Attachment A New Series IIe Cell Site Configuration /Pricing
Omni 15 Channel
Attachment A-1 New Series IIe Cell Site Configuration /Pricing
Omni 25 Channel
Attachment A-2 New Series II Cell Site Configuration /Pricing
3 Sector 48 Channel
Attachment A-3 New Series II Cell Site Configuration /Pricing
3 Sector 64 Channel
Attachment A-4 New Series IIm Cell Site Configuration /Pricing
Omni 7 Channel
Attachment A-5 New Series IIm Cell Site Configuration /Pricing
Omni 15 Channel
Attachment B New Series IIe Cell Site Configuration /Pricing
Omni 9 Growth Cabinet
Attachment C New Series IIe Cell Site Configuration /Pricing
Growth from Omni 25 to 3-Sector 25 Channel
Attachment D CDMA Implementation in Series II Cell Site
Configuration/Pricing
Attachment E Software Package Feature List
Attachment F Autoplex CTSO Fax Flash Installation of 8 Meg
Memory Boards
Attachment G 60 DS1 5ESS-CDX Switch Configuration/Pricing
Attachment H ECP Equipment for 5ESS-CDX Switch
Configuration/Pricing
Attachment I Billings/Fargo Swapout - Spares
Attachment J Billings/Fargo Swapout
Attachment K 5ESS Landline Configuration/Pricing
Attachments -1
<PAGE> 4
Attachment L Billing (ECP - IMS Removal) Quote
Attachment M Project Implementation Schedule
Attachment N Buyer Companies
Attachments -2
<PAGE> 5
GENERAL AGREEMENT FOR PURCHASE OF CELLULAR SYSTEMS
This is an Agreement between Lucent Technologies Inc. (Seller), a Delaware
corporation having an office at 111 Madison Avenue, Morristown, New Jersey 07960
and Western Wireless Corporation (Customer), a Washington corporation having an
office at 2001 NW Sammamish Road, Suite # 100, Issaquah, Washington 98027 (this
Agreement).
1. ARTICLE I
GENERAL PROVISIONS APPLICABLE TO ENTIRE AGREEMENT
1.1. HEADINGS AND DEFINITIONS
All headings used in this Agreement are inserted for convenience only
and are not intended to affect the meaning or interpretation of this Agreement
or any clause. For the purpose of this Agreement, the following definitions will
apply:
"Advertising" means all advertising, sales promotion, press releases,
and other publicity matters relating to performance under this
Agreement;
"Affiliate" of a corporation means its Subsidiaries, any company of
which it is a Subsidiary, and other Subsidiaries of such company. For
purposes of this Agreement, the meaning of "Affiliate" shall not
include any company or subsidiary which is a manufacturer of
telecommunication products in direct competition with Seller;
"Buyer Company" means an entity described in Attachment N to this
Agreement;
"CDX" shall mean Compact Digital Exchange;
"Candidate Software Features" means those software features planned for
future releases, but not yet developed, nor assured of being developed
and released;
"Cell Site Equipment" means Control Equipment, Radio Equipment and
Filter Equipment contained within a cell site as defined in Attachments
A - M and such other equipment as is sold by Seller generally to its
Customers and which is contained in a cell site;
"Customer Price List" means Seller's published "Network Wireless
Systems Price Reference Guide" or other price notification releases
furnished by Seller generally to its Customers for the purpose of
communicating Seller's prices or pricing related information to
Customer; however, this does not include firm price quotations;
"Designated Processor" means the Product for which the licenses to use
Licensed Materials are initially granted;
"DCS" means Seller's Autoplex digital cellular switch;
-1-
<PAGE> 6
"Firmware" means a combination of (i) hardware and (ii) Software
represented by a pattern of bits contained in such hardware;
"Form" means physical shape;
"Fit" means physical size or mounting arrangement (e.g., electrical or
mechanical connections);
"Franchise Area" means an area for which the Federal Communications
Commission has granted a permit to construct or license to operate a
cellular mobile telecommunications system;
"Function" means product features;
"Force Majeure" means fires, strikes, riots, embargoes, explosions,
earthquakes, floods, wars, water, the elements, serious labor disputes,
government requirements, civil or military authorities, acts of God or
by the public enemy, inability to secure raw materials as a result of
industry-wide shortages or transportation facilities, acts or omissions
of carriers or suppliers, or other causes beyond a party's control
whether or not similar to the foregoing;
"Hazardous Material" means material designated as a "hazardous chemical
substance or mixture" by the Administrator, pursuant to Section 6 of
the Toxic Substance Control Act, a "hazardous material" as defined in
the Hazardous Materials Transportation Act (49 U.S.C. 1801, et seq.),
or a "hazardous substance" as defined in the Occupational Safety and
Health Act Hazard Communication Standard (29 CFR 1910.1200);
"In Revenue Service" means use of a Product or any part thereof for
commercial service, whether or not revenue is actually being generated;
"Information" means all documentation and technical and business
information in whatever form recorded, which a party may furnish under,
or has furnished in contemplation of, this Agreement;
"Initial Operations Date" means, as to a System, the agreed upon date
by which Seller shall complete its delivery and installation of such
System;
"Licensed Materials" means the Software and Related Documentation for
which licenses are granted by Seller under this Agreement; no Source
Code versions of Software are included in Licensed Materials;
"MSC" means a mobile switching center and usually consists of an ECP,
IMS OMP and at least one (1) DCS;
"OMP" means Seller's operations management platform;
-2-
<PAGE> 7
"Product" means systems, equipment, and parts thereof, other than
Turnkey Items, but the term does not mean Software whether or not such
Software is part of Firmware, but the term does include hardware which
is part of Firmware;
"Product Manufacturing Information" means manufacturing drawings and
specifications of raw materials and components, including part
manufacturing drawings and specifications covering special tooling and
the operation thereof, and a detailed list of all commercially
available parts and components purchased by Seller on the open market
disclosing the part number, name and location of the supplier, and
price lists;
"Quality Management Tools" means Seller-furnished Software not
necessary for operation of Products furnished under this Agreement but
useful in the management of a wireless telecommunications system.
Unless otherwise specifically agreed by the parties, Seller does not
furnish under this Agreement such Software or the computer processor
necessary for Use of the Software;
"Related Documentation" means materials useful in connection with
Software, such as, but not limited to, flow charts, logic diagrams,
program descriptions, and specifications. No Source Code versions of
Software are included in Related Documentation;
"Related Operator" means an entity (other than Customer) offering
wireless telecommunications services to the public and which, for
purposes of furnishing such services, has an agreement with Customer
pursuant to which Customer resells to or shares with such operator
capacity on a Network Wireless System, as for example, when the Related
Operator's Cell Site or DCS equipment is interconnected with Customer's
MSC Products; or when Customer's Cell Site equipment is interconnected
with a Related operator's MSC Products;
"Repair Parts" means new, remanufactured, reconditioned, refurbished,
or functionally equivalent parts for the maintenance, replacement, and
repair of Products sold pursuant to this Agreement;
"Seller's Manufactured Product" means a Product manufactured by Seller
or purchased by it pursuant to its procurement specifications including
all components of such Products, which components are purchased by
Seller and become an integral part of such Products;
"Services" means the performance of work for the Customer and includes
but is not limited to: (1) engineering Services such as preparation of
equipment specifications, preparation and updating of office records,
and preparation of a summary of material not specifically itemized in
the order; (2) installation Services such as installation, equipment
removal, and cable mining; and (3) other Services such as maintenance
and repair. Services do not include Turnkey Services;
-3-
<PAGE> 8
"Software" means a computer program consisting of a set of logical
instructions and tables of information which guide the functioning of a
processor; such program may be contained in any medium whatsoever,
including hardware containing a pattern of bits representing such
program, but the term "Software" does not mean or include such medium;
"Software Update" means a reissued version or partial update of an
existing Software generic release (e.g., Release 3.1 following Release
3.0), containing one or more of the following, in any combination, (i)
infrastructure changes, (ii) improvements in basic call processing
capabilities, as well as basic system operation and maintenance, and
(iii) changes to maintain compatibility between a new system release
and features existing in a prior system release (when initially
introduced, a new system release may not always be fully compatible
with features available immediately prior to such release), (iv) a
platform for optional Software features, and (v) consolidations of
periodic fixes and overwrites;
"Source Code" means any version of Software incorporating high-level or
assembly language that generally is not directly executable by a
processor. Except as may be expressly provided, this Agreement does not
require Seller to furnish any Source Code;
"Specifications" means the specifications and performance standards of
the System as set forth in the current Autoplex System 1000 Technical
Specifications;
"Standard Charges" means Seller's applicable rates and charges for
labor and/or materials as determined from Seller's Customer Price List
or other pricing information provided to Customer, less any discounts
applicable thereto;
"Start Date" means, as to a System installation project, the date upon
which Seller has received Customer's written notice that Customer has
performed all Customer responsibilities and furnished all necessary
items required prior to Seller's commencement of installation of the
MSC for the System;
"Subsidiary" of a company means a corporation or partnership the
majority of whose shares or other securities entitled to vote for
election of directors or similar officers is now or hereafter owned or
controlled by such company either directly or indirectly; but any such
corporation, or partnership shall be deemed to be a Subsidiary of such
company only as long as such ownership or control exists;
"System" means an integrated cellular telecommunications system and all
expansions thereof, that includes Products and Licensed Materials and
which, in addition to the Specifications applicable to such Products
and Licensed Materials, may be subject to separate Specifications of
system performance or system functionality, including all Products,
Licensed Materials and Services purchased hereunder relating to such
System;
"Territory" means the 50 states of the United States plus the District
of Columbia;
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<PAGE> 9
"Turnkey Item" means a good or product or a partial assembly of goods
or products furnished and, perhaps, installed by Seller as part of a
Turnkey Service but not furnished by Seller pursuant to this Agreement.
A Turnkey Item is not a Vendor Item or a Product as described in this
Agreement;
"Turnkey Services" means items and activities normally the
responsibility of the Customer under this Agreement, which may include,
but shall not be limited to, project management, field coordination,
construction and system testing. Turnkey Services do not include, and
are separate from, Seller's normal engineering and installation
Services;
"Use" with respect to Licensed Materials means loading the Licensed
Materials, or any portion thereof, into a processor for execution of
the instructions and tables contained in such Licensed Materials;
"Vendor Item" means a Product or partial assembly of Products furnished
by Seller but neither manufactured by Seller nor purchased by Seller
pursuant to its procurement specifications. A Vendor Item is not a
Turnkey Item; and
"Warranty Period" means the period of time listed in the respective
WARRANTY clauses which, unless otherwise stated, commences on the date
of shipment, or if installed by Seller on acceptance by Customer or
thirty (30) days from the date Seller submits its notice of completion
of its installation whichever is sooner, and for Services, commences on
the date the Service is completed.
1.2. TERM OF AGREEMENT
This Agreement shall be effective January 1, 1996 upon execution by the
last of the parties to execute this document, and except as otherwise provided
herein, shall continue in effect for receipt of orders through December 31,
2000. This Agreement shall supersede the written Agreement, Amendments to and
any other Agreements for Purchase and Sale of Autoplex Cellular Equipment,
Software and Services between the Customer and Seller executed by Customer on
March 17, 1993 as Markets Cellular Limited Partnership, MCII General Partnership
and AT&T Corp., respectively (collectively, the "old agreement"), except as to
provisions of the old agreement which by their nature are intended to survive
termination, including but not limited to, provisions relating to warranty of
items purchased and confidential information received under such old agreement.
All orders placed under the prior written Agreement since January 1, 1996, will
be treated as being placed under this Agreement once executed and, accordingly,
all such orders shall be counted towards the commitments, and entitled to the
discounts and credits, set forth in this Agreement. The modification or
termination of this Agreement shall not affect the rights or obligations of
either party under any order accepted by Seller before the effective date of the
modification or termination.
1.3. SCOPE
The terms and conditions of this Agreement shall apply to all
transactions in which Seller furnishes cellular Products, Licensed Materials, or
Services to Customer for Customer's own use
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<PAGE> 10
and use for the benefit of Buyer Companies and Related Operators as provided
herein. As a matter of clarification, and notwithstanding the immediately
succeeding paragraph, the terms and conditions of this Agreement do not cover
Seller's Products, Licensed Materials or Services for personal communications
network systems or cellular digital packet data systems. Purchases of such items
shall be subject to separate written agreement or amendment to this Agreement,
as mutually agreed by the parties. Turnkey Services to be performed by Seller,
if any, and/or Turnkey Items to be obtained by Seller for Customer, if any,
shall be subject to separate agreement of the parties. To the extent that any
terms and conditions in any other Article of the Agreement conflict with the
provisions of this Article I, such terms and conditions supersede such
conflicting provisions of this Article I.
Seller agrees that Seller will maintain and from time to time furnish
to Customer a copy of Seller's Customer Price Guide, which shall contain all of
Seller's currently available commercial offerings of cellular telecommunications
systems and cellular-like telecommunications systems and related services,
including Products, Licensed Materials and Services offerings of personal
communications network systems.
The Buyer Company which is the end user of the Product, Licensed
Materials or Services furnished hereunder shall be considered "Customer" for all
purposes under this Agreement except placing the order and payment. Western
Wireless Corporation ("WWC") shall be considered "Customer" for purposes of
placing the order and payment. In addition, WWC shall be considered "Customer"
for purposes of passage of title and risk of loss with regard to Products and
Licensed Materials which are delivered to WWC. Seller agrees to look first to
WWC for all payments which become due hereunder for purchase prices, interest on
late payments and cancellation charges, but the Buyer Company, if any, having
received the Products, Licensed Materials and/or Services to which particular
payments relate, shall be jointly and severally liable therefor. The entity
which is the end user of the Products, Licensed Materials or Services furnished
hereunder shall have and may enforce against Seller all of the rights, benefits
and obligations contained herein (including, without limitation, warranty
claims), and all rights and claims (except claims for payment) or defenses
Seller has or may acquire against such entity shall be asserted solely against
such entity which has received such Products, Licensed Materials or Services;
provided, however, that in the event of a disputed claim for payment hereunder,
WWC will (i) do whatever is reasonably necessary to help resolve such a claim
and (ii) make the disputed payments to Seller (including any interest on late
payments with respect thereto) if and when such claim is ultimately resolved in
favor of Seller. WWC shall have the right to enforce or assert on behalf of
itself or the Buyer Company for whose benefit the order was placed any right,
claim or defense available to it or to such Buyer Company, in its sole
discretion.
Products and Licensed Materials furnished under this Agreement are
furnished for use in connection with a Customer's wireless telecommunications
business in the Franchise Areas in which WWC and the Buyer Companies are
authorized to provide wireless telecommunications services to the public. In
addition, Products and Licensed Materials may be purchased under this Agreement
for use in providing a Related Operator's wireless telecommunications services
to the public, whether or not such services will be provided in one of such
Franchise Areas of WWC or a Buyer Company, provided that such purchased item(s)
will be interconnected with a Seller-
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<PAGE> 11
furnished System in one of such Franchise Areas licensed to WWC or a Buyer
Company. Unless otherwise agreed by Seller in writing, WWC shall be deemed the
"Customer" under this Agreement with respect to all such purchases for the
benefit of a Related Operator, and as such shall have all rights and obligations
of Customer, including the obligation to pay for all such purchased items.
Except as expressly provided herein for resale to Buyer Companies,
items furnished under this Agreement are not furnished for resale. However,
Customer may resell Products after internal use and make incidental sales of
unused Products. Licensed Materials, whether or not integral to the operation or
embodied in Products, may be transferred if and only to the extent expressly
provided in the Software-specific provisions of this Agreement. Nothing in this
paragraph shall be deemed to bar arrangements between Customers and Related
Operators in which capacity on the systems of either or both are shared, so long
as such arrangements do not involve prohibited resale, sublicenses or other
transfers of Products and/or licenses of Licensed Materials.
1.4. PURCHASE OF SYSTEMS, PRODUCTS, SERVICES AND LICENSED MATERIALS
Seller agrees to engineer, furnish and install and Customer agrees to
order the Systems for Fargo, North Dakota, and Billings, Montana (Billings/Fargo
Swapout), in accordance with the terms and conditions contained in this
Agreement. The Systems will consist, as required, of a central mobile telephone
switching office ("MSC") and/or cell sites, as set forth in Attachment J to this
Agreement. The Systems may be modified by Customer prior to acceptance with the
consent of Seller, which consent will not be unreasonably withheld. In addition,
Customer shall, during the term of this Agreement purchase of Products, Services
and Licensed Materials and other equipment, software and services marketed by
Seller (measured at net invoiced prices - i.e., net of all applicable discounts
and credits), whether purchased under this Agreement or other agreement of
Seller, of which shall be purchased on or before . For purposes of
determining Customer's fulfillment of these volume commitments, purchases shall
include Customer's purchases for the Billings/Fargo Swapout and shall include
all other purchases under orders received by Seller prior to the end of as
applicable, in each case calling for delivery in accordance with Seller's
standard lead times. In calculating the volume of Customer's purchases, the
following items shall be excluded:
- - Taxes, transportation, hauling, hoisting, and warehousing
- - Terminals and other end user products
- - Antennas and towers, tower growth, tower modifications, etc.
- - Building modifications and construction
- - Any other purchases which are typically not associated with Seller's
equipment
1.5. ADDITIONS TO SYSTEMS
The parties contemplate that Customer will wish to obtain additional
Products, Licensed Materials and Services to expand the coverage of or add
features to one or more Systems. Orders
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<PAGE> 12
for such additional items received by Seller during the term of this Agreement
shall be received and accepted subject to the terms and conditions hereof.
1.6 PLANNING INFORMATION
Upon Seller's request, and to the extent feasible, Customer will
provide to Seller non-binding forecasts of Customer's annual Product, Licensed
Materials, and Services needs. Such forecasts will be provided on a schedule to
be agreed upon. In addition, where preliminary order information is required,
Customer shall provide such information to Seller within an agreed upon time
prior to the date the order is to be placed. There shall be no penalty or
liability for failure by the Customer to order Products, Licensed Materials, and
Services which are included in the Customer's forecasts.
1.7. ORDERS
All orders submitted by Customer shall be deemed to incorporate and be
subject to the terms and conditions of this Agreement unless otherwise agreed in
writing.
All orders, including electronic orders, shall contain the information
necessary for Seller to fulfill the order.
All schedules and requested dates are subject to Seller's concurrence
which concurrence will not be unreasonably withheld or delayed.
No provision or data on any order or contained in any documents
attached to or referenced in any order, any subordinate document (such as
shipping releases), shall be binding, except data necessary for Seller to fill
the order. All such other data and provisions are hereby rejected. Electronic
orders shall be binding on Customer notwithstanding the absence of a signature.
1.8 ORDER ACCEPTANCE:
All orders are subject to acceptance by Seller, which acceptance shall
not be unreasonably withheld or delayed. Seller shall acknowledge the date of
order receipt either in writing or electronic data interface format. The
acknowledged date of order receipt is the price effective date for all Products,
Licensed Materials, and Services not quoted on a firm-fixed-price basis pursuant
to this Agreement.
Orders submitted for Products, Licensed Materials, or Services in
accordance with the terms and conditions of this Agreement shall be deemed
accepted by Seller in accordance with the following:
(a) If listed in a Customer Price List with price and scheduled interval,
upon receipt unless Seller notifies Customer to the contrary within
days of order receipt;
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<PAGE> 13
(b) If listed in a Customer Price List with price and nominal interval (as
indicated in the Customer Price List), upon receipt unless Seller
notifies Customer to the contrary days of order receipt;
(c) If the order is for Products, Licensed Materials or Services not listed
in a Customer Price List or requires engineering, upon receipt unless
Seller notifies Customer to the contrary within days of order
receipt.
If Customer submits an order requesting a delivery or completion
interval less than the interval listed in the applicable Customer Price List,
Seller will accept such order only for its standard interval. Seller will,
however, use reasonable efforts to meet Customer's requested interval and
provide confirmation or denial of the requested shortened interval within days.
Additional charges may be applicable.
While it is Seller's objective to provide Customer with an
acknowledgment of each order received, it is Customer's responsibility to advise
Seller of any missing or late notifications to insure that the order has not
been lost. No order is to be considered "accepted" by Seller unless its receipt
has been acknowledged.
1.9 CHANGES IN CUSTOMER'S ORDERS
Changes made by Customer to an accepted order shall be treated as a
separate order unless the parties expressly agree otherwise. If any such change
affects Seller's ability to meet its obligations under the original order, any
price, shipment date, or completion date quoted by Seller with respect to such
original order is subject to change. However, Seller expressly agrees to use all
reasonable efforts to minimize any delayed shipment or completion date
occasioned by such changes.
1.10 PRICING
Prices, fees, and charges (hereinafter "prices") shall be as set forth
in Seller's Customer Price Lists, firm price quotations, specific agreements, or
other prices submitted by Seller to Customer. As for the Systems described in
Attachment J, the parties' specific agreement as to price is set forth below and
in Attachments A through L to this Agreement.
In those cases where the price is to be determined from a Customer
Price List, the applicable Customer Price List shall be the issue which is in
effect on the date of Seller's receipt of the order provided that the requested
shipment or service-commencement date is in accordance with Seller's published
shipping or planning interval or thirty (30) days from the date of order
receipt, whichever is longer. Prices for Products, Licensed Materials or
Services to be shipped or performed beyond such period will be established by
determining an effective order-entry date (the date required for order entry by
Seller in accordance with Customer's requested date) and applying the price from
the applicable Customer Price List as of that date.
In those cases where the price is not to be determined from a Customer
Price List, a firm price quotation, or specific agreement, the applicable price
will be Seller's price in effect on the
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<PAGE> 14
date of Seller's receipt of the order and such price will be communicated to
Customer as soon as practicable thereafter.
Seller may amend its prices, other than those subject to firm price
quotations or other agreements between the parties, but such changes shall only
be applicable to orders received after such change.
Notwithstanding the foregoing, if Seller is delayed from completion of
an order due to any change requested by Customer or as a result of Customer's
delay in furnishing information or in performing its obligations, any price
agreed to by Seller is subject to reasonable change.
Unless expressly stated in writing, Seller's prices are exclusive of
charges for transportation and other related services, such as hauling and
hoisting and any sales or other tax or duty which Seller may be required to
collect or pay upon the ordered transaction.
1.10.1 SPECIAL DISCOUNTS AND INCENTIVES
In consideration of Customer's execution of this Agreement, Seller
shall provide the additional benefits set forth in this Subsection 1.10.1,
provided that with respect to purchases for Buyer Companies (other than Buyer
Companies qualifying as Affiliates of Western Wireless Corporation, as to which
all provisions of this Section 1.10.1 shall apply) and for the benefit of
Related Operators only the provisions of Subsections 1.10.1 shall apply.
However, Seller's obligations under this subsection are contingent upon
Customer's continuing to meet the commitments set forth in Section 1.4 of this
Agreement. In the event that Customer fails to meet any of such commitments,
Seller may withdraw any or all of such additional benefits remaining unused
immediately upon notice to Customer. However, as of the withdrawal date and for
the duration of this Agreement, Customer shall retain the right to receive those
standard discounts set forth in subsection (a) immediately following below.
(a) Customer's Standard Discount. With respect to purchases of Products and
Software under this Agreement, commencing with Products and Software
ordered after January 1, 1996, but before January 1, 2001, and
scheduled for shipment on or before the end of March 2001 or such later
period if Seller's standard lead time is longer than three (3) months,
Customer shall be entitled to the following discounts off of the list
price in Seller's Customer Price Lists:
Item Percent Discount
MSC Equipment
Inside Cell Site Equipment*
* For purposes hereof, "Inside Cell Site Equipment" means the control
equipment, radio equipment and filter equipment offered by Seller
under this Agreement for use in a Cell Site.
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<PAGE> 15
Cell Site Software Initial Operating Fees*
* As a matter of clarification, all other Software (not expressly
identified and priced elsewhere in this Agreement) shall be provided
in accordance with Seller's standard Customer Price List including
any applicable volume discount that may be set forth therein).
For clarification, these discounts do not apply to fees or other
charges for purchases of used or refurbished equipment, which shall
normally be the subject of special quotation.
(b) System Swapout Pricing. The total price for the entire Billing/Fargo
Swapout including 18 cells, 2 MSCs (two 5ESS-2000 Switch DCSs, two
ECPs, two IMSs, and one OMP), Software, and spares (after accounting
for all applicable discounts and credits) is. All Products and
Licensed Material outlined in Attachment J will be invoiced upon
shipment from factory and, except as expressly provided herein or
otherwise agreed in writing, is subject to the standard payment terms
set forth in Section 1.11 Invoices and Terms of Payment. Cell site
installation and engineering (except where noted in Attachment J), cell
and MSC power, transportation and related charges, and all applicable
sales and use taxes are not included. The above system pricing is
comprised of the category pricing described in the following
subsections of this Subsection (b). This pricing is subject to change
(but retaining the same discount structure) if the Systems as installed
are comprised of different amounts of equipment than as contemplated
herein.
(i) Cell Site Pricing. Seller agrees to invoice and Customer
agrees to pay not more than the sum of for Series II and
Series IIe cell site Products that Seller will furnish for
completion of the Systems, which for the purposes hereof, the
parties agree shall include fifteen (15) Series II Omni Cell
Sites for a total of 324 analog channels and three (3) Series
IIe Omni Cell Sites for a total of 35 analog channels as
identified in Attachment J The parties further agree that such
maximum price is exclusive of cell site spares, engineering
(except where noted in Attachment J), installation, power
products, transportation and related charges, and all
applicable sales and use taxes.
(ii) MSC Pricing. Seller agrees to invoice and Customer agrees to
pay not more than the sum of for the Billings/Fargo MSC
Products that Seller will furnish for completion of the
Systems by the Initial Operation Date, which for the purposes
hereof, the parties agree shall include two Executive Cellular
Processors ("ECP"), two Inter-process Message Switches
("IMS"), and two 5ESS-2000 Switch DCS, including MSC
installation as identified in Attachment J. The parties
further agree that such maximum price is exclusive of power
products, transportation and related charges, and all
applicable sales and use taxes. Such maximum price does
include installation and commissioning of such Products.
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<PAGE> 16
(iii) Software Pricing. Seller, Customer, shall provide with the
Billings/Fargo MSC Products for the Systems the Seller's
standard system Software, as well as the optional Software
features listed in Attachments E and J to this Agreement.
These Software features are exclusive of those optional
Software features in subsection (n) below
(iv) Spares Pricing. Seller agrees to invoice and Customer agrees
to pay not more than the sum of for MSC spares and Series
II and Series IIe cell spares that Seller will furnish for
completion of the Systems by the Initial Operation Date, which
for the purposes hereof, the parties agree shall include
Recommended 5ESS-2000 DCS, ECP, IMS, and DLI spares for the
Billings MSC, Critical 5ESS-2000 DCS, ECP, IMS, and DLI spares
for the Fargo MSC, and Series II Cell Site Spares as
identified in Attachments J and I respectively. The parties
further agree that such price is exclusive of engineering,
installation, transportation and related charges, and all
applicable sales and use taxes.
(v) Billings Used MSC Equipment. Customer agrees to
Customer's existing Billings MSC equipment including ECP and
IMS to Seller, in an operational but otherwise "as - is"
condition, when replaced with the new Billings MSC equipment
described in section 1.10.1(b)(ii) above. Customer shall
provide to Seller all relevant spare equipment and other ECP
and IMS related equipment (but not including power and
transmission equipment).
Except as provided below, or as otherwise agreed by Seller,
Customer shall deliver to Seller possession of the Billings
ECP and IMS equipment promptly after it has been replaced by
the new Billings MSC equipment. After cut over of the new
Billings MSC equipment, Customer shall issue its order for
Seller to de-install and pack the ECP and IMS equipment.
Seller shall invoice Customer for such services as quoted in
Attachment L. Seller shall bear the expense of transporting
the ECP and IMS equipment from Customer's location to Seller's
location of choice. Title and risk of loss of or damage to the
ECP and IMS equipment shall remain with Customer until
commencement of de-installation by Seller, after which it
shall pass to Seller.
(c)
(d) Project Implementation Manager (PIM). Seller agrees that, it will
assign a PIM until completion of installation of the Swapout Systems,
who shall be Seller's interface with the Customer for all aspects of
the project. In addition, Customer shall have access to a PIM, for
up to after installation; Seller shall use all good faith efforts
to have the same person who acted as PIM prior to completion of
installation act as PIM during said post-installation period. The PIM's
responsibilities shall include the scheduling of deliveries,
installations and turnovers of equipment, general Seller/Customer
coordination and other responsibilities as mutually agreed.
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<PAGE> 17
(e) Switch Consultant. Seller agrees that, it will provide a competent
MSC technician for each market (Fargo, North Dakota, and Billings,
Montana) to assist Customer in the maintenance, training, optimization
and administration of the MSC Products and Licensed Materials. Such
technician shall be available to Customer on-site, on a full-time
basis, at the location of the executive cellular processor for the
Systems in Fargo, North Dakota and Billings, Montana, starting on the
Installation Complete Date, for so long as the assistance of such
person is reasonably necessary, but in no case beyond days
following such date. Nothing herein shall be deemed to require a
technician to work beyond a normal work week or to work hours that will
cause Seller to have to pay such person overtime pay or equivalent
compensation, unless such work is agreed to by Seller in advance. The
cost of travel and reasonable living expenses to other locations (other
than locations local to Billings and Fargo) shall be for the account of
and billed to Customer.
(f) Cell Site Model Configuration Pricing. Seller shall provide the model
pricing set forth below in this Subsection (f). The model
configurations are for furnish only orders and do not include
engineering, if applicable, or installation.
(i) Series II Product Family. Seller shall offer Customer Series
II, IIe, and IIm model configurations and pricing as detailed
in Attachments A through A5.
(ii) Series IIc Growth Frame. Seller shall offer Customer Series
IIe Growth Frames in the configuration and pricing as detailed
in Attachment B.
(iii) Series IIe Sectorization. Seller shall offer Customer a Series
IIe Sectorization model in the configuration and pricing as
detailed in Attachment C.
Any Series II, Series IIe, Series IIm or Series IImm Cell Sites
ordered, other than the above referenced models (except as provided
immediately below) will be subject to the discounts set forth in
Subsection (a) above, as applicable.
(g) Refurbished Mod LACS with New LAMs and Pre-amps. Seller currently has a
stock of refurbished Mod LACs. These LACs include new LAMs
and carry a two year standard warranty. The warranty period for such a
LAC shall commence upon the earlier of (i) the installation complete
date (whether or not installed by Seller), or (ii) . Seller is
willing to offer these refurbished LACs to Customer at a price of
LAC with pre-amps. Availability of refurbished Mod LACs is on
a first-come-first-served basis. This price is available for
refurbished LACs only.
(h) Mod M-LAC (Modulator LAC) Pricing. Seller shall provide Customer with
the option of purchasing a minimum of Mod M-LACs per order under
orders calling for delivery within Seller's standard lead time and made
in the first quarter and third quarter of each of the calendar
years . This purchase pricing option shall the
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<PAGE> 18
calendar years . The price for Mod M-LACs shall be .
Bulk purchases of more than shall be priced .
(i) Series II RCU Pricing. Seller shall provide Customer with the option of
bulk purchasing a minimum of analog RCUs per order under orders
calling for delivery within Seller's standard lead time and made in the
first quarter and third quarter of each calendar year during the
initial term of this Agreement. The price for units is .
This price of this Agreement. purchases of more than
shall be priced .
(j) Meg Memory Upgrade. Seller shall charge Customer a for the
purchase of 8-Meg Memory boards. This upgrade will be required in
all Series II product family cell sites prior to cut over of the Fargo
and Billings MSCs. See Attachment F for CTSO Fax Flash installation
instructions.
(k) TDMA Cell Site Pricing. The following pricing shall be applicable
during the initial year term of this Agreement.
(i) TDMA Enhanced Digital Radio Unit (EDRU). The EDRU shall be
priced at Seller's Customer Price List in effect upon
order acknowledgment,
The planned General Availability (GA) date for the EDRU, which
will support both the VSELP and ASELP vocoders, is .
However, this GA date is dependent upon availability of IS-136
ASELP compliant mobiles for testing purposes in .
(ii) Series IIe TDMA Initial Operating Software Fees. The Series
IIe TDMA Initial Software Fee
(l) CDMA Cell Site Pricing. Attachment D contains Seller's estimated CDMA
pricing for a Series II CDMA Growth Frame with eight (8) CDMA voice
channels. The estimated price for the CDMA Growth Frame has been
computed using Customer's standard cell site hardware discount
for initial cell site software operating fees. Note, this price does
not include the additional hardware requirements for the MSC (5ESS,
ECP, & IMS) or CDMA software features.
(m) MSC Upgrade Pricing. Customer has requested 5ESS remote switch
configurations to replace all current Universal (U-Mod) and Traditional
Mod (T-Mod) DCSs. Seller has developed 5ESS-CDX pricing based on
Customer's requirements for a 60 DS1 remote switch configuration. The
estimated price for a 60 DS1 5ESS-CDX switch is per switch -- see
Attachment G for CDX pricing. The actual price shall be determined by
the final configuration of each switch using the methodology as per
Attachment G. This price includes software, critical spares and
engineering. In addition, to the 5ESS-CDX equipment Customer will be
required to purchase additional timing equipment for the ECP. The
additional ECP equipment is estimated at per remote 5ESS-CDX --
see
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<PAGE> 19
Attachment H for pricing. Installation, engineering, and
transportation, and the Landline Cellular Option (LCO) and Landline
features are additional.
Should Customer place orders with Seller, in accordance with Seller's
standard lead time, to upgrade its existing Definity T-Mod and U-Mod
remote switch modules (listed below) in Butte, Missoula, Bismarck,
Grand Forks, Casper, Pueblo, and Great Falls by December 31,1997 ,
for the U-Mod or T-Mod equipment listed in the table below:
<TABLE>
<CAPTION>
DCS # NAME MS T-MOD U-MOD
--- ---- -- ----- -----
<S> <C> <C> <C> <C>
1 Billings 1 2 2
2 Butte 1 2
3 Missoula 1 2
4 Bismarck 1 1 1
5 Grand Forks 1 2
6 Casper 1 2
7 Pueblo 1 2
8 Great Falls 0 1
- -- -
TOTAL 7 10 7
</TABLE>
Customer may use the Billings DCS (1 TMS, 2 T-Mods, 2
U=Mods) for growth purposes in other markets until conversion of the
Customer's remote switching offices to 5ESS CDX technology, not later
than .
In return for the U-Mod or T-Mod equipment listed above, Customer
will be required to de-install and return the Definity DCSs (including
TMS, Common Controller, U-Mod and T-Mod and ancillary DCS equipment,
except power) to Seller. Customer will be required to pay for
de-installation and packing of DCS equipment. Seller will pay shipping
cost to a warehouse to be designated by Seller. The for the
Butte, Missoula, Bismarck, Grand Forks, Casper, Pueblo, and Great Falls
DCS upgrade is . This is based on Customer purchasing a
minimum of seven 5ESS-CDXs with a minimum of 420 DS1 connections,
for a minimum of (which is inclusive of Customer's standard MSC
discount), for Butte, Missoula, Bismarck, Grand Forks, Casper, Pueblo,
and Great Falls.
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<PAGE> 20
(n) Optional Software Features Pricing. Seller will invoice Customer a
price for certain Optional Software Features, as provided herein. For
Customer can activate any new optional ECP/OMP or Series II
product family cell features in (including interim releases). This
includes any features expressly described in Attachment E plus any
additional optional features that become available in (including
interim releases). The fee will be invoiced progressively as follows:
------------------------------------------------------------
SOFTWARE PAYMENT SCHEDULE
-------------------------
|
|
|
------------------------------------------------------------
For any Candidate Software Feature offered in this Agreement pursuant
to Attachment E, which for whatever reason, is not developed and/or
released pursuant to Seller's Software Releases (including
interim releases); Seller will employ reasonable efforts to provide
said Candidate Software Features to . Seller's obligation to
continue its efforts with respect to any such non-provided Candidate
Software Feature shall arise only if Customer notifies Seller of
Customer's continuing interest in obtaining and using such feature. Any
Candidate Software Feature developed subsequent to release yet
within said term of this Agreement shall be provided to Customer at
.
The Software package pricing does not include the following:
1. 5ESS Landline features.
2. Cell or ECP Initial Operating fees (applicable only for new
cells or ECP)
3. CDPD Initial Operating fee and optional features for MDIS,
MDBS or NMS.
4. Annual Release Maintenance Fees or comparable Software Update
fees.
As regards any analog or TDMA optional software features that Customer
acquires pursuant to this Agreement, Seller agrees that during the
initial term of this Agreement, Seller shall , , provide CDMA
equivalent features for those portions of the System(s) on which
Customer implements the CDMA technology during such initial term.
(o) Series I Cell Sites. Seller agrees to of Customer's existing
Series I Cell Sites when they are replaced with Series II Cell Sites
(other than microcells) purchased under this Agreement. As each Series
II Cell Site (other than a microcell) is purchased under this Agreement
in replacement of an existing Series I Cell Site, Customer shall be
entitled the replaced Series I Cell Site. Customer shall provide to
Seller with each Series I Cell Site all relevant spare circuit packs
and other Series I related equipment (but not including power and
transmission equipment).
Except as provided below, or as otherwise agreed by Seller
promptly after it has been replaced by a Series II Cell Site. Prior to
delivery of such Series II Cell Site, Customer shall issue its order
for Seller to de-install and pack the Series I Cell Site. Seller shall
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<PAGE> 21
invoice Customer at Seller's standard rates for such Services. Seller
shall bear the expense of transporting the Series I Cell Site from
Customer's location to Seller's location of choice. Title and risk of
loss of or damage to the Series I Cell Site shall remain with Customer
until commencement of de-installation by Seller. If requested by
Seller, Customer shall issue its evidence of such transfer of title.
For each Series I Cell Site under the provisions of this subclause,
Seller shall issue a
(p) Annual Release Maintenance Fees. Seller will charge Customer Annual
Release Maintenance Fees (for MSCs and Cell Sites) in the amount
of per ECP. This fee will be automatically invoiced to Customer
in January of each year and is based on the number of ECPs in service
as of December 31 of the immediately preceding calendar year. Customer
will be invoiced for Annual Release Maintenance Fees upon
execution of this Agreement. Seller will accept Customer's as
payment for Annual Release Maintenance Fees.
(q) 5ESS Landline Pricing. Seller's budgetary pricing for landline feature
capability for the 5ESS-2000, based on information provided by
Customer, for _ customers is -- see Attachment K.
1.11 INVOICES AND TERMS OF PAYMENT
Except as provided in this Agreement, Products and Licensed Materials
(including transportation charges and taxes, if applicable) will be billed by
Seller when shipped, or as soon thereafter as practicable. Engineering will be
billed upon main shipment of Products. Installation will be billed as performed
or as soon thereafter as practical. Customer shall pay such invoiced amounts,
less any disputed items, for receipt by Seller within thirty (30) days of the
invoice date. Delinquent payments are subject to a late payment charge at the
rate per month, or portion thereof, of the amount due (but not to exceed
the maximum lawful rate). Any disputed items which Seller determines are not
valid are due for payment based upon the original invoice date and will be
subject to a retroactive late payment charge based upon the original invoice
date. Customer shall notify Seller of any disputed invoice amounts within
from the date of the invoice. Seller may apply any credit which remains
outstanding in favor of Customer to the oldest undisputed invoice which remains
in Customer's portfolio.
1.11.1 ENGINEER, FURNISH AND INSTALL (EF&I) ORDERS:
Seller shall bill EF&I and/or F&I orders under this Agreement on an
individual order basis, at . For purposes hereof, EF&I and F&I orders
include only those orders issued in accordance with Seller's standard lead times
which include combined EF&I or combined F&I when such orders are originally
issued, and do not include originally issued E&F or Furnish only orders as to
which Customer subsequently or separately orders installation Services. Such
excluded orders shall be billed pursuant to Section 1.11 immediately preceding.
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<PAGE> 22
1.11.2 EARLY PAYMENT DISCOUNTS:
Provided that Customer makes payment by EFT as set forth in Subsection
1.11.3 below, Customer may pay all invoiced amounts, less an additional
percent discount, if payment is received by the Seller within ten (10) days of
the invoice date. Such additional discount shall be applied against the invoiced
amount (i.e., after all applicable discounts have been applied).
1.11.3 ELECTRONIC FUNDS TRANSFER (EFT) PAYMENTS:
Customer payments for invoiced amounts may be made by EFT means. EFT
payments shall be made to:
Lucent Technologies Inc.
c/o Chase Manhattan Bank
New York, New York
Lucent Domestic CARMS Acct# ABA Routing Number
Seller shall be entitled to change such address for EFT transfers by notice
furnished pursuant to Section 1.23 of this Agreement.
Customer shall, concurrently with the EFT payment, either mechanically transmit
a remittance file to Seller's banking institution identified above or fax to the
Seller the related EFT payment remittance advice such that Seller may apply EFT
payments to the proper invoices paid. Remittance advices shall be faxed to:
Lucent Technologies Inc.
Financial Operations Center
900 North Point Parkway
Alpharetta, Ga. 30202
Attn: Cash Applications Manager
Fax: (770) 750-4288
with fax copy to:
Lucent Technologies Inc.
2000 Northeast Expressway
Norcross, Georgia 30071
Attn: James Stevens
Network Systems Wireless Asset Management Group
Fax: (770) 798-2167
1.11.4 PAYMENTS BY CHECK (NON-EFT):
Non-EFT payments and related remittance advices shall be mailed to the
address identified on Seller's invoice.
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1.12. DELIVERY AND INSTALLATION SCHEDULE
Pursuant to the Project Implementation Schedule per Attachment M,
Customer shall notify Seller that the MSC site and/or cell sites for the Systems
described in Attachments A - M are ready for installation and that Customer's
responsibilities referred to in Article IV relating to such sites have been
performed or furnished. Seller shall have access to such sites on and from the
date of Seller's receipt of such notification (the "Start Date").
Seller agrees that it will install all of the parts of the Systems and
submit notices of completion to Customer on or before the Initial Operations
Date, which, unless extended as provided in this Agreement or by mutual consent
of the parties, shall be pursuant to the Schedule per Attachment M.
1.13. TRANSPORTATION
Seller's prices for Products and Licensed Materials do not include
freight charges or related transportation Services or charges therefor, unless
expressly stated in writing by Seller to the contrary. Seller, in accordance
with its normal practices, will arrange for transportation for such items, will
prepay transportation, if appropriate, and invoice transportation charges.
If Customer elects to route Products and/or Licensed Materials or to
arrange for transportation, Seller will provide related services subject to a
separate fee.
Premium transportation will only be used with Customer's concurrence.
1.14. PACKING, MARKING, AND SHIPPING:
Seller shall, at no additional charge, pack and mark shipping
containers in accordance with its standard practices for domestic shipments.
Where in order to meet Customer's requests, Seller packs and/or is required to
mark shipping cartons in accordance with Customer's specifications, Seller shall
invoice Customer reasonable additional charges related to such packing and/or
marking.
Seller shall:
(a) Enclose a packing memorandum with each shipment and, if the shipment
contains more than one package, identify the package containing the
memorandum; and
(b) Mark Products as practicable for identification in accordance with
Seller's marking specifications (e.g., model/serial number and month
and year of manufacture).
Partial shipments under an order may be made by Seller and separately
invoiced.
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1.15. TITLE AND RISK OF LOSS:
Title (except as provided in the clause USE OF INFORMATION and in
Article III) and risk of loss to a Product, Licensed Material, or other item
furnished to Customer under this Agreement shall pass to Customer upon delivery
to the final destination established by Customer's order for the item or other
agreement of the parties. Delivery of an item to its final destination by Seller
shall be deemed complete at such time as all transportation, interim
warehousing, hauling and hoisting required to be performed by Seller or its
agents under the order for the item have been completed. Notwithstanding the
above, if sooner, title and risk of loss to the item shall pass to Customer at
the point at which Seller or Seller's supplier or agent turns over possession of
the item to Customer, Customer's employee, Customer's designated carrier,
warehouser or hoister, or other Customer's agent. For the purposes of this
clause, receipt of an item by a carrier arranged for by Seller in performance of
a Turnkey Service provided under separate agreement of the parties shall be
deemed receipt by Customer's designated carrier.
Customer shall notify Seller promptly of any claim with respect to loss
which occurs while Seller has the risk of loss and shall cooperate in every
reasonable way to facilitate the settlement of any claim.
Nothing herein shall, during the period either party has the risk of
loss to an item, relieve other party of responsibility for loss to the item
resulting from the acts or omissions of said other party, other parties
employees or agents.
1.16. COMPLIANCE WITH LAWS:
Performance under this Agreement shall be subject to all applicable
laws, orders, and regulations of federal, state, and local governmental
entities.
1.17. TAXES:
Customer shall be liable for and shall reimburse Seller for all taxes
and related charges, however designated, (excluding franchise taxes, taxes on
Seller's gross receipts, net income or similar taxes) imposed upon or arising
from the provision of Services, or the transfer, sale, license, or use of
Products, Licensed Materials, or other items provided by Seller. Taxes
reimbursable under this paragraph shall be separately listed on the invoice.
Seller shall not collect the otherwise applicable tax if the front of
the order indicates that the purchase is exempt from Seller's collection of such
tax and a valid tax exemption certificate is furnished by Customer to Seller.
1.18. TRAINING:
Seller will make available Seller's standard training for Customer's
personnel in the planning for, operation and maintenance of Products and
Software furnished hereunder in accordance with Seller's published prices at
Seller's training locations or as mutually agreed.
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1.19. TERMINATION FOR CONVENIENCE:
Customer may, upon written notice to Seller, terminate any order or
portion thereof, except with respect (i) to any order for Systems, or (ii) to
Products or Licensed Materials that have already been shipped and Services that
have already been performed.
For those Products and Licensed Materials not shipped but considered
stock items, Customer agrees that it will pay Seller an order termination fee
equal to of the price or licensee fee for such items.
For those Products and Licensed Materials not shipped and considered
customized or non-stock items, Customer agrees to pay a termination fee based
upon Seller's incurred expenses (after adjustment for recoveries and/or salvage
value, if any), including associated general and administrative expenses plus a
reasonable profit.
For Services in process, Customer agrees to pay for all Services
rendered to date, plus Seller's incurred expenses, including a reasonable
profit, for those Services ordered by Customer and subsequently terminated.
Customer may issue "holds" on orders or suspend performance under this
Agreement, in whole or in part, with Seller's prior written consent and upon
terms that will compensate Seller for any loss, damages, or expenses incurred.
1.20. CANCELLATION FOR BREACH:
In the event Seller or Customer is in material breach or default of
this Agreement or any order placed hereunder and such breach or default
continues for a period of after the receipt of written notice (and such
additional time as may be agreed upon by the parties), then Seller or Customer
shall have the right to cancel that part of any order affected by the breach or
default without any charge, obligation or liability, except for those items
already fully discharged. Notwithstanding anything in the foregoing to the
contrary, in the event that Customer shall cancel an order in part for failure
of Seller to deliver items or perform Services in accordance with such order,
Customer shall be, entitled to return additional items furnished under such
order to the extent they are unusable without such items as are subject to such
cancellation. Both parties shall cooperate in every reasonable way to facilitate
the remedy of a breach or default hereunder within such period.
1.21. PATENTS, TRADEMARKS AND COPYRIGHTS:
(a) Seller will defend all suits against Customer alleging that any Products,
Software or Service furnished hereunder infringes any United States patent,
trademark, copyright, trade secret or other intellectual property right and will
indemnify and hold Customer harmless against all damages and costs which by
final judgment, settlement or award of arbitration may be assessed against
Customer on account of such infringement; provided that Seller (i) shall have
prompt
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written notice of all claims of such infringement and suit and full opportunity
and authority to assume the sole defense of and to settle such suit, and (ii)
shall be furnished upon Seller's request all information and assistance
available to Customer for such defense. If said item is in any such suit held to
constitute infringement and the use of said item is enjoined, Seller will, at
its sole cost and expense, without adversely affecting the ability of the System
to perform in accordance with the Specifications, including, without limitation
those respecting service received by subscribers, billing, administration and
maintenance, at its option, either procure for Customer the right to continue
using said item; or replace it with a suitable non-infringing item; or modify it
so it becomes non-infringing; or, with consent of Customer, remove the item and
refund the purchase prices less a reasonable allowance for use, damage and
obsolescence, provided, however, that if the removal of the enjoined item
renders the System inoperable, or adversely affects the ability of the System to
perform in accordance with the Specifications, including, without limitation,
those respecting service received by subscribers, billing, administration and
maintenance, Seller shall also remove the System and refund to Customer the
amount paid therefor less a reasonable amount for use, damage and obsolescence.
In exercising any of its options under this Paragraph 1.21 Seller
shall minimize disruption of Customer's use of the System.
(b) If Seller elects not to assume the sole defense of any such claim, Seller
shall reimburse Customer for its costs in defending such claim, including
reasonable attorney's fees.
(c) No undertaking of Seller under this clause shall extend to any such alleged
infringement or violation to the extent that it: (1) arises from adherence to
design modifications, specifications, drawings, or written instructions which
Seller is directed by Customer to follow, but only if such alleged infringement
or violation does not reside in corresponding commercial Product or Licensed
Material of Seller's design or selection; or (2) arises from adherence to
instructions to apply Customer's trademark, trade name, or other company
identification; or (3) resides in a Product or Licensed Material which is not of
Seller's origin and which is furnished by Customer to Seller for use under this
Agreement; or (4) relates to uses of Products or Licensed Materials provided by
Seller in combinations with other Products or Licensed Materials, furnished
either by Seller or others, which combination was not installed, recommended or
otherwise approved by Seller. In the foregoing cases numbered (1) through (4),
Customer will defend and save Seller harmless, subject to the same terms and
conditions and exceptions stated above with respect to the Seller's rights and
obligations under this clause.
(d) The liability of Seller and Customer with respect to any and all claims,
actions, proceedings, or suits by third parties alleging infringement of
patents, trademarks, or copyrights or violation of trade secrets or proprietary
rights because of, or in connection with, any items furnished pursuant to this
Agreement shall be limited to the specific undertakings contained in this clause
and shall not be governed by the Paragraph entitled CUSTOMER'S REMEDIES.
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1.22. USE OF INFORMATION:
All Information which bears a legend or notice restricting its use,
copying or dissemination, shall remain the property of the furnishing party. The
furnishing party grants the receiving party the right to use such Information
only as follows. Such Information (1) shall not be reproduced or copied, in
whole or part, except for use as authorized or contemplated in this Agreement;
and (2) shall, together with any full or partial copies thereof, be returned or
destroyed when no longer needed. Moreover, when Seller is the receiving party,
Seller shall use such Information only for the purpose of performing under this
Agreement, and when Customer is the receiving party, Customer shall use such
Information only (1) to order, (2) to evaluate Products, Licensed Materials or
Services, or (3) to install, operate, and maintain the particular Products or
Licensed Materials for which it was originally furnished. Unless the furnishing
party consents in writing, such Information, except for that part, if any, which
is known to the receiving party free of any confidential obligation, or which
becomes generally known to the public through acts not attributable to the
receiving party, shall be held in confidence by the receiving party. The
receiving party may disclose such Information to other persons, upon the
furnishing party's prior written authorization, but solely to perform acts which
this clause expressly authorizes the receiving party to perform itself and
further provided such other person agrees in writing (a copy of which writing
will be provided to the furnishing party at its request) to the same conditions
respecting use of Information contained in this clause and to any other
reasonable conditions requested by the furnishing party.
The term "Information" as used in this clause does not include Software
(whether or not embodied in Firmware) or Related Documentation. The use of
Software and Related Documentation is governed by Article III of this Agreement.
1.23. NOTICES:
All notices under this Agreement shall be in writing (except where
otherwise stated) and shall be addressed to the addresses set forth below or to
such other address as either party may designate by notice pursuant hereto. Such
notices shall be deemed to have been given when received.
Seller: Lucent Technologies Inc.
Post Office Box 20046
Greensboro, North Carolina 27420
Attn: Contract Manager, Network Systems
Copy to: Lucent Technologies Inc.
67 Whippany Road
Post Office Box 903
Whippany, New Jersey 07980
Attn: Chuck Many, Wireless General Sales Manager
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<PAGE> 28
Customer: Western Wireless Corporation
2001 NW Sammamish Road
Suite # 100
Issaquah, Washington 98027
Attn: Vice President - Engineering
Copies to: Western Wireless Corporation
2001 NW Sammamish Road
Suite # 100
Issaquah, Washington 98027
Attn: General Counsel
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza - 29 Floor
New York, New York 10112
Attn: Barry A. Adelman, Esq.
1.24. RIGHT OF ACCESS:
Each party shall provide the other access to its facilities reasonably
required in connection with the performance of the respective obligations under
this Agreement. No charge shall be made for such access. Reasonable prior
notification will be given when access is required. Neither party shall require
releases of any personal rights in connection with visits to its premises.
1.25. INDEPENDENT CONTRACTOR:
All work performed by one party under this Agreement shall be performed
as an independent contractor and not as an agent of the other and no persons
furnished by the performing party shall be considered the employees or agents of
the other. The performing party shall be responsible for its employees'
compliance with all laws, rules, and regulations while performing work under
this Agreement.
1.26. CUSTOMER'S REMEDIES:
(a) Customer's exclusive remedies and the entire liability of Seller and
its affiliates and their employees and agents for any claim, loss,
damage, or expense of Customer or any other entity arising out of this
Agreement, or the use or performance of any Product, Licensed Material,
or Service, whether in an action for or arising out of breach of
contract, tort, including negligence indemnity, or strict liability
shall be as follows:
(1) For infringement--the remedy set forth in the "PATENTS, TRADEMARKS,
AND COPYRIGHTS" clause;
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(2) For the performance of Products, Turnkey Items, Software,
Services, and Turnkey Services or claims that they do not conform
to a warranty--the remedy set forth in the applicable "WARRANTY"
clause;
(3) For tangible property damage and personal injury caused by
Seller's negligence--the amount of direct damage;
(4) For everything other than as set forth above--the amount of direct
damages not to exceed.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, OTHER THAN
SUBSECTION (A) ABOVE AND ANY OTHER EXPRESS REMEDY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY NOR ITS AFFILIATES, ITS EMPLOYEES OR AGENTS
SHALL BE LIABLE FOR INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGE OR
LOST PROFITS, REVENUES OR SAVINGS ARISING OUT OF THIS AGREEMENT, OR THE
USE OR PERFORMANCE OF ANY PRODUCT, LICENSED MATERIALS, TURNKEY ITEMS,
SERVICES, TURNKEY SERVICES, OR OTHER ITEMS WHETHER IN AN ACTION FOR OR
ARISING OUT OF BREACH OF CONTRACT, TORT, INCLUDING NEGLIGENCE, OR
STRICT LIABILITY. THIS CLAUSE 1.26(b) SHALL SURVIVE FAILURE OF AN
EXCLUSIVE OR LIMITED REMEDY.
(c) Customer shall give Seller prompt notice of any claim. Any action or
proceeding against Seller must be brought within the earlier of
twenty-four (24) months after the Customer has knowledge of the
existence of a cause of action or the end of the applicable period for
limitation of actions.
1.27. FORCE MAJEURE:
Except with respect to Customer's obligation to make timely payments
under this Agreement, neither party shall be held responsible for any delay or
failure in performance to the extent that such delay or failure is caused by a
Force Majeure.
1.28. ASSIGNMENT:
Except as provided in this clause, neither party shall assign this
Agreement or any right or interest under this Agreement, nor delegate any work
or obligation to be performed under this Agreement, (an "assignment") without
the other party's prior written consent, which consent will not be unreasonably
withheld or delayed. Any attempted assignment in contravention of this shall be
void and ineffective. Nothing shall preclude a party from employing a
subcontractor in carrying out its obligations under this Agreement. A party's
use of such subcontractor shall not release the party from its obligations under
this Agreement.
Upon the acceptance by Seller of any assignment by Customer pursuant to
this clause 1.28 and assumption of the duties under this Agreement by the
assignee and the payment in full of all
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amounts due and owing under this Agreement, Customer shall be released and
discharged, to the extent of the assignment, from all further duties under this
Agreement.
Seller has the right to assign this Agreement and to assign its rights
and delegate its duties under this Agreement, in whole or in part, at any time
and without Customer's consent, to any present or future Subsidiary of Seller,
or to any combination of the foregoing. Seller shall give Customer prompt
written notice of the assignment.
Any assignment by Seller pursuant to this Clause shall not relieve
Seller from any obligations or duties under this Agreement unless Customer, upon
being assured as to the financial viability of Seller's assignee, consents to
Seller being released and discharged, such consent not to be unreasonably
withheld by Customer.
For purposes of this clause, the term "Agreement" includes this
Agreement, any subordinate contract entered into in connection with or as
contemplated by this Agreement and any order placed under such Agreement or
subordinate contract.
1.29. PUBLICITY:
Each party shall submit to the other proposed copy of all Advertising
wherein the name, trademark, code, specification or service mark of the other
party or its affiliates is mentioned; and neither party shall publish or use
such Advertising without the other's prior written approval. Such approval shall
be granted as promptly as possible (usually within ten (10) days), and may be
withheld only for good cause. The parties acknowledge that the obtaining of
prior approval for each such use may be an administrative burden. At the request
of either party, Customer and Seller will establish mutually acceptable written
guidelines that will constitute pre-authorization for the uses specified
therein. Such guidelines shall be subject to change from time to time at the
reasonable request of either party.
1.30. APPLICABLE LAW:
The construction and interpretation of, and the rights and obligations
of the parties pursuant to this Agreement, shall be governed by the laws of the
State of New York without giving effect to principles of conflicts of law. .
1.31. SURVIVAL OF OBLIGATIONS:
The parties' rights and obligations which, by their nature, would
continue beyond the termination, cancellation, or expiration of this Agreement,
shall survive such termination, cancellation, or expiration.
1.32. SEVERABILITY:
If any provision in this Agreement shall be held to be invalid or
unenforceable then such provision shall be construed so as to render it
enforceable, to the extent feasible. If no such
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construction is feasible, such provision shall be severed from this Agreement
and, the remaining portions shall remain in effect. In the event such invalid or
unenforceable provision is considered an essential element of this Agreement,
the parties shall promptly negotiate a replacement provision.
1.33. NON-WAIVER:
No waiver of the terms and conditions of this Agreement, or the failure
of either party strictly to enforce any such term or condition on one or more
occasions shall be construed as a waiver of the same or of any other term or
condition of this Agreement on any other occasion.
1.34. CUSTOMER RESPONSIBILITY
Each Party, at no charge to the other Party, shall provide such party
with such electrical and environmental conditions, technical information, data,
technical support, or assistance as may reasonably be required by such Party to
fulfill its obligations under this Agreement, any subordinate agreement, or
order. If either Party fails to provide the required conditions, information,
data, support, or assistance, the other Party shall be discharged from any such
obligation.
1.35. PUBLICATION OF AGREEMENT
The parties shall keep the provisions of this Agreement and any order
submitted hereunder confidential except (i) as reasonably necessary for
performance hereunder, (ii) to their respective lenders, accountants and legal
counsel, and except to the extent disclosure may be required by applicable laws
or regulations, in which latter case, the party required to make such disclosure
shall promptly inform the other prior to such disclosure in sufficient time to
enable such other party to make known any objections it may have to such
disclosure. Such other party shall have the right to seek a protective order to
assure that such information will be withheld from the public record. The party
required to make the disclosure shall, upon request of the other party and at
such other party's expense, provide reasonable assistance in obtaining such
protective order.
1.36. ARBITRATION:
Any dispute regarding any right, obligation, duty or liability
arising out of the provisions of this Agreement, shall be referred upon written
demand by either party within sixty (60) days, to the Intercompany Review Board.
The Intercompany Review Board shall be a standing committee composed
of two members each from Seller and Customer. Each party shall notify the other
of the name, title and address of its representatives appointed to the
Intercompany Review Board.
Upon resignation or retirement of any member from the Board, or
replacement of any member of the Board, the party which placed the member on the
Board shall immediately notify
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the other of the name, title, and address of that member's replacement. Any
reference herein to the Board, or members of the Board, shall include the above
designees of the members.
Upon referral of any dispute to the Board, the members of the Board
may meet in person or by telephone, or confer by any other means to resolve the
dispute. A formal resolution from the Board must be in writing and signed by all
four members.
If a controversy referred to the Board is not resolved within of
such referral, either party may request initiation of mediation of the
controversy under the Commercial Mediation Rules of the American Arbitration
Association. A party receiving such request shall not be required to consent to
mediation, but each party hereby represents that it will be its policy to act in
good faith and genuinely to consider mediation.
If the controversy has not been resolved within of the initiation
of mediation, or if the notified party is not willing to engage in mediation,
which may be inferred by the notifying party if the notified party's written
concurrence is not received within , such controversy shall be resolved by
arbitration pursuant to this Paragraph and the then current rules, and under
supervision of, the American Arbitration Association ("AAA"). The duty to
arbitrate shall extend to any officer, employee, agent, Affiliate or Subsidiary
making or defending any claim which would otherwise be arbitrable hereunder. The
arbitration shall be held in New York City before a single arbitrator who is
knowledgeable in commercial business transactions and wireless communications
and who is acceptable to both parties. If the parties are unable to agree upon
an arbitrator within , the arbitrator shall be selected by the President of
the AAA. The arbitrator's decision and award shall be final and binding and may
be entered in any court having jurisdiction thereof. The arbitrator shall not
have the power to award punitive or exemplary damages. Issues of arbitrability
shall be determined in accordance with the federal substantive and procedural
laws.
Each party shall bear its own attorney's fees associated with any
mediation or arbitration instituted hereunder and other costs shall be borne as
provided by the applicable rules of the American Arbitration Association;
provided, however, if court proceedings to stay litigation or compel arbitration
are necessary, the party who unsuccessfully opposes such proceedings shall pay
all associated costs, expenses and attorney's fees which are reasonably incurred
by the other party.
The procedures specified in this Paragraph shall be the sole and
exclusive procedures for the resolution of disputes between the parties arising
out of or relating to this Agreement; provided, however, nothing herein shall be
deemed to require arbitration of matters deemed not arbitrable under federal
law, or to prohibit a party from seeking a preliminary injunction or other
preliminary judicial relief if in such party's judgment such action is necessary
to avoid irreparable damage. Despite any such action, the parties will continue
to participate in good faith in the procedures specified herein. All applicable
statutes of limitation shall be tolled while the procedures specified in this
clause are pending, and nothing herein shall be deemed to bar any party from
taking such action as may be required to effectuate such tolling.
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<PAGE> 33
Except as provided expressly in this Paragraph, nothing in this
Agreement shall in any way affect or limit the rights of the parties to pursue
remedies at law or in equity.
1.37. DUTIES OF GOOD FAITH
Seller acknowledges that Customer, in entering into this Agreement,
has relied on the good will and trust that Seller has assured Customer that
Seller deserves. Customer acknowledges that Seller, in entering into this
Agreement, has relied on the good will and trust that Customer has assured
Seller that Customer deserves. Customer and Seller accordingly agree to
discharge all of their obligations and exercise all judgments and action
hereunder in utmost good faith and in such a fashion as will minimize costs and
losses to Customer or Seller.
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2. ARTICLE II
PROVISIONS APPLICABLE TO THE PURCHASE OF PRODUCTS
2.1. GENERAL:
The provisions of this Article II shall be applicable to the purchase
of Products from Seller. If Software is also to be licensed for use on a
purchased Product, or if a Product is also to be engineered or installed by
Seller, the provisions of Articles III and IV shall also be applicable.
2.2. PRODUCT AVAILABILITY:
Seller shall notify Customer, usually at least one (1) year, before
Seller discontinues accepting orders for a Seller's Manufactured Product sold
under this Agreement. Upon receipt of such notice with respect to a Product,
Customer shall have the right to place orders for its reasonably anticipated
future needs for such Product. Where Seller offers a functionally equivalent
Product for sale, the notification period may vary.
2.3. DOCUMENTATION:
Seller shall furnish to Customer, one copy of documentation for the
Products provided hereunder (i.e., one set of ECP documentation for each ECP
Site, one set of DCS documentation for each DCS Site and one set of cell site
documentation for each Cell Site). Such documentation shall be sufficient to
acquaint Customer's personnel with the System and Products and any further
Systems provided hereunder and to specify, order, operate and maintain such
Products. Such documentation will be that customarily provided by Seller to its
Customers at no additional charge. Such documentation shall be provided prior
to, with, or shortly after the shipment of the Products from Seller to Customer.
Additional copies of the documentation are available at prices set forth in the
Customer Price List.
2.4. PRODUCT COMPLIANCES:
Seller represents that a Product furnished hereunder shall comply, to
the extent required, with applicable federal and state laws, rules and
regulations pertaining to the Products, including without limitation, the
requirements of Part 22 of the Federal Communication Commission's Rules and
Regulations pertaining to cellular radio in effect upon delivery of such
Product. In addition, Seller represents that a Product furnished hereunder shall
comply, to the extent required, with the requirements of Subpart J of Part 15 of
the Federal Communication Commission's Rule and Regulations in effect upon
delivery of such Product, including those sections concerning the labeling of
such Product and the suppression of radio frequency and electromagnetic
radiation to specified levels. Seller makes no undertaking with respect to
harmful interference caused by (i) installation, repair, modification or change
of Products or Software by other than Seller, Seller's agents or employees or
subcontractors; (ii) Products being subjected to misuse, neglect, accident or
abuse by other than Seller, Seller's agents or employees or subcontractors;
(iii) Products or
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Software being used in a manner not in accordance with operating instructions or
in a suitable installation environment.
Seller assumes no responsibility under this clause for items designated
or supplied by Customer, including but not limited to antennas, power equipment
and batteries. Type acceptance or certification of such items shall be the sole
responsibility of Customer.
2.5. PRODUCT CHANGES:
Prior to the shipment of a Product, Seller may at any time make changes
in a Product furnished pursuant to this Agreement, or modify the drawings and
published specifications relating thereto, or substitute Products of later
design to fill an order, provided the changes, modifications, or substitutions
under normal and proper use do not impact upon the Form, Fit, or Function of an
ordered Product as identified in the Specifications and do not adversely impact
the ability of the Product or System as a whole to operate in accordance with
those Specifications.
Seller shall notify Customer of all changes to Products which, in
Seller's determination, are required to remedy a non-conformance to Seller's
applicable Specifications, to correct design defects that are of type that
result in inoperative electrical or mechanical conditions or an extremely
unsatisfactory operating condition, or which are recommended to enhance safety.
If Seller has furnished and installed a Product which is subject to
such a change, Seller will implement such change, at its expense, if it is
announced within from the date of shipment of that Product, by, at its
option, either (1) modifying the Product at Customer's site; (2) modifying the
Product which Customer has returned to Seller in accordance with Seller's
instructions; or (3) replacing the Product requiring the change with a
replacement Product for which such change has already been implemented. However,
if Seller has not engineered the original Product application and, accordingly,
office records are not readily available to Seller, Seller will provide the
generic change information and associated parts for Customer's use in applying
such change. If Seller has not installed such Product, Seller, will, at its
expense, furnish the parts and documentation necessary to implement such change
if it is announced within from the date of shipment of that Product.
Customer may notify Seller of any problems which it considers fall within the
categories described above. If Customer does not make or permit Seller to make
the change as stated above within one (1) year from the date of change
notification, subsequent repairs or replacements under this Paragraph and under
the Paragraph entitled PRODUCT WARRANTY may, at Seller's option, be billed to
Customer.
2.6. CONTINUING PRODUCT SUPPORT - PARTS AND SERVICES:
In addition to repairs provided for under Product Warranty, Seller
offers repair Services and Repair Parts in accordance with Seller's repair
Services and Repair Parts practices and terms and conditions then in effect, for
Seller's Manufactured Products furnished pursuant to this Agreement. Such repair
Services and Repair Parts shall be available while Seller is manufacturing or
stocking such Products or Repair Parts, but in no event less than after
such Product's discontinued availability effective date. Seller may use either
new, remanufactured, reconditioned,
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refurbished, or functionally equivalent Products or parts in the furnishing of
repairs or replacements under this Agreement.
Seller will give Customer reasonable notice of its intention
to discontinue manufacture of such Repair Parts so that Customer may order
additional parts for inclusion in its inventory, provided that nothing in this
sentence shall limit Seller's obligation under this Paragraph or Paragraph 2.2.
In addition, when Seller ceases to supply such parts and a functional equivalent
has not been designated, it will attempt to locate another source of supply for
Customer.
2.7. SPECIFICATIONS:
Upon request, Seller shall provide to Customer, , one (1) copy of
Seller's available commercial Specifications applicable to Products orderable
hereunder. Additional copies are available at the applicable price therefor.
Such Specifications, together with all Product and Software and all applicable
training documentation, are all that is necessary to operate or maintain the
System, Products and Software.
2.8. CUSTOMER TECHNICAL SUPPORT:
Seller provides Customer Technical Support for the AUTOPLEX Cellular
System through the Customer Technical Support Organization (CTSO). The CTSO is
available and is solely dedicated to the Seller's Wireless Infrastructure
Product line. The CTSO provides diagnostic center support, performance
measurement and system engineering services. Customer Technical Support is
currently provided at no cost to the Customer. Seller agrees that during the
term of this Agreement, that it shall not commence to charge Customer for such
services unless it generally commences to charge other customers of Seller in
comparable circumstances. Special, unusual or customized services may be
billable, depending upon the nature of the request.
2.9. PRODUCT WARRANTY:
(a) Seller warrants to Customer during the Warranty Period that:
(i) As of the date title to Products passes to Customer, Seller
will have the right to sell, transfer, and assign such
Products and the title conveyed by Seller shall be good and
valid;
(ii) Upon shipment or, if installed by Seller, on acceptance by
Customer or from the date Seller submits its notice of
completion of its installation, whichever is sooner, Seller's
Manufactured Products will be free from defects in material
and workmanship, and will conform to and perform in accordance
with the Specifications, or any other agreed-upon
specification referenced in the order for such Product; and
(iii) With respect to Vendor Items, Seller, to the extent permitted,
does hereby assign to Customer the warranties given to Seller
by its vendor of such Vendor Items.
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Such assignment will be effective on the date of shipment of
such Vendor Items. With respect to Vendor Items recommended by
Seller in the Specifications for which the vendor's warranty
cannot be assigned to Customer, or if assigned, less than
remain of the vendor's warranty at the time of assignment,
Seller warrants for from the date of shipment or, if
installed by Seller, on acceptance by Customer or from
the date Seller submits its notice of completion of its
installation whichever is sooner, that such Vendor's Items
will be free from defects in material and workmanship. Upon
written request of Customer, Seller shall identify those items
in its Customer Price Lists that are Vendor Items.
(b) The Warranty Periods listed below are applicable to Seller's
Manufactured Products furnished pursuant to this Agreement, unless
otherwise stated:
<TABLE>
<CAPTION>
Class of Product New Product Repaired or
Replacement
Product or Part
---------------- ----------- ---------------
<S> <C> <C>
Cellular Radio Tele-communications Systems
(Including MSCs & Cell Sites) Months Months
Power Products Months Months
Transmission Systems
-All Transmission Products in the "2000
Product Family" Months Months
-D4 Circuit Packs Months Months
-SLC Circuit Packs Months Months
-SLC Series 5 Plug-ins Months Months
-T1 Repeaters Months Months
-DDM-1000 Circuit Packs Months Months
-Other Transmission Products Months Months
Other Products Months Months
</TABLE>
Refer to the SOFTWARE WARRANTY CLAUSE for associated Software
warranties.
The Warranty Period for a repaired Product or part thereof repaired
under or for a replacement Product of Part thereof furnished in lieu of
repair under this Warranty is the period listed or the unexpired term
of the new Product Warranty Period, whichever is longer.
Notwithstanding anything in this Agreement to the contrary, Customer's use of
any part of Systems In Revenue Service or to provide training or hands-on
experience to Customer's personnel shall, if prior to Seller's notice of
installation completion, commence the applicable warranty period; provided,
however, this provision shall not apply to training provided by Seller nor to
the extent that Customer's personnel merely familiarize themselves with the
Systems without actual operation of the Products.
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(c) If under normal and proper use, a defect or nonconformity appears in an item
of Product during the applicable Warranty Period and Customer promptly notifies
Seller and confirms such notice in writing of such defect or nonconformity and
follows Seller's instructions regarding return of the defective or
non-conforming item, Seller, at its option, will either repair or replace the
same without charge at its manufacturing or repair facility or provide a refund
or credit based on the original purchase price; provided, however, that Seller's
option to provide a refund or credit shall not apply to those defects which
materially affect (i) the Product's and System's ability to deliver a service to
the end users or (ii) the billing, administration or maintenance capabilities of
such System. If a defect or non-conformity is in a Seller's Manufactured Product
developed by Seller or purchased by Seller pursuant to Seller's procurement
specifications and installed by Seller and Seller ascertains in its reasonable
judgment that the Product is repairable but not readily returnable for repair,
the repairs or replacements shall be made at Customer's site. No Product will be
accepted for repair or replacement without the written authorization of and in
accordance with instructions of Seller. Transportation expenses associated with
returns to Seller shall be borne by Customer. Seller shall pay the costs of
transportation of the repaired or replacing item to the destination designated
by Customer (within the contiguous forty-eight United States). If Seller
determines that a returned item is not defective, Customer shall pay Seller all
costs of handling, inspecting, testing and transportation. In repairing or
replacing any Product or part of a Product under this warranty, Seller may use
reconditioned or refurbished parts. Replaced Products or parts shall become
Seller's property.
(d) If Customer and Seller have a disagreement as to whether or not a problem is
a defect or nonconformity covered by this warranty, Seller agrees to correct the
problem and bill Customer for the corrective action under the Paragraph entitled
INVOICES AND TERMS OF PAYMENT. Seller will segregate such bills. Such disputed
warranty claims will be subject to resolution by the Intercompany Review Board
in accordance with the Paragraph entitled RESOLUTION OF DISPUTES, and if
resolved in Customer's favor, Seller agrees to credit Customer for the costs of
corrective action covered by warranty.
(e) Seller makes no warranty with respect to defective conditions or
non-conformities caused by Products being (i) subjected to misuse, neglect,
accident or abuse by anyone other than Seller or its subcontractors, employees
or agents; (ii) improperly wired, repaired or altered by anyone other than
Seller or its subcontractors, employees or agents; (iii) improperly installed,
stored or maintained by anyone other than Seller or its subcontractors,
employees or agents; or (iv) used in a manner not in accordance with
Specifications or written operating instructions.
(f) If as a result of a defect or non-conformity covered by this warranty,
Customer is not able to offer services to its subscribers, billing,
administration or maintenance in accordance with the Specifications, Seller
shall at its sole cost and expense repair or correct the problem or replace the
defective Product and ship any required replacement Product (or components
thereof) to Customer as promptly as possible. If such repair, replacement, or
installation of replacement Product requires the services of Seller's service
personnel at Customer's sites, Seller shall, at its sole cost and expense,
dispatch such service personnel as are required to correct such problem
immediately upon being notified thereof by Customer.
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<PAGE> 39
THE FOREGOING PRODUCT WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CUSTOMER'S SOLE AND
EXCLUSIVE REMEDY SHALL BE SELLER'S OBLIGATION TO REPAIR, REPLACE, CREDIT OR
REFUND AS SET FORTH ABOVE IN THIS WARRANTY.
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<PAGE> 40
3. ARTICLE III
PROVISIONS APPLICABLE TO THE LICENSING OF SOFTWARE
3.1. GENERAL:
The provisions of this Article apply to the granting of licenses
pursuant to this Agreement by Seller to Customer for Licensed Materials.
3.2. LICENSE:
Upon delivery of Licensed Materials, but subject to payment of all
applicable license fees including, but not limited to, any continuing up-date
fees, Seller grants to Customer a personal, nontransferable (except as otherwise
permitted pursuant to this Agreement), and nonexclusive license pursuant to this
Agreement to use Licensed Materials in the Territory with the Designated
Processor (or temporarily on any comparable replacement, if the Designated
Processor becomes inoperative, until the Designated Processor is restored to
operational status) or with Seller's equipment owned by a Related Operator.
Customer shall use Licensed Materials only for its own internal business
operation or for those of a Related Operator.
Except as provided herein, the license grants Customer no right to and
Customer will not sublicense such Licensed Materials, or modify, decompile, or
disassemble Software furnished as object code to generate corresponding Source
Code.
3.3. TITLE, RESTRICTIONS AND CONFIDENTIALITY:
All Licensed Materials (whether or not part of Firmware) furnished by
Seller, and all copies thereof made by Customer, including translations,
compilations, and partial copies are the property of Seller.
Except for any part of such Licensed Materials which is or becomes
generally known to the public through acts not attributable to Customer,
Customer shall hold such Licensed Materials in confidence, and shall not,
without Seller's prior written consent, disclose, provide, or otherwise make
available, in whole or in part, any Licensed Materials to anyone, except to its
employees having a need- to-know. Customer shall not copy Software embodied in
Firmware. Customer shall not make any copies of any other Licensed Materials
except as necessary in connection with the rights granted hereunder. Customer
shall reproduce and include any Seller copyright and proprietary notice on all
such necessary copies of the Licensed Materials. Customer shall also mark all
media containing such copies with a warning that the Licensed Materials are
subject to restrictions contained in an agreement between Seller and Customer
and that such Licensed Materials are the property of Seller. Customer shall
maintain records of the number and location of all copies of the Licensed
Materials.
Customer shall take appropriate action, by instruction, agreement, or
otherwise, with the persons permitted access to the Licensed Materials so as to
enable Customer to satisfy its obligations under this Agreement.
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<PAGE> 41
When the Licensed Materials are no longer needed by Customer, or if
Customer's license is canceled or terminated, Customer shall return all copies
of such Licensed Materials to Seller or follow written disposition instructions
provided by Seller.
3.4. CHANGES IN LICENSED MATERIALS:
Seller may substitute modified Licensed Materials to fill an order,
provided the modifications, under normal and proper Use, do not materially
adversely affect the Use, Function, or performance of the ordered Licensed
Materials. Unless otherwise agreed, such substitution shall not result in any
additional charges to Customer with respect to licenses for which Seller has
quoted fees to Customer.
3.5. SOFTWARE MODIFICATION REQUESTS:
Seller will evaluate any request by Customer that the Software provided
under this Agreement be modified or enhanced. At the conclusion of such
evaluation, Seller will advise Customer as to the feasibility of developing the
requested modification or enhancement. Should the request be feasible and if
Seller has the resources available to commit to the development, Seller will
provide Customer with a price estimate, availability date, and other pertinent
information. Other terms and conditions for any such modification or enhancement
shall be agreed upon prior to the commencement of work on the modification or
enhancement, it being understood that Seller will offer its then standard terms
and conditions, if any, being offered to its other customers.
3.6. MODIFICATION BY CUSTOMER:
Unless otherwise agreed, Customer is not granted any right to modify
Software furnished by Seller under this Agreement.
3.7. RELATED DOCUMENTATION:
Seller shall furnish to Customer, at no additional charge, one copy of
the Related Documentation for Software furnished by Seller pursuant to this
Agreement. Such Related Documentation will be that customarily provided by
Seller to its Customers at no additional charge. Such Related Documentation
shall be provided prior to, with, or shortly after provision of Software by
Seller to Customer. Additional copies of the Related Documentation are available
at prices set forth in the Customer Price List.
3.8. SOFTWARE WARRANTY:
(a) Seller warrants to Customer that:
(i) Software developed by Seller or developed in accordance with
Seller's Specifications will, during the Warranty Period
described below, be free from those
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defects which materially affect performance in accordance with
Seller's Specifications and Seller further warrants that it
has the right to grant the licenses to use Software it grants
under this Agreement; and
(ii) With respect to Software not covered in paragraph (a),
sub-paragraph (i), Seller to the extent permitted, does hereby
assign to Customer the warranties given to Seller by its
supplier of such Software.
(b) The Warranty Periods listed below are applicable to Software developed by
Seller or developed in accordance with Seller's Specifications, the Related
Documentation developed by Seller and associated with such Software, and the
medium on which such Software is recorded, unless otherwise stated.
<TABLE>
<CAPTION>
Software Warranty Period
-------- ---------------
<S> <C>
-Network Wireless Systems including
Software Updates Months
-Transmission Systems (for D4 Systems) Months
-All Other Months
</TABLE>
The Warranty Period for media and Related Documentation shall
commence on the same date as commences the Warranty Period for their associated
Software. So long as Seller continues to offer annual Software Updates pursuant
to Seller's Annual Release Maintenance Fee program the Warranty Period for
Software shall extend from the later of the date of payment by Customer of
Seller's Annual Release Maintenance Fee or the implementation of a Software
update furnished pursuant to such program, so long as Customer continues
promptly to implement each such Software Update so furnished. If Customer fails
to promptly implement any Software Update furnished by Seller, the Warranty
Period for the Software shall continue to run from the later of the date of
payment of the last consecutive Annual Release Maintenance Fee or the last
consecutive Software Update implemented by Customer and shall terminate at the
end of such period.
(c) The provisions of Section 2.9(c)-(f) are incorporated herein and shall apply
to any warranty claim by Customer during the Warranty Period with respect to the
Software.
THE FOREGOING SOFTWARE WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CUSTOMER'S SOLE AND
EXCLUSIVE REMEDY SHALL BE SELLER'S OBLIGATION TO CORRECT, REPLACE, CREDIT, OR
REFUND AS SET FORTH ABOVE IN THIS WARRANTY.
3.9. TAXES APPLICABLE TO SOFTWARE:
Notwithstanding clause TAXES in Article I of this Agreement, Seller
shall not bill, collect, or remit any state or local sales or use tax with
respect to the license of Software under this
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Agreement, or with respect to the performance of Services related to such
Software, which Customer represents to Seller is not properly due under
Customer's interpretation of the law of the taxing jurisdiction, if (1) Customer
submits to Seller a written explanation of the authorities upon which Customer
bases its position that the license or performance of Services is not subject to
sales or use tax, and (2) Seller agrees that there is authority for Customer's
position, provided, however, that Customer shall hold Seller harmless for all
costs and expenses (including, but not limited to, taxes and related charges
payable under clause TAXES, and attorney's fees) arising from the assertion by a
taxing authority that the license of, or the performance of Services with
respect to, the Software was subject to state or local sales or use tax.
3.10. LIMITED TRANSFERABILITY:
(a) Where Customer elects to transfer Cell Sites and MSC Products and related
Power and Transmission Products furnished under this Agreement to a third party,
and where such Products will remain in place and operational for the purpose of
continuing to provide wireless telecommunications service in the area for which
such Products were installed, or where Customer elects to transfer Products to
an Affiliate for reuse within the Territory, Customer may transfer its right to
Use the Licensed Materials, including Software, furnished under this Agreement
for Use with such Products without the payment of any additional Software
right-to-use fee(s) by the transferee, except where feature or size sensitive
units are a factor, but only under the following conditions:
(i) The right to use such Licensed Materials may be transferred only
together with the Products with which Customer has a right to use such Licensed
Materials, and such right to use the Licensed Materials shall continue to be
limited to use with such Products;
(ii) Before any such Licensed Materials shall be transferred,
Customer shall notify Seller of such transfer and the transferee shall have
agreed in writing (a copy of which will be provided to Seller) to keep the
Licensed Materials in confidence and to corresponding conditions respecting use
of Licensed Materials as those imposed on Customer in this Agreement; and
(iii) The transferee shall have the same right to Software warranty
and Software maintenance for such software as the transferor, provided the
transferee continues to pay the fees, including recurring Software Update fees,
if any, associated with such Licensed Materials or maintenance.
(b) Except as provided in Section 3.10 subsection (a) immediately preceding, and
except as may otherwise in this Agreement be provided expressly, Customer shall
have no right to transfer Licensed Materials furnished by Seller under this
Agreement without consent of Seller. If Customer elects to transfer a Product
purchased under this Agreement for which it does not under this Agreement have
the right to transfer the related Licensed Materials, Seller agrees that upon
written request of the transferee of such Product, or of Customer, Seller shall
not without reasonable cause fail to grant the transferee a license to use such
Licensed Materials with the Products upon Seller's then standard license terms
and conditions, including license fees.
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3.11. AVAILABILITY AND SUPPORT OF SOFTWARE FEATURES/UPDATES:
Seller agrees to make available to Customer, at Seller's Standard Charges
(except as noted in Section 1.10 Pricing and related software items pursuant to
Attachment E per this Agreement) therefore those additional Software features
applicable to the Systems and other Products purchased under this Agreement
which are developed by Seller, which Seller has a right to and has elected to
license to others and which Seller has licensed to another cellular mobile
carrier.
To the extent that Seller continues to provide an Annual Release
Maintenance Fee program for MSC and Cell Site Software furnished under this
Agreement, Seller shall offer to Customer at Seller's prices quoted in the then
current Autoplex Cellular Price Reference Guide, such program, which when
purchased, shall entitle Customer (i) to any and all Software updates (excluding
those updates priced separately as Optional Features) for Software furnished
hereunder and (ii) to the warranty coverage for System Software Updates
described in the Paragraph entitled SOFTWARE WARRANTY. At the effective date of
this Agreement Seller is operating under a pricing policy pursuant to which
Customer's payment of Seller's Annual Release Maintenance Fees for Software
updates entitles Customer to receive, without payment of additional fees, new
software generic releases for MSCs and Cell Sites as they are issued from time
to time. Nothing herein shall be deemed to require Seller to continue this
policy or to continue to offer an annual Software update service and, subject to
any applicable rules concerning general price increases, Seller shall be
entitled to establish and administer separate fees for such generic Software,
but, in no such case where any annual Software update service is terminated
shall Seller be relieved of any obligation to repair, replace or refund for any
warranty defect in Software or Software Updates furnished to Customer, as
provided in the Paragraph entitled SOFTWARE WARRANTY.
Seller agrees to maintain a standard, supported, generic version of
Software necessary for operation of Products furnished by Seller pursuant to
this Agreement for a period of not less than ten (10) years from the effective
date of this Agreement.
Seller agrees to maintain a standard, supported, generic version of any
Software developed and furnished by Seller pursuant to this Agreement, and if
such maintenance is not available from another entity, then Seller shall furnish
Customer, under a suitable confidentiality agreement, Seller's then existing
Software Source Code, Software development programs, and associated
documentation for such standard version to the extent necessary for Customer to
maintain and enhance for its own Use the standard version of that Software for
which it has the right to Use.
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4. ARTICLE IV
PROVISIONS APPLICABLE TO ENGINEERING,
INSTALLATION, AND OTHER SERVICES
4.1. GENERAL:
The provisions of this Article IV shall be applicable to the furnishing
by Seller of Services other than Services furnished pursuant to any other
Article of this Agreement.
4.2. ACCEPTANCE OF INSTALLATION:
At reasonable times during the course of Seller's installation,
Customer, at its request may, or upon Seller's request shall, inspect completed
portions of such installation. Upon Seller's further request, and upon
sufficient notice to Customer, Customer shall observe Seller's testing of the
Product being installed to determine that such testing and the test results are
in accordance with Seller's acceptance standards or acceptance procedures. The
job shall be considered complete and ready for acceptance by Customer when the
Product has been installed and tested by Seller in accordance with its standard
procedures, and Seller represents such Product to be in working order and
operating in accordance with the Specifications. Upon completion of the
installation, Seller will submit to Customer a notice of completion. Where
Seller's installation relates to a System or an expansion of a System, separate
notices of completion shall be issued for (i) the MSC, (ii) each cell site, and
(iii) such System as a whole.
Customer shall promptly make final inspection of substantial
conformance with Seller's specifications and do everything reasonably necessary
to expedite acceptance of the job. Seller will promptly correct any defects for
which it is responsible. The job will be considered as fully accepted unless
Seller receives notification to the contrary within after
submitting the notice of completion. Notwithstanding the foregoing, if Customer
places the Products and/or Licensed Materials into commercial service, such
action will constitute Customer's acceptance but Seller shall nevertheless
remain fully responsible to correct all defects and items of non-compliance with
the Specifications under any applicable warranty.
4.3. CONDITIONS OF INSTALLATION AND OTHER SERVICES PERFORMED ON CUSTOMER'S
SITE:
4.3.1. ITEMS PROVIDED BY CUSTOMER
Except as the parties may have otherwise agreed for Turnkey Services,
as set forth in this Agreement or in other agreements of the parties, Customer
will be responsible for furnishing the following items (as required by the
conditions of the particular installation or other on-site Service, hereinafter
collectively referred to as the "Service") at no charge to Seller and these
items will not be included in Seller's price for the Service. Seller's
representative shall have the right to inspect the site prior to Service Start
Date. Should Customer fail to furnish any of such items for
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which it is responsible after Seller provides Customer notice, Seller may
furnish such items and charge Customer for them in addition to the prices
otherwise charged by Seller for the Service.
Regulatory Commission Approvals--Prior to Service Start Date, obtain
such approvals, licenses, permits, tariffs and/or other authorities from the
Federal Communications Commission and state and local public utilities
commissions as may be necessary for construction and operation of a cellular
mobile radio telephone system.
Easements, Permits and Rights-of-Way--Prior to Service Start Date,
provide all reasonable rights-of-way, easements, licenses to come upon land to
perform the Service, permits and authority for installation of Products and
other items; permits for opening sidewalks, streets, alleys, and highways; and
construction and building permits.
Access to Building and Work Site--Allow employees of Seller and it
subcontractors free access to premises and facilities at all reasonable hours
during the scheduled Service or at such other times as are reasonably requested
by Seller for performance under this Agreement. Customer shall obtain for
Seller's and its subcontractors' employees any necessary identification and
clearance credentials to enable Seller and its subcontractors to have access to
the work site.
Environmental Conditions--When Customer provides or arranges for a
third party to provide MSC and/or cell site structures, Customer shall prior to
Service Start Date:
a. Insure that the MSC and/or cell site structures are in a
structurally safe and sound condition to properly house the
materials to be installed, in accordance with weight,
strength, and structural requirements specified by Seller.
b. Take such action as may be necessary to insure that the
premises will be dry and free from dust and Hazardous
Materials, including but not limited to asbestos, and in such
condition as not to be injurious to Seller's or its
subcontractors' employees or to the materials to be installed.
Prior to commencement of the Services and during the
performance of the Service, Customer shall, if requested by
Seller, provide Seller with sufficient data to assist Seller's
supplier in evaluating the environmental conditions at the
work site (including the presence of Hazardous Materials). The
price quoted by Seller's supplier for the Service does not
include the cost of removal or disposal of the Hazardous
Materials from the work site. Customer is responsible for
removing and disposing of the Hazardous Materials, including
but not limited to asbestos, prior to commencement of the
Service.
Sensitive Equipment--Prior to commencement of the Service, inform
Seller of the presence of any known sensitive equipment at the work site (e.g.,
equipment sensitive to static electricity or light).
Repairs to Buildings--Prior to Service Start Date, make such
alterations and repairs as are reasonably necessary per specifications for
proper installation of items to be installed.
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Building Readiness--Prior to Service Start Date, provide hoisting and
hauling services, furnish suitable openings in buildings to allow the items to
be installed to be placed in position, and provide necessary openings and ducts
for cable and conductors in floors and walls as designated on engineering
drawings furnished by Seller.
Surveys--Prior to Service Start Date furnish surveys (describing the
physical characteristics, legal limitations and utility locations for the work
site) and a legal description of the site.
Electrical Current, Heat, Light and Water--Provide electric current for
charging storage batteries and for any other necessary purposes with suitable
terminals where work is to be performed; provide temperature control and general
illumination (regular and emergency) in rooms in which work is to be performed
or Products or other items stored, equivalent to that ordinarily furnished for
similar purposes in a working office; provide exit lights; provide water and
other necessary utilities for the proper execution of the Service.
Cellular System Utility Requirements--Negotiate with the power and
telephone companies for installation of the power and telephone facilities
necessary to proper operation of the Products and/or other items being
installed. The type and quantity of such facilities shall be subject to Seller's
reasonable approval. Customer shall have the telephone company provide, place,
install, extend and terminate telephone facilities into the MSC and cell sites;
line up and test the telephone company facilities outside and inside the MSC and
cell sites; and provide to Seller copies of the test results prior to Seller's
commencing integration testing of the MSC with each cell site.
Material Furnished by Customer--New or used material furnished by
Customer shall be in such condition that it requires no repair and no adjustment
or test effort in excess of that normal for new equipment. Customer assumes all
responsibility for the proper functioning of such material. Customer shall also
provide the necessary information for Seller to properly install such material.
Furniture--provide and install all furniture.
Floor Space and Storage Facilities--Provide, during progress of the
Service, suitable and easily accessible floor space and storage facilities (a)
to permit storing major items of Products and other material closely adjacent to
where they will be used, (b) for administrative and luncheon purposes, (c) for
Seller's and its subcontractors' employees' personal effects, and (d) for tools
and property of Seller and its subcontractors. Where the Service is to be
performed outside of a building or in a building under construction, Customer
shall, in addition to the above requirements, as appropriate, permit or secure
permission for Seller and its subcontractors to maintain at the work site,
storage facilities (such as trailers) for Products, materials and other items
and for tools and equipment needed to complete the Service.
Watch Service--For MSCs, provide normal security (for cell sites,
commercial alarms) necessary to prevent admission of unauthorized persons to
building and other areas where installation Service is performed and to prevent
unauthorized removal of the Products and other items. If space for storage
facilities is provided to Seller, Seller will inform Customer as to which
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storage facilities at the work site Seller will keep locked; such storage
facilities will remain closed to Customer's surveillance.
Use of Available Testing Equipment--Customer shall make available to
Seller: (1) the maintenance test facilities which are imbedded in equipment to
which the Product or other item being installed will be connected or added, and
(2) meters, test sets, and other portable apparatus that is unique to the item,
if provided by Customer, being installed. Seller's use of such test equipment
shall not interfere with the Customer's normal equipment maintenance functions.
Customer Hazardous Materials Cleanup--At the conclusion of the Service,
Customer shall be responsible for the cleanup, removal, and proper disposal of
those Hazardous Materials present at Customer's premises.
Access to Existing Facilities--Customer shall permit Seller reasonable
use of such portions of the existing plant or equipment as are necessary for the
proper completion of such tests as require coordination with existing
facilities. Such use shall not interfere with the Customer's normal maintenance
of equipment.
Grounds--Customer shall provide access to suitable and isolated
building ground as required for Seller's standard grounding of equipment. Where
installation is outside or in a building under construction, Customer shall also
furnish lightning protection ground. Customer has expressed a belief that
Seller's standard grounding practices may exceed that required in specific
instances. In the event that Customer has not provided access to grounds in
accordance with Seller's standard grounding practices and Customer refuses to do
so, Seller will, if feasible, complete installation using the grounds which
Customer does provide in such non-standard situation. Seller shall have no
liability whatsoever for consequences resulting solely from Customer's failure
to follow Seller's standard grounding practices. Without in any way intending to
limit the foregoing, Customer acknowledges that all defects in Products and
Licensed Materials, including any reduced performance thereof, resulting solely
from Customer's failure to comply with Seller's standard grounding practices
shall not be covered by Seller's applicable warranty and all Services performed
by Seller to effect repair in such cases shall be for the account of Customer.
Nothing herein shall be deemed to require Customer to perform grounding that
Seller has otherwise agreed to perform pursuant to the express terms of this
Agreement.
Requirements for Customer Designed Circuits--Customer shall furnish
information covering the proper test and readjust requirements for apparatus and
requirements for circuit performance associated with circuits designed by
Customer or standard circuits modified by Customer's drawings.
Through Tests and Trunk Tests--Customer shall make required through
tests and trunk tests to other offices after Seller provides its notice of
completion or notice of advanced turnover.
-44-
<PAGE> 49
4.3.2. ITEMS TO BE FURNISHED BY SELLER
The following items will be furnished by Seller (if required by the
conditions of the particular Service) and the price thereof is included in
Seller's price for Service:
Protection of Equipment and Building--Seller shall provide protection
for Customer's equipment and buildings during the performance of the Service and
in accordance with Seller's standard practices.
Method of Procedure--Seller shall prepare a detailed Method of
Procedure ("MOP") before starting work on live equipment. Customer shall review
the MOP and any requested changes shall be negotiated. Customer shall give
Seller written acceptance of the MOP prior to start of the work.
The following items will be furnished by Seller if requested by
Customer, but Customer will be billed and shall pay for them in addition to
Seller's standard or firm quoted price for the Services:
Protection of Buildings and Equipment--Seller may provide protection of
buildings and equipment in accordance with special practices of Customer
differing from Seller's standard practices.
Maintenance--Maintenance of Products, Software and other items from
completion of installation until date of acceptance but nothing herein shall be
deemed to require Customer to pay for conversions of the Products, Software and
other items, which is otherwise determined by the terms of this Agreement are
the responsibility of Seller.
Locally Purchased Items--Purchase of items indicated by Seller's
specifications as needing to be purchased locally.
Readjusting Apparatus--Seller may provide readjustment (in excess of
that normally required on new apparatus) of apparatus associated with relocated
or rewired circuits.
Cross-Connections (Other than to Outside Cable Terminations)--Seller
may run or rerun permanent cross-connections in accordance with revised
cross-connection lists furnished by Customer.
Handling, Packing, Transportation and Disposition of Removed and
Surplus Customer Equipment--Except as otherwise provided in this Agreement,
Seller may pack, transport, and dispose of surplus and removed Customer
equipment as agreed by the parties.
-45-
<PAGE> 50
Premium Time Allowances and Night Shift Bonuses--Seller may have its
Services personnel work premium time and night shifts to the extent that Seller
may deem such to be necessary to effect the required coordination of installing
and testing operations or other Services because of Customer's requirements,
unless the need therefor results from Seller's failure to perform its
obligations hereunder in a reasonable and timely manner in which event Seller
shall bear the cost of premium time and night shifts for its personnel.
Emergency Lighting System--Seller may provide new emergency lighting
system (other than the original ceiling mounted stumble lighting) to satisfy
illumination and safety needs of Products of certain heights.
4.4. WORK DONE BY OTHERS:
Work done at the site by Customer or its other vendors or contractors
shall not interfere with Seller's performance of the installation or other
Services. If Customer or its other vendors or contractors fail to timely
complete the site readiness or if Customer's or its other vendors or
contractors' work interferes with Seller's performance, the scheduled completion
date of Seller's Services under this Agreement shall be extended as necessary to
compensate for such delay or interference.
4.5. SERVICES WARRANTIES:
(a) Seller warrants to Customer only, that Services will be performed in a
careful and workmanlike manner and in accordance with Seller's
specifications or those referenced in the order and with accepted
practices in the community in which such Services are performed, using
material free from defects except where such material is specified or
provided by Customer. If Services prove to be not so performed and if
Customer notifies Seller, with respect to engineering, installation, or
repair Services, within a period commencing on the date of
completion of the Service, and with respect to other Services, as
identified by Seller in writing, Seller, at its option, either will
correct the defective or nonconforming Service or render a full or
prorated refund or credit based on the original charge for the Service.
(b) Where Seller performs engineering or installation Services as part of a
combined engineering, furnishing, and installation order, the period
referenced above shall commence on completion of the installation
Service.
(c) THE FOREGOING SERVICES WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ALL
OTHER EXPRESS AND IMPLIED WARRANTIES INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
CUSTOMER'S SOLE AND EXCLUSIVE REMEDY SHALL BE SELLER'S OBLIGATION TO
MAKE CORRECTIONS OR GIVE A CREDIT OR REFUND AS SET FORTH ABOVE IN THIS
WARRANTY.
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<PAGE> 51
5. ARTICLE V
ENTIRE AGREEMENT AND EXECUTION
5.1. ENTIRE AGREEMENT:
The terms and conditions contained in this Agreement, including
Attachments A through M, any subordinate agreements, and orders accepted
pursuant to this Agreement or any subordinate agreement supersede all prior oral
or written understandings between the parties with respect to the subject matter
thereof and constitute the entire agreement of the parties with respect to such
subject matter. Such terms and conditions shall not be modified or amended
except by a writing signed by authorized representatives of both parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives on the date(s) indicated.
WESTERN WIRELESS CORPORATION LUCENT TECHNOLOGIES INC.
By: /s/ Tim R. Wong By: /s/ Nina Aversano
----------------------------- -----------------------------
Printed Name: Tim R. Wong Printed Name: Nina Aversano
Title: Vice President, Engineering and Title: President, GCM
Technical Operations
Date: September 12, 1996 Date: September 12, 1996
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<PAGE> 52
EXHIBIT 10.44
AMENDMENT NO. 2
TO
PCS 1900 SUPPLY AGREEMENT
BETWEEN
WESTERN PCS CORPORATION
AND
NORTHERN TELECOM INC.
Made as of this 25th day of July, 1996, by and between Western PCS
Corporation (hereinafter referred to as "Buyer"), a Delaware corporation with
offices located at 2001 NW Sammamish Road, Suite 100, Issaquah, Washington
98027, and Northern Telecom Inc., a Delaware corporation with offices located at
2435 N. Central Expressway, Richardson, Texas 75080 (hereinafter referred to as
"Seller").
WHEREAS, Buyer and Seller entered into a PCS 1900 Supply Agreement dated
June 30, 1995 ("Agreement"); and
WHEREAS, Buyer and Seller now wish to amend this Agreement in order to add
a new Schedule E to Annex 8 to allow for the further provision of Services,
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Buyer and Seller agree to amend the Agreement as follows:
1. Add a new Schedule E "Supplemental Project Services," as attached
hereto, to Annex 8. References to Schedule E shall be added to the Table of
Contents and to Article 22.
This Amendment No. 2 shall be retroactive to April 1, 1996 ("Effective
Date") upon execution by both parties.
Except as specifically modified herein, the Agreement shall in all
respects continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their representatives being thereunto duly authorized.
WESTERN WIRELESS CORPORATION NORTHERN TELECOM INC.
By: /s/ Tim R. Wong By: /s/ Douglas Patterson
------------------------------ --------------------------------
Printed Name: Tim R. Wong Printed Name: Douglas Patterson
Title: Vice President, Engineering Title: Vice President,
and Technical Operations Finance, Wireless Networks
Date: July 25, 1996 Date: August 19, 1996
<PAGE> 1
EXHIBIT 10.43
AMENDMENT NO. 1
TO
PCS 1900 SUPPLY AGREEMENT
BETWEEN
WESTERN PCS CORPORATION
AND
NORTHERN TELECOM INC.
Made as of this 25th day of July, 1996, by and between Western PCS
Corporation (hereinafter referred to as "Buyer"), a Delaware corporation with
offices located at 2001 NW Sammamish Road, Suite 100, Issaquah, Washington
98027, and Northern Telecom Inc., a Delaware corporation with offices located at
2435 N. Central Expressway, Richardson, Texas 75080 (hereinafter referred to as
"Seller").
WHEREAS, Buyer and Seller entered into a PCS 1900 Supply Agreement dated
June 30, 1995 ("Agreement"); and
WHEREAS, Buyer and Seller now wish to modify this Agreement in order to
add a new Annex 12 for the Oklahoma City MTA Project Services,
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Buyer and Seller agree to amend the Agreement as follows:
1. Add a new Annex 12 "Oklahoma City MTA Project Services," as attached
hereto and, including "Schedule A - Network Engineering and Support Services for
the Oklahoma City MTA, Schedule B - Construction Management for the Oklahoma
City MTA, Schedule C - Network Implementation for the Oklahoma City MTA."
References to Annex 12 shall be added to the Table of Contents and to Article
22.
This Amendment No. 1 shall be retroactive to April 1, 1996 ("Effective
Date") upon execution by both parties.
<PAGE> 2
Except as specifically modified herein, the Agreement shall in all
respects continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their representatives being thereunto duly authorized.
WESTERN WIRELESS CORPORATION NORTHERN TELECOM INC.
By: /s/ Tim R. Wong By: /s/ Douglas Patterson
---------------------------- -------------------------------
Printed Name: Tim R. Wong Printed Name: Douglas Patterson
Title: Vice President, Engineering Title: Vice President,
and Technical Operations Finance, Wireless Networks
Date: July 25, 1996 Date: August 19, 1996
-2-
<PAGE> 1
EXHIBIT 10.44
AMENDMENT NO. 2
TO
PCS 1900 SUPPLY AGREEMENT
BETWEEN
WESTERN PCS CORPORATION
AND
NORTHERN TELECOM INC.
Made as of this 25th day of July, 1996, by and between Western PCS
Corporation (hereinafter referred to as "Buyer"), a Delaware corporation with
offices located at 2001 NW Sammamish Road, Suite 100, Issaquah, Washington
98027, and Northern Telecom Inc., a Delaware corporation with offices located at
2435 N. Central Expressway, Richardson, Texas 75080 (hereinafter referred to as
"Seller").
WHEREAS, Buyer and Seller entered into a PCS 1900 Supply Agreement dated
June 30, 1995 ("Agreement"); and
WHEREAS, Buyer and Seller now wish to amend this Agreement in order to add
a new Schedule E to Annex 8 to allow for the further provision of Services,
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Buyer and Seller agree to amend the Agreement as follows:
1. Add a new Schedule E "Supplemental Project Services," as attached
hereto, to Annex 8. References to Schedule E shall be added to the Table of
Contents and to Article 22.
This Amendment No. 2 shall be retroactive to April 1, 1996 ("Effective
Date") upon execution by both parties.
Except as specifically modified herein, the Agreement shall in all
respects continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their representatives being thereunto duly authorized.
WESTERN WIRELESS CORPORATION NORTHERN TELECOM INC.
By: /s/ Tim R. Wong By: /s/ Douglas Patterson
------------------------------ --------------------------------
Printed Name: Tim R. Wong Printed Name: Douglas Patterson
Title: Vice President, Engineering Title: Vice President,
and Technical Operations Finance, Wireless Networks
Date: July 25, 1996 Date: August 19, 1996
<PAGE> 1
October 25, 1996 Exhibit 10.45
Harris Trust Company of California
601 South Figueroa, Suite 4900
Los Angeles, California 90017
Ladies and Gentlemen:
Western Wireless Corporation (the "Company"), a Washington corporation,
hereby appoints Harris Trust Company of California ("Harris Trust") to act as
exchange agent (the "Exchange Agent") in connection with an exchange offer by
the Company to exchange an aggregate principal amount of up to $200,000,000 of
its 10-1/2% Senior Subordinated Notes Due 2007 (the "New Notes"), which have
been registered under the Securities Act of 1933, as amended, for a like
principal amount of its outstanding 10-1/2% Senior Subordinated Notes Due 2007
(the "Old Notes"). The terms and conditions of the exchange offer are set forth
in a Prospectus, included as part of a Registration Statement on Form S-4
originally filed on October 25, 1996 (as the same may be amended or supplemented
from time to time, the "Prospectus"), and in the related Letter of Transmittal,
which together constitute the "Exchange Offer." Capitalized terms used herein
and not defined shall have the respective meanings ascribed thereto in the
Prospectus.
On the basis of the representations, warranties and agreements of the
Company and Harris Trust contained herein and subject to the terms and
conditions hereof, the following sets forth the agreement between the Company
and Harris Trust as Exchange Agent for the Exchange Offer:
1. Appointment and Duties as Exchange Agent.
(a) The Company hereby authorizes Harris Trust to act as
Exchange Agent in connection with the Exchange Offer and Harris Trust agrees to
act as Exchange Agent in connection with the Exchange Offer. As Exchange Agent,
Harris Trust will perform those services as are outlined herein or which are
customarily performed by an exchange agent in connection with an exchange offer
of like nature, including, but not limited to, accepting tenders of the Old
Notes and assisting the Company in the preparation of the documentation
necessary to effect the transactions herein contemplated (without assuming
responsibility for such documentation, unless such information has been
furnished to the Company in writing by Harris Trust).
<PAGE> 2
(b) The Company acknowledges and agrees that Harris Trust has
been retained pursuant to this Agreement to act solely as Exchange Agent in
connection with the Exchange Offer, and, in such capacity, Harris Trust shall
perform such duties as are outlined herein and which are specifically set forth
in the section of the Prospectus captioned "The Exchange Offer" and in the
Letter of Transmittal; provided, however, that in no way will Harris Trust's
general duty to act in good faith and without gross negligence or willful
misconduct be discharged by the foregoing.
(c) Harris Trust will examine each of the Letters of
Transmittal (or electronic instructions transmitted by the Depository Trust
Corporation (the "DTC Transmissions"), and certificates for the Old Notes and
any other documents delivered or mailed to Harris Trust by or for holders of the
Old Notes (or any Book-Entry Conformations (as set forth in the Prospectus)
received by Harris Trust with respect to the Old Notes), to ascertain whether:
(i) the Letters of Transmittal and any such other documents are duly executed
and properly completed in accordance with the instructions set forth therein (or
that the DTC Transmission contains the proper information required to be set
forth therein) and (ii) the Old Notes have otherwise been properly tendered (or
that the Book-Entry confirmations are in due and proper form and contain the
information required to be set forth therein). In each case where the Letters of
Transmittal or any other documents have been improperly completed or executed
(or the DTC Transmissions are not in due and proper form or omit certain
information) or certificates for the Old Notes are not in proper form for
transfer (or the Book-Entry Confirmations are not in due and proper form or omit
certain information) or some other irregularity in connection with the tender or
acceptance of the Old Notes exists, Harris Trust will endeavor, subject to the
terms and conditions of the Exchange Offer, to advise the tendering holders of
Old Notes of the irregularity and to take any other action as may be necessary
or advisable to cause such irregularity to be corrected. Notwithstanding the
above, Harris Trust shall not be under any duty to give any notification of any
irregularities in tenders or incur any liability for failure to give any such
notification.
(d) With the approval of the President, any Senior Vice
President, any Executive Vice President, any Vice President or the Treasurer or
any Assistant Treasurer of the Company (such approval, if given orally, to be
confirmed in writing) or any other party designated by any such officer, Harris
Trust is authorized to waive any irregularities in connection with any tender of
the Old Notes pursuant to the Exchange Offer.
(e) Tenders of the Old Notes may be made only as set forth in
the Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer" and the Old Notes shall be considered properly tendered only
when tendered in accordance with such procedures set forth therein.
Notwithstanding the provisions of this paragraph, the Old Notes which the
President, any Senior Vice President, any Executive Vice President, any Vice
President or the Treasurer, any Assistant Treasurer or any other designated
officer of the Company, shall approve (such approval, if given orally, to be
confirmed in writing) as having been properly tendered shall be considered to be
properly tendered.
-2-
<PAGE> 3
(f) Harris Trust shall advise the Company with respect to any
Old Notes received as soon as possible after 5 p.m., New York City time, on the
Expiration Date and accept its instructions with respect to disposition of such
Old Notes.
(g) Harris Trust shall (i) ensure that each Letter of
Transmittal and, if required pursuant to the terms of the Exchange Offer, the
related Old Notes or a bond power are duly executed (with signatures guaranteed
where required) by the appropriate parties in accordance with the terms of the
Exchange Offer; (ii) in those instances where the person executing the Letter of
Transmittal (as indicated on the Letter of Transmittal) is acting in a fiduciary
or a representative capacity, ensure that proper evidence of his or her
authority so to act is submitted; (iii) in those instances where the Old Notes
are tendered by persons other than the registered holder of such Old Notes,
ensure that customary transfer requirements, including any applicable transfer
taxes, and the requirements imposed by the transfer restrictions on the Old
Notes (including any applicable requirements for certifications, legal opinions
or other information) are fulfilled; (iv) ensure that the Old Notes tendered in
part are tendered in principal amounts of $1,000 and integral multiples thereof;
and (v) deliver certificates for the Old Notes tendered in part to the transfer
agent for split-up and shall return any untendered Old Notes or Old Notes which
have not been accepted by the Company to the holders of such Old Notes (or in
the case of Old Notes tendered by book-entry transfer, such non-exchanged Old
Notes will be credited to an account maintained with the Book-Entry Transfer
Facility) promptly after the expiration or termination of the Exchange Offer.
(h) Upon acceptance by the Company of any Old Notes duly
tendered pursuant to the Exchange Offer (such acceptance if given orally, to be
confirmed in writing), Harris Trust will cause the New Notes in exchange
therefor to be issued as promptly as possible (subject to receipt from the
Company of appropriate certificates under the related Indenture) and Harris
Trust will deliver such New Notes on behalf of the Company at the rate of $1,000
principal amount of New Notes for each $1,000 principal amount of the Old Notes
tendered as promptly as possible after acceptance by the Company of the Old
Notes for exchange and notice (such notice if given orally, to be confirmed in
writing) of such acceptance by the Company; provided, however, that, in all
cases, the Old Notes tendered pursuant to the Exchange Offer will be exchanged
only after timely receipt by Harris Trust of certificates for such Old Notes (or
a Book-Entry Confirmation), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
any other required documents (or a properly completed DTC Transmission). Unless
otherwise instructed by the Company, Harris shall issue the New Notes only in
denominations of $1,000 or any integral multiple thereof.
(i) Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and the conditions set forth in the Prospectus
and the Letter of Transmittal, the Old Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time on or prior to the Expiration Date in
accordance with the terms of the Exchange Offer.
(j) Notice of any decision by the Company not to exchange any
Old Notes tendered shall be given by the Company either orally (if give orally,
to be confirmed in writing) or in a written notice to Harris Trust.
-3-
<PAGE> 4
(k) If, pursuant to the Exchange Offer, the Company does not
accept for exchange all or part of the Old Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer--Certain Conditions to the Exchange Offer" or
otherwise, Harris trust shall, upon notice from the Company (such notice if
given orally, to be confirmed in writing), promptly after the expiration or
termination of the Exchange Offer return such certificates for unaccepted Old
Notes (or effect appropriate Book-Entry Confirmations), together with any
related required documents and the Letters of Transmittal (or DTC Transmissions)
relating thereto that are in Harris Trust's possession, to the persons who
deposited such certificates.
(l) Certificates for reissued Old Notes, unaccepted Old Notes
or New Notes shall be forwarded by (a) first-class certified mail, return
receipt requested under a blanket surety bond obtained by Harris Trust
protecting Harris Trust and the Company from loss or liability arising out of
the non-receipt or non-delivery of such certificates or (b) by registered mail
insured by Harris Trust separately for the replacement value of each such
certificate.
(m) Harris Trust is not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, commercial
bank, trust company or other nominee or to engage or use any person to solicit
tenders.
(n) As Exchange Agent, Harris Trust:
(i) shall have no duties or obligations other than
those specifically set forth in the Prospectus, the Letter of Transmittal or
herein or as may be subsequently agreed to in writing;
(ii) will make no representation and will have no
responsibilities as to the validity, value or genuineness of any of the
certificates or the Old Notes deposited pursuant to the Exchange Offer, and will
not be required to and will make no representation as to the validity, value or
genuineness of the Exchange Offer; provided, however, that in no way will Harris
Trust's general duty to act in good faith and without gross negligence or
willful misconduct be limited by the foregoing;
(iii) shall not be obligated to take any legal action
hereunder which might in Harris Trust's reasonable judgment involve any expense
or liability, unless Harris Trust shall have been furnished with reasonable
indemnity;
(iv) may reasonably rely on and shall be protected in
acting in reliance upon any certificate, instrument, opinion, notice, letter,
telegram or other document or security delivered to Harris Trust and reasonably
believed by Harris Trust to be genuine and to have been signed by the proper
party or parties;
(v) may reasonably act upon any tender, statement,
request, comment, agreement or other instrument whatsoever not only as to its
due execution and validity and
-4-
<PAGE> 5
effectiveness of its provisions, but also as to the truth and accuracy of any
information contained therein, which Harris Trust believes in good faith to be
genuine and to have been signed or represented by a proper person or persons
acting in a fiduciary or representative capacity (so long as proper evidence of
such fiduciary's or representative's authority to so act is submitted to Harris
Trust) and Harris Trust examines and reasonably concludes that such evidence
properly establishes such authority;
(vi) may rely on and shall be protected in acting upon
written or oral instructions from the President, any Senior Vice President, any
Executive Vice President, any Vice President, the Treasurer, any Assistant
Treasurer or any other designated officer of the Company;
(vii) may consult with its own counsel with respect to
any questions relating to Harris Trust's duties and responsibilities and the
written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken by
Harris Trust hereunder in good faith and in accordance with the written opinion
of such counsel; and
(viii) shall not advise any person tendering Old Notes
pursuant to the Exchange Offer as to whether to tender or refrain from tendering
all or any portion of its Old Notes or as to the market value, decline or
appreciation in market value of any Old Notes that may or may not occur as a
result of the Exchange Offer or as to the market value of the New Notes.
(o) Harris Trust shall take such action as may from time to
time be requested by the Company (and such other action as Harris Trust may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery or such other forms as may be
approved from time to time by the Company, to all persons requesting such
documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for tendering into (or withdrawing from) the Exchange Offer.
The Company will furnish you with copies of such documents at your request.
(p) Harris Trust shall advise orally and promptly thereafter
confirm in writing to the Company and such other person or persons as the
Company may request, daily (and more frequently during the week immediately
preceding the Expiration Date and if otherwise reasonably requested) up to and
including the Expiration Date, the aggregate principal amount of the Old Notes
which have been duly tendered pursuant to and in compliance with the terms of
the Exchange Offer and the items received by Harris Trust pursuant to the
Exchange Offer and this Agreement, separately reporting and giving cumulative
totals as to items properly received and items improperly received. In addition,
Harris Trust will also provide, and cooperate in making available to the
Company, or any such other person or persons upon request (such request if made
orally, to be confirmed in writing) made from time to time, such information as
the Company may reasonably request. Such cooperation shall include, without
limitation, the granting by Harris Trust to the Company, and such person or
persons as the Company may request, access to those
-5-
<PAGE> 6
persons on Harris Trust's staff who are responsible for receiving tenders, in
order to ensure that immediately prior to the Expiration Date the Company shall
have received adequate information in sufficient detail to enable the Company to
decide whether to extend the Exchange Offer. Harris Trust shall prepare a final
list of all persons whose tenders were accepted, the aggregate principal amount
of the Old Notes accepted and deliver said list to the Company.
(q) Letters of Transmittal, Book-Entry Confirmations, DTC
Transmissions and Notices of Guaranteed Delivery shall be stamped by Harris
Trust as to the date and the time of receipt thereof and shall be preserved by
Harris Trust for a period of time at least equal to the period of time Harris
Trust preserves other records pertaining to the transfer of securities, or one
year, whichever is longer, and thereafter shall be delivered by Harris Trust to
the Company. Harris Trust shall dispose of unused Letters of Transmittal and
other surplus materials by returning them to the Company.
(r) Harris Trust hereby expressly waives any lien, encumbrance
or right to set-off whatsoever that Harris Trust may have with respect to funds
deposited with it for the payment of transfer taxes by reasons of amounts, if
any, borrowed by the Company, or any of its subsidiaries or affiliates pursuant
to any loan or credit agreement with Harris Trust or for compensation owed to
Harris Trust hereunder or for any other matter.
2. Compensation.
In consideration of Harris Trust's acceptance of the appointment set
forth in Paragraph 1 above, the Company agrees to (i) pay Harris Trust a fee for
all services rendered under the foregoing appointment of Three Thousand Five
Hundred and No/100 Dollars ($3,500.00) and (ii) reimburse Harris Trust for any
reasonable out-of-pocket expenses incurred as Exchange Agent in performing the
services described herein; provided, however, that Harris Trust shall not be
entitled to reimbursement for the fees or disbursements of its legal counsel
without the prior written consent of the Company.
3. Indemnification.
(a) The Company hereby agrees to protect, defend, indemnify
and hold harmless Harris Trust against and from any and all costs, losses,
liabilities, expenses (including reasonable counsel fees and disbursements) and
claims imposed upon or asserted against Harris Trust on account of any action
taken or omitted to be taken by Harris Trust in connection with its acceptance
of or performance of its duties under this Agreement and the documents related
thereto as well as the reasonable costs and expenses of defending itself against
any claim or liability arising out of or relating to this Agreement and the
documents related thereto. This indemnification shall survive the release,
discharge, termination, and/or satisfaction of this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Company shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of Harris Trust's bad faith, gross negligence or willful
misconduct. In no case shall the Company be liable under this indemnification
agreement with respect to any claim against Harris Trust unless the Company
shall be notified by Harris Trust, by letter, of the written assertion of a
-6-
<PAGE> 7
claim against Harris Trust or of any other action commenced against Harris
Trust, reasonably promptly after Harris Trust shall have received any such
written assertion or shall have been served with a summons in connection
therewith. The Company shall be entitled to participate at its own expense in
the defense of any such claim or other action, and, if the Company so elects,
the Company may assume the defense of any pending or threatened action against
Harris Trust in respect of which indemnification may be sought hereunder, in
which case the Company shall not thereafter be responsible for the fees and
disbursements of legal counsel for Harris Trust under this paragraph; provided
that the Company shall not be entitled to assume the defense of any such action
if the named parties to such action include both the Company and Harris Trust
and representation of both parties by the same legal counsel would, in the
written opinion of counsel for Harris Trust, be inappropriate due to actual or
potential conflicting interests between them. It is understood that the Company
shall not be liable under this paragraph for the fees and disbursements of more
than one legal counsel for Harris Trust. In the event that the Company shall
assume the defense of any such suit, the Company shall not therewith be liable
for the fees and expenses of any counsel retained by Harris Trust.
(b) Harris Trust agrees that, without the prior written
consent of the Company (which consent shall not be unreasonably withheld), it
will not settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding in respect of which
indemnification could be sought in accordance with the indemnification provision
of this Agreement (whether or not Harris Trust or the Company or any of its
directors, officers and controlling persons is an actual or potential party to
such claim, action or proceeding).
4. Tax Information.
(a) Harris Trust shall arrange to comply with all requirements
under the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that Harris Trust is required, in
certain instances, to deduct 31 percent with respect to interest paid on the New
Notes and proceeds from the sale, exchange, redemption or retirement of the New
Notes from holders of the New Notes who have not supplied their correct Taxpayer
Identification Number or required certification. Such funds will be turned over
by Harris Trust to the Internal Revenue Service.
(b) Harris Trust shall notify the Company of the amount of any
transfer taxes payable in respect of the exchange of the Old Notes and, upon
receipt of written approval from the Company, shall deliver or cause to be
delivered, in a timely manner, to each governmental authority to which any
transfer taxes are payable in respect of the exchange of Old Notes, a check in
the amount of all transfer taxes so payable, and the Company shall reimburse
Harris Trust for the amount of any and all transfer taxes payable in respect of
the exchange of the Old Notes; provided however, that Harris Trust shall
reimburse the Company for amounts refunded to it in respect of its payment of
any such transfer taxes, at such time as such refund is received by Harris
Trust.
-7-
<PAGE> 8
5. Governing Law.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the state of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
6. Notices.
Any communication or notice provided for hereunder shall be writing and
shall be given (and shall be deemed to have been given upon receipt) by delivery
in person, telecopy, or overnight delivery or by registered or certified mail
(postage prepaid, return receipt requested) to the applicable party at the
addresses indicated below:
If to Harris Trust:
Harris Trust Company of California
601 South Figueroa, Suite 4900
Los Angeles, California 90017
Telecopier No: (213) 239-0631
Attention: Corporate Trust Department
and to
c/o Harris Trust Company of New York
77 Water Street, 4th Floor
New York, NY 10005
Telecopier No: (212) 701-7636
Attention: Reorganization Department
If to the Company:
Western Wireless Corporation
2001 NW Sammamish Road, Suite 100
Issaquah, Washington 98027
Telecopier No: (206) 313-5547
Attention: Alan R. Bender, Senior Vice President
or, as to each party, at such other address as shall be designated by such party
in a written notice complying as to delivery with the terms of this Section.
-8-
<PAGE> 9
7. Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto and nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement. Without limitation to
the foregoing, the parties hereto expressly agree that no holder of the Old
Notes or the New Notes shall have any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
8. Counterparts: Severability.
This Agreement may be executed in one or more counterparts, and by
different parties hereto on separate counterparts, each of which when so
executed shall be deemed an original, and all of such counterparts shall
together constitute one and the same agreement. If any term or other provision
of this Agreement or the application thereof is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other provisions of
this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the agreements contained herein is not affected
in any manner adverse to any party. Upon such determination that any term or
provision or the application thereof is invalid, illegal or unenforceable, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the agreements contained herein may be performed
as originally contemplated to the fullest extent possible.
9. Headings.
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
10. Entire Agreement: Amendment.
This Agreement constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof. This Agreement may not be
amended or modified nor may any provision hereof be waived except in writing
signed by each party to be bound thereby.
11. Termination.
This Agreement shall terminate upon the earlier of (a) the 90th day
following the expiration, withdrawal, or termination of the Exchange Offer, (b)
the close of business on the date of actual receipt of written notice by Harris
Trust from the Company stating that this Agreement is terminated, (c) one year
following the date of this Agreement, or (d) the time and date on which this
Agreement shall be terminated by mutual consent of the parties hereto.
-9-
<PAGE> 10
12. Miscellaneous.
Harris Trust hereby acknowledges receipt of the Prospectus and the
Letter of Transmittal and the Notice of the Guaranteed Delivery and further
acknowledges that it has examined each of them. Any inconsistency between this
Agreement, on the one hand, and the Prospectus, the Letter of Transmittal and
the notice of guaranteed Delivery (as they may be amended or supplemented from
time to time), on the other hand, shall be resolved in favor of the latter three
documents, except with respect to the duties, liabilities and indemnification of
Harris Trust as Exchange Agent which shall be controlled by this Agreement.
Kindly indicate your willingness to act as Exchange Agent and Harris
Trust's acceptance of the foregoing provisions by signing in the space provided
below for that purpose and returning to the Company a copy of this Agreement so
signed, whereupon this Agreement and Harris Trust's acceptance shall constitute
a binding agreement between Harris Trust and the Company.
Very truly yours,
WESTERN WIRELESS CORPORATION
By: /s/ Alan R. Bender
-------------------------------
Name:
Title:
Accepted and agreed to as of
the date first written above:
HARRIS TRUST COMPANY OF CALIFORNIA
By: /s/ Esther Cervantes
-------------------------------
Name:
Title:
-10-
<PAGE> 1
Exhibit 10.46
WESTERN WIRELESS CORPORATION
10 1/2% Senior Subordinated Notes Due 2007
Purchase Agreement
October 18, 1996
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette
Securities Corporation,
Salomon Brothers Inc,
Toronto Dominion Securities (USA) Inc.,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Western Wireless Corporation, a Washington corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of
$200,000,000 principal amount of the Senior Subordinated Notes Due 2007,
specified above (the "Securities").
1. The Company represents and warrants to, and agrees with, each of the
Purchasers that:
(a) A preliminary offering circular, dated October 9, 1996 (the
"Preliminary Offering Circular") and an offering circular, dated October
18, 1996 (the "Offering Circular", in each case including the
international supplement thereto), have been prepared in connection with
the offering of the Securities. Any reference to the Preliminary Offering
Circular or the Offering Circular shall be deemed to refer to and include
the Company's most recent Quarterly Report on Form 10-Q and all subsequent
documents filed with the United States Securities and Exchange Commission
(the "Commission") pursuant to Section 13(a), 13(c) or 15(d) of the United
States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
on or prior to the date of the Preliminary Offering Circular or the
Offering Circular, as the case may be, and any reference to the
Preliminary Offering Circular or the Offering Circular, as the case may
be, as amended or supplemented, as of any specified date, shall be deemed
to include (i) any documents filed with the Commission pursuant to Section
13(a), 13(c) or 15(d) of the Exchange Act after the date of the
Preliminary Offering Circular or the Offering Circular, as the case may
be, and prior to such specified date and (ii) any Additional Issuer
Information (as defined in Section 5(f)) furnished by the Company prior to
the completion of the distribution of the Securities; and all documents
filed under the Exchange Act and so deemed to be included in the
Preliminary Offering Circular or the Offering Circular, as the case may
be, or any amendment or supplement thereto are hereinafter called the
"Exchange Act Reports". The Exchange Act Reports, when they were or are
filed with the Commission, conformed or will conform in all material
respects to the applicable requirements of the Exchange Act and the
applicable rules and regulations of the Commission thereunder. The
Preliminary Offering Circular or the Offering Circular and any amendments
or supplements thereto and the Exchange Act Reports did not and will not,
as of their respective dates, contain an untrue
<PAGE> 2
statement of a material fact or omit 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; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a Purchaser through Goldman, Sachs & Co.
expressly for use therein;
(b) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Offering Circular any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Offering Circular; and, since the respective dates as of which information
is given in the Offering Circular, there has not been any change in the
capital stock or partnership interests and there has not been any increase
in the short-term debt or long-term debt of the Company or any of its
subsidiaries, or any material adverse change, or any development involving
a prospective material adverse change, in or affecting the general
affairs, management, financial position, shareholders' equity or results
of operations of the Company and its subsidiaries (a "Material Adverse
Effect"), otherwise than as set forth or contemplated in the Offering
Circular;
(c) The Company and its subsidiaries have valid title in fee simple
to all real property and valid title to all personal property owned by
them, in each case free and clear of all liens, encumbrances and defects
except those that are described in the Offering Circular, those that could
not reasonably be expected to have a Material Adverse Effect and those
that do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions
as could not reasonably be expected to have a Material Adverse Effect, and
do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries;
(d) The Company has been duly incorporated and is validly existing
as a corporation under the laws of the State of Washington, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Offering Circular, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and
each subsidiary of the Company listed on Exhibit 21 to the Company's
Registration Statement (Commission File No. 333-2688) (the "Significant
Subsidiaries", or the "Significant Subsidiary", as the case may be) has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation;
(e) The Company has an authorized capitalization as set forth in the
Offering Circular, and all the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description of the capital stock
contained in the Company's prospectus dated as of May 22, 1996 with
respect to the Company's Class A Common Stock; and all of the issued
shares of capital stock or partnership interests of each Significant
Subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and (except for minority
interests representing less than 10% of
2
<PAGE> 3
such Significant Subsidiary) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims
other than liens granted pursuant to the Loan Agreement, dated as of May
6, 1996, with The Toronto-Dominion Bank, Barclays Bank, PLC, and Morgan
Guaranty Trust Company of New York, as Managing Agents (the "Credit
Facility") or the Loan Agreement, dated June 30, 1995, with Northern
Telecom Inc. (the "NORTEL Facility" and, together with the Credit
Facility, the "Senior Secured Facilities");
(f) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by
the Indenture dated as of October 24, 1996 (the "Indenture") between the
Company and Harris Trust Company of California, as Trustee (the
"Trustee"), under which they are to be issued; the Indenture constitutes a
valid and legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
Securities and the Indenture will conform in all material respects to the
descriptions thereof in the Offering Circular;
(g) The Exchange and Registration Rights Agreement between the
Company and the Purchasers dated the date hereof, which is substantially
in the form previously delivered to you (the "Registration Rights
Agreement"), has been duly authorized, executed and delivered by the
Company, and constitutes a valid and legally binding agreement of the
Company enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles, and will conform in all material respects to
the description thereof in the Offering Circular;
(h) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, this
Agreement and the Registration Rights Agreement and the consummation of
the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement, shareholders agreement, registration rights agreement or other
material agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any
of its subsidiaries is subject, nor will such action result in any
violation of the provisions of the Articles of Incorporation or By-laws of
the Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company of the transactions
contemplated by this Agreement, the Indenture or the Registration Rights
Agreement, except such consents, approvals, authorizations, registrations
or qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Purchasers, and such consents, approvals,
authorizations, registrations and qualifications as may be required under
the Securities Act of 1933, as amended (the "Securities Act"), the Trust
Indenture Act of 1939 and state or foreign securities or Blue Sky laws in
connection with the exchange offer or resale registration statement
contemplated in the Offering Circular and described in the Registration
Rights Agreement;
3
<PAGE> 4
(i) Neither the Company nor any of its Significant Subsidiaries is
(a) in violation of its Articles or Certificate of Incorporation, as the
case may be, or By-laws or (b) in default in the performance or observance
of any material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease,
shareholders agreement, registration rights agreement or other agreement
or instrument to which it is a party or by which it or any of its
properties may be bound, except, in the case of this clause (b), for
defaults that individually or in the aggregate would not have a Material
Adverse Effect;
(j) The statements set forth in the Offering Circular under the
caption "Description of Senior Subordinated Notes," insofar as they
purport to constitute a summary of the terms of the Securities, under the
captions "Offer and Resale", "Risk Factors -- Competition",
"--Intellectual Property and Branding", "--Governmental Regulation",
"Description of Indebtedness", "Business -- Competition" and "Business --
Governmental Regulation" insofar as they purport to describe the
provisions of the laws and documents to which the Company or any
subsidiary is a party referred to therein are accurate, complete and fair
in all material respects;
(k) Other than as set forth or contemplated in the Offering
Circular, there are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect on the
current or future consolidated financial position, shareholders' equity or
results of operations of the Company and its subsidiaries taken as a
whole; and, to the best of the Company's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened
by others;
(l) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(m) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(n) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Securities Act and the rules and
regulations of the Commission thereunder;
(o) Except as otherwise disclosed or contemplated by the Offering
Circular, the Company and its subsidiaries have such certificates of
convenience or necessity, easements, rights-of-way, operating rights,
permits, licenses, franchises and authorizations of governmental or
regulatory authorities ("Permits"), including Permits issued by the
Federal Communications Commission (the "FCC"), as are necessary to own
their respective properties and to conduct their respective businesses
substantially in the manner described in the Offering Circular, except for
any such Permits the absence of which could not reasonably be expected to
result in a Material Adverse Effect; the Company and its subsidiaries have
fulfilled all their material obligations with respect to such Permits and
no event has occurred which allows (or after notice or lapse of time would
allow) revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, in each case
which could reasonably be expected to result in
4
<PAGE> 5
a Material Adverse Effect; and, except as described in the Offering
Circular, none of such Permits contains any restriction that is burdensome
to the Company or any of its subsidiaries, except for restrictions that
could not reasonably be expected to have a Material Adverse Effect;
(p) Except as otherwise disclosed or contemplated by the Offering
Circular, the Company and its subsidiaries own or possess all trademarks,
trademark registrations, service marks, service mark registrations, trade
names, licenses relating to intellectual property, trade secrets and
rights ("Intellectual Property") described in the Offering Circular as
being owned or possessed by them or any of them, and the Company is not
aware of any claim to the contrary or any challenge by any other person to
the rights of the Company or any of its subsidiaries with respect to the
foregoing, which claim or challenge could reasonably be expected to have a
Material Adverse Effect;
(q) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Securities) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulation promulgated thereunder, including, without
limitation, Regulations G, T, U, and X of the Board of Governors of the
Federal Reserve System;
(r) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company
in connection with the offering of the Securities;
(s) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the
meaning of Rule 144A under the Securities Act) as securities which are
listed on a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system;
(t) The Company is subject to Section 13 or 15(d) of the Exchange
Act;
(u) Neither the Company, nor any person acting on its behalf (other
than the Purchasers, as to which the Company makes no representation), has
offered or sold the Securities by means of any general solicitation or
general advertising within the meaning of Rule 502(c) under the Act or,
with respect to Securities sold outside the United States to non-U.S.
persons (as defined in Rule 902 under the Securities Act), by means of any
directed selling efforts within the meaning of Rule 902 under the
Securities Act and the Company, any affiliate of the Company and any
person acting on its or their behalf has complied with and will implement
the "offering restrictions" within the meaning of such Rule 902; and
(v) Within the preceding six months, except for the Company's 10
1/2% Senior Subordinated Notes due 2006, neither the Company nor any other
person acting on behalf of the Company has offered or sold to any person
any Securities, or any securities of the same or a similar class as the
Securities, other than Securities offered or sold to the Purchasers
hereunder. The Company will take reasonable precautions designed to insure
that any offer or sale, direct or indirect, in the United States or to any
U.S. person (as defined in Rule 902 under the Securities Act) of any
Securities or any substantially similar security issued by the Company,
within six months subsequent to the date on which the distribution of the
Securities has been completed (as notified to the Company by Goldman,
Sachs & Co.), is made under restrictions and other circumstances
reasonably designed not to affect the status of the offer and sale of the
Securities in the United
5
<PAGE> 6
States and to U.S. persons contemplated by this Agreement as transactions
exempt from the registration provisions of the Securities Act.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 97.25% of the principal amount thereof, plus accrued interest, if any,
from October 24, 1996 to the Time of Delivery hereunder, the principal amount of
Securities set forth opposite the name of such Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities, the
several Purchasers propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company that:
(a) It will offer and sell the Securities only to: (i) persons who
it reasonably believes are "qualified institutional buyers" ("QIBs")
within the meaning of Rule 144A under the Securities Act in transactions
meeting the requirements of Rule 144A, (ii) institutions which it
reasonably believes are "accredited investors" ("Institutional Accredited
Investors") within the meaning of Rule 501 under the Securities Act or
(iii) upon the terms and conditions set forth in Annex I to this
Agreement;
(b) It is an Institutional Accredited Investor; and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the
methods described in Rule 502(c) under the Securities Act.
4. (a) Except as set forth in the next paragraph, the Securities to be
purchased by each Purchaser hereunder will be represented by one or more
definitive global Securities in book-entry form which will be deposited by or on
behalf of the Company with The Depository Trust Company ("DTC") or its
designated custodian. The Company will deliver the Securities to Goldman, Sachs
& Co., for the account of each Purchaser, against payment by or on behalf of
such Purchaser of the purchase price therefor by certified or official bank
check or checks, payable to the order of the Company in, or by wire transfer to
an account specified by the Company of, Federal (same day) funds, by causing DTC
to credit the Securities to the account of Goldman, Sachs & Co. at DTC. The
Company will cause the certificates representing the Securities to be made
available to Goldman, Sachs & Co. for checking at least twenty-four hours prior
to the Time of Delivery (as defined below) at the office of DTC or its
designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on October 24, 1996
or such other time and date as Goldman, Sachs & Co. and the Company may agree
upon in writing. Such time and date are herein called the "Time of Delivery".
Such Securities, if any, as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company (such request to include the
authorized denominations and the names in which they are to be registered),
shall be delivered in definitive certificated form, by or on behalf of the
Company to Goldman, Sachs & Co. for the account of certain of the Purchasers,
against payment by or on behalf of such Purchaser of the purchase price therefor
by certified or official bank check or checks, payable to the order of the
Company in, or by wire transfer to an account specified by the Company of,
Federal (same day) funds. The Company will cause the certificates representing
the
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<PAGE> 7
Securities to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery at the office of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004.
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Securities and any additional documents requested by the Purchasers
pursuant to Section 7(j) hereof, will be delivered at such time and date at the
offices of Preston Gates & Ellis, 701 Fifth Avenue, Seattle, Washington
98104-7078 (the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at 1:00 p.m., Seattle time, on the New York Business Day next
preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to
make no amendment or any supplement to the Offering Circular which shall
be disapproved by you promptly after reasonable notice thereof; and to
furnish you with copies thereof;
(b) In connection with the exchange offer and the registration
statement (the "Registration Statement") contemplated by the Registration
Rights Agreement, to prepare the Secondary Transactions Prospectus (as
defined below) in a form approved by Goldman, Sachs & Co. and to file such
prospectus pursuant to Rule 424(b) under the Securities Act not later than
the Commission's close of business on the second business day following
the date on which such Registration Statement is declared effective, or,
if applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Securities Act; to make no amendment or any supplement to the
Registration Statement or Secondary Transactions Prospectus which shall be
disapproved by Goldman, Sachs & Co., promptly after reasonable notice
thereof (such approval not to be unreasonably withheld or delayed); to
advise Goldman, Sachs & Co., promptly after it receives notice thereof, of
the time when such Registration Statement becomes effective and to advise
Goldman, Sachs & Co. when any supplement to the Secondary Transactions
Prospectus or any amended Secondary Transactions Prospectus has been filed
and to furnish Goldman, Sachs & Co. with copies thereof; to cause such
Registration Statement (and, if requested by Goldman, Sachs & Co. in order
to register under the Securities Act Securities for offer and sale in
secondary transactions, one or more additional registration statements
under the Securities Act) to remain in effect as to the Securities for so
long as Goldman, Sachs & Co. may deem necessary in order to facilitate
secondary transactions therein (any reference herein to the Registration
Statement or the Secondary Transactions Prospectus shall be deemed to
refer to and include any such additional registration statement or the
form of prospectus included therein (in the form first filed pursuant to
Rule 424(b) under the Securities Act)); to advise Goldman, Sachs & Co.,
promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any prospectus, or the suspension of the qualification of the
Securities for offer or sale in any jurisdiction, of the initiation of
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Secondary Transactions Prospectus or for additional
information; in the event of the issuance of any stop order or of any
order preventing or suspending the use of any prospectus or suspending any
such qualification, promptly to use
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<PAGE> 8
its best efforts to obtain the withdrawal of such order; as used herein,
"Secondary Transactions Prospectus" means the form of prospectus relating
to the distribution of the Securities in secondary transactions, in the
form first filed pursuant to Rule 424(b) under the Securities Act;
(c) Promptly from time to time to take such action as Goldman, Sachs
& Co. may reasonably request to qualify the Securities for offer or sale
under the securities laws of such jurisdictions as Goldman, Sachs & Co.
may request and to comply with such laws so as to permit the continuance
of sales and dealings therein in such jurisdictions for as long as may be
necessary to facilitate secondary transactions in the Securities provided
that in connection therewith the Company shall not be required to qualify
as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(d) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under
the securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction;
(e) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, to furnish the Purchasers with four copies of the Offering Circular
in New York City and each amendment or supplement thereto signed by an
authorized officer of the Company with the independent accountants'
report(s) in the Offering Circular, and any amendment or supplement
containing amendments to the financial statements covered by such
report(s), signed by the accountants, and additional copies thereof in
such quantities as you may reasonably request, and if, at any time prior
to the expiration of nine months after the date of the Offering Circular,
any event shall have occurred as a result of which the Offering Circular
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made when such Offering Circular is delivered, not misleading,
or, if for any other reason it shall be necessary or desirable during such
same period to amend or supplement the Offering Circular, to notify you
and upon your request to prepare and furnish without charge to each
Purchaser and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Offering Circular or a
supplement to the Offering Circular which will correct such statement or
omission or effect such compliance;
(f) During the period beginning from the date hereof and continuing
until the date six months after the Time of Delivery, not to offer, sell
contract to sell or otherwise dispose of, except as provided hereunder,
any securities of the Company that are substantially similar to the
Securities;
(g) Not to be or become, at any time prior to the expiration of
three years after the Time of Delivery, an open-end investment company,
unit investment trust, closed-end investment company or face-amount
certificate company that is or is required to be registered under Section
8 of the Investment Company Act;
(h) At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, for the benefit of holders from time to time of
Securities, to furnish at its expense, upon
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request, to holders of Securities and prospective purchasers of securities
information (the "Additional Issuer Information") satisfying the
requirements of subsection (d)(4)(i) of Rule 144A under the Securities
Act;
(i) If requested by you, to use its best efforts to cause such
Designated Securities to be eligible for the PORTAL trading system of the
National Association of Securities Dealers, Inc.;
(j) To file with the Commission, not later than 15 days after the
Time of Delivery, five copies of a notice on Form D under the Securities
Act (one of which will be manually signed by a person duly authorized by
the Company); to otherwise comply with the requirements of Rule 503 under
the Securities Act; and to furnish promptly to you evidence of each such
required timely filing (including a copy thereof);
(k) To furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report (including
a balance sheet and statements of income, shareholders' equity and cash
flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and, as soon as practicable after the end
of each of the first three quarters of each fiscal year (beginning with
the fiscal quarter ending after the date of the Offering Circular),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail; and to furnish to the
holder of the Securities all other documents specified in Section 704 of
the Indenture all in the manner so specified;
(l) During a period of five years from the date of the Offering
Circular, to furnish to you, and for so long as Goldman, Sachs & Co. may
offer or sell Securities in secondary transactions to furnish to Goldman,
Sachs & Co., copies of all reports or other communications (financial or
other) furnished to shareholders of the Company, and to deliver to you,
and for so long as Goldman, Sachs & Co. may offer or sell Securities in
secondary transactions to deliver to Goldman, Sachs & Co., (i) as soon as
they are available, (A) copies of any reports and financial statements
furnished to or filed with the Commission or any inter-dealer quotation
system or national securities exchange on which the Securities or any
class of securities of the Company is listed; and (B) the documents
specified in Section 704 of the Indenture as in effect at the Time of
Delivery; and (ii) such additional information concerning the business and
financial condition of the Company as you and, for so long as Goldman,
Sachs & Co. may offer or sell Securities in secondary transactions,
Goldman, Sachs & Co. may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the
accounts of the Company and its subsidiaries are consolidated in reports
furnished to its shareholders generally or to the Commission);
(m) During the period of three years after the Time of Delivery, the
Company will not, and will not permit any of its "affiliates" (as defined
in Rule 144 under the Securities Act) to, resell any of the Securities
which constitute "restricted securities" under Rule 144 that have been
reacquired by any of them;
(n) The Company shall file and use its best efforts to cause to be
declared or become effective under the Securities Act, on or prior to the
30th day after the Time of Delivery, a registration statement on Form S-4
providing for the registration of (i) another series of debt securities of
the Company, with terms substantially identical to the Securities (except
that such securities will not contain terms with respect to special
interest payments or transfer restrictions) (the "Exchange Securities"),
and the exchange of the Securities for the Exchange Securities, all
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<PAGE> 10
in a manner which will permit persons who acquire the Exchange Securities
to resell the Exchange Securities pursuant to Section 4(1) of the
Securities Act;
(o) To furnish or cause to be furnished to you, each time the
Secondary Transactions Prospectus shall be amended or supplemented,
written opinions of counsel for the Company specified in Section 7 hereof,
a letter from the independent accountants who have certified the financial
statements included in the Secondary Transactions Prospectus as then
amended and certificates of officers of the Company, in each case in form
and substance satisfactory to you, all to the effect specified in
subsections (b), (c), (d), (e) and (j), respectively, of Section 7 hereof
(as modified to relate to the Secondary Transactions Prospectus as then
amended or modified); and
(p) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Offering Circular under the caption "Use of Proceeds".
6. The Company covenants and agrees with the several Purchasers that the
Company will pay or cause to be paid the following: (i) all expenses in
connection with the preparation, printing and filing of the Registration
Statement and amendments and supplements thereto and the mailing and delivering
of copies thereof to Goldman, Sachs & Co.; (ii) the fees, disbursements and
expenses of the Company's counsel and accountants in connection with the issue
of the Securities and all other expenses in connection with the preparation,
printing and filing of the Preliminary Offering Circular and the Offering
Circular and any amendments and supplements thereto and the mailing and
delivering of copies thereof to the Purchasers and dealers; (iii) the cost of
printing or producing any Agreement among Purchasers, this Agreement, the
Indenture, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iv) all expenses
in connection with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 5(b) hereof, including the
fees and disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(v) any fees charged by securities rating services for rating the Securities;
(vi) the cost of preparing the Securities; (vii) the fees and expenses of the
Trustee and any agent of the Trustee and the fees and disbursements of counsel
for the Trustee in connection with the Indenture and the Securities; (viii) any
cost incurred in connection with the designation of the Securities for trading
in PORTAL; and (ix) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Purchasers will pay all of their own
costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of the Time of Delivery, true
and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) Sullivan & Cromwell, counsel for the Purchasers, shall have furnished
to you such opinion or opinions (a draft of each such opinion is attached as
Annex III(a) hereto), dated the Time of Delivery, with respect to the matters
covered in paragraphs (i), (ii), (vi), (vii) and (viii) of subsection (b) below
as well as such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass
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upon such matters;
(b) Each of Preston Gates & Ellis and Rubin Baum Levin Constant & Friedman,
each counsel for the Company, shall have furnished to you their written opinions
(a draft of each such opinion is attached as Annex III(b) and Annex III(c)
hereto), dated the Time of Delivery, in form and substance satisfactory to you,
to the effect that (such opinions may cover different subsections set forth
below, provided that Rubin Baum Levin Constant & Friedman shall give the opinion
with respect to the validity of the Indenture):
(i) The Company has been duly incorporated and is validly existing
as a corporation under the laws of the State of Washington, with corporate
power and authority to own its properties and conduct its business as
described in the Offering Circular.
(ii) The Company has an authorized capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued and are fully
paid and non-assessable;
(iii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of
each jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, other than such
jurisdictions in which the failure to be so qualified would not result in
a Material Adverse Effect (such counsel being entitled to rely in respect
of the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the Company,
provided that such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and certificates);
(iv) Each Significant Subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock or partnership interests of each Significant
Subsidiary have been duly and validly authorized and issued, are fully
paid and non-assessable, and (except for minority interests representing
less than 10% of such Significant Subsidiary) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims other than liens granted pursuant to the Senior Secured
Facilities (such counsel being entitled to rely in respect of the opinion
in this clause upon opinions of local counsel and in respect to matters of
fact upon certificates of officers of the Company or its Significant
Subsidiaries, provided that such counsel shall state that they believe
that both you and they are justified in relying upon such opinions and
certificates);
(v) To the best of such counsel's knowledge and other than as set
forth in the Offering Circular, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a
party or of which any property of the Company or any of its subsidiaries
is the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and, to the best of such counsel's knowledge and other
than as set forth in the Offering Circular, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
(vi) This Agreement has been duly authorized, executed and delivered
by the Company;
(vii) The Securities have been duly authorized, executed,
authenticated, issued and delivered
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<PAGE> 12
and constitute valid and legally binding obligations of the Company
entitled to the benefits provided by the Indenture; and the Securities and
the Indenture conform to the descriptions thereof in the Offering
Circular;
(viii) The Indenture has been duly authorized, executed and
delivered by the parties thereto and constitutes a valid and legally
binding instrument, enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles;
(ix) The Registration Rights Agreement has been duly authorized,
executed and delivered, and constitutes a valid and legally binding
obligation of the Company enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Registration Rights
Agreement conforms in all material respects to the description thereof in
the Offering Circular;
(x) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, this
Agreement and the Registration Rights Agreement and the consummation of
the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement, shareholders agreement, registration rights agreement or other
material agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Articles of Incorporation
or By-laws of the Company or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties;
(xi) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries and, in the case
of any court, known to such counsel is required for the issue and sale of
the Securities or the consummation by the Company of the transactions
contemplated by this Agreement, the Indenture or the Registration Rights
Agreement, except such consents, approvals, authorizations, registrations
or qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Purchasers, and such consents, approvals,
authorizations, registrations and qualifications as may be required under
the Securities Act, the Trust Indenture Act and state or foreign
securities or Blue Sky laws in connection with the exchange offer or
resale registration statement contemplated in the Offering Circular and
described in the Registration Rights Agreement;
(xii) Neither the Company nor any of its Significant Subsidiaries is
(a) in violation of its Articles or Certificate of Incorporation, as the
case may be, or By-laws or (b) in default in the performance or observance
of any material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease,
shareholders agreement, registration rights agreement or other agreement
or instrument, which such agreement or instrument is known to such
counsel, to which it is a party or by which it or any of its properties
may be bound, except, in the case of this clause (b), for defaults that
individually or in the aggregate would not have a Material Adverse Effect;
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<PAGE> 13
(xiii) The statements set forth in the Offering Circular under the
caption "Description of Senior Subordinated Notes", insofar as they
purport to constitute a summary of the terms of the Securities, and under
the captions "Description of Indebtedness" and "Offer and Resale", insofar
as they purport to describe the provisions of the laws and documents to
which the Company or a subsidiary of the Company is a party referred to
therein are accurate, complete and fair in all material respects; and
(xiv) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act.
(xv) The Exchange Act Reports (other than the financial statements
and related schedules therein, as to which such counsel need express no
opinion), when they were filed with the Commission, complied as to form in
all material respects with the requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder;
(xvi) No registration of the Securities under the Securities Act,
and no qualification of an indenture under the United States Trust
Indenture Act of 1939 with respect thereto, is required for the offer,
sale and initial resale of the Securities by the Purchasers in the manner
contemplated by this Agreement and the Offering Circular;
In addition, such counsel shall state that nothing has come to their
attention that would cause them to believe that, as of its date, the
Offering Circular, excluding the Exchange Act Reports, and the Offering
Circular or any further amendment or supplement thereto made by the
Company prior to the Time of Delivery (other than the financial statements
and related schedules or other financial data therein, as to which such
counsel need express no belief) contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of the Time of Delivery, the
Offering Circular, excluding the Exchange Act Reports, and the Offering
Circular or any further amendment or supplement thereto made by the
Company prior to the Time of Delivery (other than the financial statements
and related schedules or other financial data therein, as to which such
counsel need express no belief) contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(c) A Senior Vice President of the Company responsible for real estate
matters shall furnish to you a certificate on behalf of the Company, dated the
Time of Delivery, in form and substance satisfactory to you, stating that to the
best of his knowledge and without any independent investigation (i) the Company
and its subsidiaries have valid title in fee simple to all real property owned
by them, in each case free and clear of all liens, encumbrances and defects
except those that are described in the Offering Circular and those that could
not reasonably be expected to have a Material Adverse Effect; and (ii) any real
property and buildings held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as could not reasonably be expected to have a Material Adverse Effect.
(d) Gurman, Blask & Freedman Chartered, regulatory counsel for the
Company, shall have furnished to you their written opinion (a draft of each such
opinion is attached as Annex III(d) hereto), dated the Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) None of the Company or any of its subsidiaries has failed to
obtain any Permit from the
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<PAGE> 14
FCC which is material to the conduct of the Company's or such subsidiary's
business. The Company and its subsidiaries have all Permits from the FCC
necessary to own their respective properties and to conduct their
respective telecommunications businesses in the manner described in the
Offering Circular, which Permits are material to the conduct of the
Company's or such subsidiary's business;
(ii) The compliance by the Company with all of the provisions of
this Agreement and the Indenture and the consummation of the transactions
herein and therein contemplated will not result in any conflict with or
result in a breach or violation of the Communications Act or the
Commission's Rules or any Permit issued to the Company or any of its
subsidiaries, as the case may be, under or pursuant to authority granted
under the Communications Act;
(iii) No consent, approval, authorization, order, registration or
qualification under the Communications Act or the Commission's Rules is
required for the sale of the Securities as described in the Offering
Circular or the consummation by the Company of the transactions
contemplated by this Agreement and the Indenture;
(iv) Other than as set forth or contemplated in the Offering
Circular, such counsel does not know of any legal or governmental
proceedings pending before the FCC to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future consolidated
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries taken as a whole; and such counsel does not
know of any such proceedings that are threatened or contemplated by the
FCC; and
(v) The statements set forth in the Offering Circular under the
captions "Risk Factors--Governmental Regulation," "Business--Competition"
and "Business--Governmental Regulation", insofar as they purport to
describe the provisions of the Communications Act and the Commission's
Rules and documents to which the Company or a subsidiary of the Company is
a party referred to therein are accurate, complete and fair in all
material respects.
(e) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Arthur Andersen LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex II hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex II(a) hereto and a draft of the
form of letter to be delivered at the Time of Delivery is attached as Annex
II(b) hereto);
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular, and (ii) since the
respective dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in Clause (i) or
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(ii), is in your judgment so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities on
the terms and in the manner contemplated in this Agreement and in the Offering
Circular;
(g) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii) a
general moratorium on commercial banking activities declared by either Federal
or New York or Washington State authorities; (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the United States
of a national emergency or war, if the effect of any such event specified in
this Clause (iv) in your judgment makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities on the terms
and in the manner contemplated in the Offering Circular; or (v) the occurrence
of any material adverse change in the existing financial, political or economic
conditions in the United States or elsewhere which, in your judgment, would
materially and adversely affect the financial markets or the market for the
Securities and other debt securities;
(i) The Securities have been designated for trading on PORTAL; and
(j) The Company shall have furnished or caused to be furnished to you at
the Time of Delivery certificates of officers of the Company satisfactory to you
as to the accuracy of the representations and warranties of the Company herein
at and as of such Time of Delivery, as to the performance by the Company of all
of its obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in the first paragraph of and subsection
(f) of this Section and as to such other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Purchaser against
any losses, claims, damages or liabilities, joint or several, to which such
Purchaser may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Offering Circular or the
Offering Circular, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, and will reimburse each
Purchaser for any legal or other expenses reasonably incurred by such Purchaser
in connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Offering Circular or the
Offering Circular or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Purchaser
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Securities Act or
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<PAGE> 16
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Circular or the Offering Circular, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Preliminary Offering Circular or the Offering Circular or any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such Purchaser through Goldman, Sachs & Co. expressly for use
therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to,
or an admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Purchasers on the other from the offering
of the Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Purchasers on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations (including any
material prejudice as a result of a failure to give notice as required by
subsection (c) above). The relative benefits received by the Company on the one
hand and the Purchasers on the
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<PAGE> 17
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Purchasers, in
each case as set forth in the Offering Circular. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Purchasers on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by pro
rata allocation (even if the Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
no Purchaser shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to investors were offered to investors exceeds the amount of any
damages which such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. The
Purchasers' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Purchaser within the meaning of the Securities Act; and the obligations of the
Purchasers under this Section 8 shall be in addition to any liability which the
respective Purchasers may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company and to each person,
if any, who controls the Company within the meaning of the Securities Act.
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by any
Purchaser you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Offering Circular,
or in any other documents or arrangements, and the Company agrees to prepare
promptly any amendments to the Offering Circular which in your opinion may
thereby be made necessary. The term "Purchaser" as used in this Agreement shall
include any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
17
<PAGE> 18
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting Purchaser to purchase its pro rata
share (based on the principal amount of Securities which such Purchaser agreed
to purchase hereunder) of the Securities of such defaulting Purchaser or
Purchasers for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities, or if the Company shall not exercise the right described
in subsection (b) above to require non-defaulting Purchasers to purchase
Securities of a defaulting Purchaser or Purchasers, then this Agreement shall
thereupon terminate, without liability on the part of any non-defaulting
Purchaser or the Company, except for the expenses to be borne by the Company and
the Purchasers as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Purchaser from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Purchasers, as set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Purchaser or any controlling person of any Purchaser, or the Company, or
any officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Purchasers through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Purchasers in making preparations for the
purchase, sale and delivery of the Securities, but the Company shall then be
under no further liability to any Purchaser except as provided in Sections 6 and
8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or given
by you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Offering
Circular, Attention: General Counsel; provided, however, that any notice to a
Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Purchaser at its address set forth in
its Purchasers' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
18
<PAGE> 19
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Purchasers, the Company and, to the extent provided in Sections 8 and 10
hereof, the officers and directors of the Company and each person who controls
the Company or any Purchaser, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Purchaser shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one and the same
instrument.
19
<PAGE> 20
If the foregoing is in accordance with your understanding, please sign and
return to us eight (8) counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Purchasers is pursuant to the authority set forth in a form of Agreement
among Purchasers, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Western Wireless Corporation
By: /s/ Donald Guthrie
---------------------------------
Name: Donald Guthrie
Title: Vice Chariman of the Board
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
Salomon Brothers Inc
Toronto Dominion Securities (USA) Inc.
By: /s/ Goldman, Sachs & Co.
----------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
20
<PAGE> 21
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of
Securities to be
Purchaser Purchased
--------- -------------------
<S> <C>
Goldman, Sachs & Co. $110,000,000
Donaldson, Lufkin & Jenrette Securities Corporation 30,000,000
Salomon Brothers Inc 30,000,000
Toronto Dominion Securities (USA) Inc. 30,000,000
------------
Total $200,000,000
============
</TABLE>
21
<PAGE> 22
ANNEX I
(1) The Securities have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. Each Purchaser represents that it has
offered and sold the Securities, and will offer and sell the Securities (i) as
part of their distribution at any time and (ii) otherwise until 40 days after
the later of the commencement of the offering and the Time of Delivery, only in
accordance with Rule 903 of Regulation S, Rule 144A or pursuant to Paragraph 2
of this Annex I under the Securities Act. Accordingly, each Purchaser agrees
that neither it, its affiliates nor any persons acting on its or their behalf
has engaged or will engage in any directed selling efforts with respect to the
Securities, and it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser agrees that, at or
prior to confirmation of sale of Securities (other than a sale pursuant to Rule
144A) or pursuant to Paragraph 2 of this Annex I, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Securities Act.
Terms used above have the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not enter
into any contractual arrangement with respect to the distribution or delivery of
the Securities, except with its affiliates or with the prior written consent of
the Company.
(2) Notwithstanding the foregoing, Securities in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
Securities will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may
A-1
<PAGE> 23
otherwise lawfully be issued or passed on.
(4) Each Purchaser agrees that it will not offer, sell or deliver any of
the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
A-2
<PAGE> 24
ANNEX II
Pursuant to Section 7(e) of the Purchase Agreement, the accountants shall
furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the
Offering Circular comply as to form in all material respects with the
applicable requirements of the Exchange Act and the related published
rules and regulations;
(iii) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Offering
Circular agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years;
(iv) On the basis of limited procedures not constituting an audit
in accordance with generally accepted auditing standards, consisting of
a reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Offering Circular,
inquiries of officials of the Company and its subsidiaries responsible
for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular are not in
conformity with generally accepted accounting principles
applied on the basis substantially consistent with the basis
for the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular;
(B) any other unaudited income statement data and balance
sheet items included in the Offering Circular do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Offering Circular;
(C) the unaudited financial statements which were not
included in the Offering Circular but from which were derived
any unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and balance
sheet items included in the Offering Circular and referred to
in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated
financial statements included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Offering Circular do not
comply as to form in all material respects with the applicable
accounting requirements or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon
<PAGE> 25
exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Offering Circular or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders'
equity or other items specified by the Purchasers, or any
increases in any items specified by the Purchasers, in each
case as compared with amounts shown in the latest balance
sheet included in the Offering Circular except in each case
for changes, increases or decreases which the Offering
Circular discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Offering Circular to the specified
date referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or
per share amounts of consolidated net income or other items
specified by the Purchasers, or any increases in any items
specified by the Purchasers, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the Purchasers,
except in each case for decreases or increases which the
Offering Circular discloses have occurred or may occur or
which are described in such letter; and
(v) In addition to the examination referred to in their
report(s) included in the Offering Circular and the limited
procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (iv) above,
they have carried out certain specified procedures, not
constituting an audit in accordance with generally accepted
auditing standards, with respect to certain amounts,
percentages and financial information specified by the
Purchasers, which are derived from the general accounting
records of the Company and its subsidiaries, which appear in
the Offering Circular, and have compared certain of such
amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and
have found them to be in agreement.
2
<PAGE> 26
ANNEX III(a)
Form of Sullivan & Cromwell Opinion
<PAGE> 27
ANNEX III(b)
Form of Preston Gates & Ellis Opinion
<PAGE> 28
ANNEX III(c)
Form of Rubin Baum Levin Constant & Friedman Opinion
<PAGE> 29
ANNEX III(d)
Form of Gurman, Blask & Freedman Chartered Opinion
<PAGE> 1
Exhibit 10.47
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of October 24, 1996,
between Western Wireless Corporation, a Washington corporation (the "Company"),
and Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation,
Salomon Brothers Inc and Toronto Dominion Securities (USA) Inc., as purchasers
(collectively, the "Purchasers") of the 10 1/2% Senior Subordinated Notes Due
2007.
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
(a) "Closing Date" shall mean the date on which the Securities are
initially issued.
(b) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular
purpose.
(c) "Effective Time", in the case of (i) an Exchange Offer, shall mean
the time and date as of which the Commission declares the Exchange Offer
registration statement effective or as of which such registration statement
otherwise becomes effective and (ii) a Shelf Registration, shall mean the
time and date as of which the Commission declares the Shelf Registration
effective or as of which the Shelf Registration otherwise becomes
effective.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
(e) "Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
(f) "Exchange Registration" shall have the meaning assigned thereto in
Section 3(g) hereof.
(g) "Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
(h) The term "holder" shall mean each of the Purchasers and other
persons who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
(i) "Indenture" shall mean the Indenture, dated as of October 24, 1996,
between the Company and Harris Trust Company of California, as Trustee, as
the same shall be amended from time to time.
(j) The term "person" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.
(k) "Registrable Securities" shall mean the Securities; provided,
however, that such Securities shall cease to be Registrable Securities when
(i) in the circumstances contemplated by Section 2(a) hereof, such
Securities either have been exchanged for Exchange Securities
<PAGE> 2
in an Exchange Offer as contemplated in Section 2(a) or the holder thereof,
other than the Purchasers, has failed to tender the same for Exchange
Securities prior to the expiration of an Exchange Offer effected in
accordance with and in the manner contemplated by this Agreement (provided
that any Exchange Security received by a broker-dealer in an Exchange Offer
in exchange for a Registrable Security that was not acquired by the
broker-dealer directly from the Company will also be a Registerable
Security through and including the earlier of the 90th day after the
Exchange Offer is completed or such time as such broker-dealer no longer
owns such Security); (ii) in the circumstances contemplated by Section 2(b)
hereof, a registration statement registering such Securities under the
Securities Act has been declared or becomes effective and such Securities
have been sold or otherwise transferred by the holder thereof pursuant to
such effective registration statement; (iii) such Securities are sold
pursuant to Rule 144 under circumstances in which any legend borne by such
Securities relating to restrictions on transferability thereof, under the
Securities Act or otherwise, is removed by the Company or pursuant to the
Indenture or such Securities are eligible to be sold pursuant to paragraph
(k) of Rule 144; or (iv) such Securities shall cease to be outstanding.
(l) "Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
(m) "Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
(n) "Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
(o) "Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Securities outside the ordinary course of such holder's business
or (iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Securities.
(p) "Rule 144", "Rule 405" and "Rule 415" shall mean, in each case,
such rule promulgated under the Securities Act (or any successor
provision), as the same shall be amended from time to time.
(q) "Securities" shall mean, collectively, the 10 1/2% Senior
Subordinated Notes Due 2007 of the Company to be issued and sold to the
Purchasers, and securities issued in exchange therefor or in lieu thereof
pursuant to the Indenture.
(r) "Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
(s) "Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
(t) "Special Interest" shall have the meaning assigned thereto in
Section 2(c) hereof.
-2-
<PAGE> 3
(u) "Trust Indenture Act" shall mean the Trust Indenture Act of 1939,
or any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section "
or "clause" refers to a Section or clause, as the case may be, of this Exchange
and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to file
under the Securities Act, as soon as practicable, but no later than 30 days
after the Closing Date, a registration statement relating to an offer to
exchange (the "Exchange Offer") any and all of the Registrable Securities for a
like aggregate principal amount of debt securities issued by the Company, which
debt securities are substantially identical to the Registrable Securities (and
are entitled to the benefits of a trust indenture which is substantially
identical to the Indenture or is the Indenture and which has been qualified
under the Trust Indenture Act) except that they have been registered pursuant to
an effective registration statement under the Securities Act and do not contain
provisions for the additional interest contemplated in Section 2(c) below (such
new debt securities hereinafter called "Exchange Securities"). The Company
agrees to use its best efforts to cause such registration statement to become
effective under the Securities Act as soon as practicable, but no later than 75
days after the Closing Date. The Exchange Offer will be registered under the
Securities Act on the appropriate form and will comply with all applicable
tender offer rules and regulations under the Exchange Act. The Company further
agrees to use its best efforts to commence and complete the Exchange Offer
promptly after such registration statement has become effective, hold the
Exchange Offer open for at least 30 days and exchange Exchange Securities for
all Registrable Securities that have been properly tendered and not withdrawn on
or prior to the expiration of the Exchange Offer. The Exchange Offer will be
deemed to have been completed only if the debt securities received by holders
other than Restricted Holders in the Exchange Offer for Registrable Securities
are, upon receipt, transferable by each such holder without restriction under
the Securities Act and the Exchange Act and without material restrictions under
the blue sky or securities laws of a substantial majority of the States of the
United States of America. The Exchange Offer shall be deemed to have been
completed upon the earlier to occur of (i) the Company having exchanged the
Exchange Securities for all outstanding Registrable Securities pursuant to the
Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange
Offer, Exchange Securities for all Registrable Securities that have been
properly tendered and not withdrawn before the expiration of the Exchange Offer,
which shall be on a date that is at least 30 days following the commencement of
the Exchange Offer. The Company agrees (x) to include in the registration
statement a prospectus for use in connection with any resales of Exchange
Securities by a broker-dealer, other than resales of Exchange Securities
received by a broker-dealer pursuant to an Exchange Offer in exchange for
Registrable Securities acquired by the broker-dealer directly from the Company,
and (y) to keep such registration statement effective for a period (the "Resale
Period") beginning when Exchange Securities are first issued in the Exchange
Offer and ending upon the earlier of the expiration of the 90th day after the
Exchange Offer has been completed or such time as such broker-dealers
-3-
<PAGE> 4
no longer own any Exchange Securities. With respect to such registration
statement, each broker-dealer that holds Exchange Securities received in an
Exchange Offer in exchange for Registerable Securities not acquired by it
directly from the Company shall have the benefit of the rights of
indemnification and contribution set forth in Sections 6(a), (c), (d) and (e)
hereof.
(b) If prior to the consummation of the Exchange Offer existing Commission
interpretations are changed such that the debt securities received by holders
other than Restricted Holders in the Exchange Offer for Registrable Securities
are not or would not be, upon receipt, transferable by each such holder without
restriction under the Securities Act, in lieu of conducting the Exchange Offer
contemplated by Section 2(a), the Company shall file under the Securities Act as
soon as practicable a "shelf registration" statement providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule
that may be adopted by the Commission (the "Shelf Registration"). In addition,
in the event that the Purchasers shall not have resold all of the Securities
initially purchased by them pursuant to the Purchase Agreement prior to the
consummation of the Exchange Offer (and notify the Company thereof) and are not
entitled to rely on the interpretation of the Commission Staff to receive fully
tradeable Exchange Securities, the Company shall likewise file under the
Securities Act as soon as practicable a Shelf Registration; provided that the
expenses related to such Shelf Registration shall be paid by the Purchasers
after 9 months from the date of effectiveness of such Shelf Registration. The
Company agrees to use its best efforts to cause the Shelf Registration to become
or be declared effective no later than 75 days after the Closing Date and to
keep such Shelf Registration effective (except for one period not to exceed 30
consecutive days in any twelve month period) for a period ending on the earlier
of the third anniversary of the Effective Time or such time as there are no
longer any Registrable Securities outstanding. The Company further agrees to
supplement or make amendments to the Shelf Registration, as and when required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Shelf Registration or by the Securities Act or rules and
regulations thereunder for shelf registration, and the Company agrees to furnish
to the holders of the Registrable Securities copies of any such supplement or
amendment prior to its being used or promptly following its filing with the
Commission.
(c) In the event that (i) the Company has not filed the registration
statement relating to the Exchange Offer (or, if applicable, the Shelf
Registration) on or before the 30th day after the Closing Date, or (ii) such
registration statement relating to the Exchange Offer (or, if applicable, the
Shelf Registration) has not become effective or been declared effective by the
Commission on or before the 75th day after the Closing Date, or (iii) the
expiration of the Exchange Offer has occurred within 45 days after the initial
effective date of the registration statement relating to the Exchange Offer (if
the Exchange Offer is then required to be made) (it being understood that the
Company shall only be required to hold the Exchange Offer open for at least 30
days) or (iv) any registration statement required by Section 2(a) or 2(b) hereof
is filed and declared effective but shall thereafter cease to be effective
(except as specifically permitted herein) when any Registrable Securities are
outstanding without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"; provided that no more than one
Registration Default shall be deemed to be in effect at any one time), then, as
liquidated damages for such Registration Default, subject to the provisions of
Section 9(b), the per annum interest rate on the Securities shall be increased
by adding 0.5% thereto (e.g., such interest rate, if initially 10.00%, would be
increased to
-4-
<PAGE> 5
10.50%) for the period from the first day on which the Registration Default
occurs to the first day on which no Registration Default is in effect (at which
time the interest rate on the Securities will be restored to its initial rate)
("Special Interest"). For each 90-day period that the Registration Default
continues, the per annum rate of such Special Interest will increase by an
additional 0.5%, provided that such rate shall in no event exceed 2.0% per annum
in the aggregate.
(d) Any reference herein to a registration statement shall be deemed to
include any document incorporated therein by reference as of the applicable
Effective Time and any reference herein to any post-effective amendment to a
registration statement shall be deemed to include any document incorporated
therein by reference as of a time after such Effective Time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall use its best efforts to cause the
Shelf Registration to permit the disposition of the Registrable Securities by
the holders thereof in accordance with the intended method or methods of
disposition thereof provided for in the Shelf Registration. In connection
therewith, the Company shall, as soon as reasonably possible (or as otherwise
specified):
(i) prepare and file with the Commission, as soon as practicable within
the specified time periods, a registration statement with respect to the
Shelf Registration on any form which may be utilized by the Company and
which shall permit the disposition of the Registrable Securities in
accordance with the intended method or methods thereof, as specified in
writing by a majority in interest of the holders of the Registrable
Securities, and use its best efforts to cause such registration statement
to become effective as soon as practicable thereafter;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such registration statement for the period specified in
Section 2(b) hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the form
of such registration statement, and furnish to the holders of the
Registrable Securities copies of any such supplement or amendment
simultaneously with or prior to its being used or filed with the
Commission;
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<PAGE> 6
(iii) comply, as to all matters within the Company's control, with the
provisions of the Securities Act with respect to the disposition of all of
the Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the holders thereof
provided for in such registration statement;
(iv) provide (A) the holders of the Registrable Securities to be
included in such registration statement, (B) the underwriters (which term,
for purposes of this Exchange and Registration Rights Agreement, shall
include a person deemed to be an underwriter within the meaning of Section
2(11) of the Securities Act), if any, thereof, (C) the sales or placement
agent, if any, therefor, (D) counsel for such underwriters or agent and (E)
not more than one counsel for all the holders of such Registrable
Securities the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission and each amendment or supplement thereto;
(v) for a reasonable period prior to the filing of such registration
statement, and throughout the period specified in Section 2(b), make
available at reasonable times at the Company's principal place of business
or such other reasonable place for inspection by the persons referred to in
Section 3(c)(iv) who shall certify to the Company that they have a current
intention to sell the Registrable Securities pursuant to the Shelf
Registration such financial and other information and books and records of
the Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries,
as shall be reasonably necessary, in the judgment of the respective counsel
referred to in such Section , to conduct a reasonable investigation within
the meaning of Section 11 of the Securities Act; provided, however, that
each such party shall be required to maintain in confidence and not to
disclose to any other person any non-public information or records, until
such time as (A) such information becomes a matter of public record
(whether by virtue of its inclusion in such registration statement or
otherwise), or (B) such person shall be required so to disclose such
information pursuant to a subpoena or order of any court or other
governmental agency or body having jurisdiction over the matter (subject to
the requirements of such order, and only after such person shall have given
the Company prompt prior written notice of such requirement), or (C) such
information is required to be set forth in such registration statement or
the prospectus included therein or in an amendment to such registration
statement or an amendment or supplement to such prospectus in order that
such registration statement, prospectus, amendment or supplement, as the
case may be, does not contain an untrue statement of a material fact or
omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(vi) promptly notify the selling holders of Registrable Securities, the
sales or placement agent, if any, therefor and the managing underwriter or
underwriters, if any, thereof and confirm such advice in writing, (A) when
such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission and by the Blue Sky or securities commissioner
or regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such registration statement or
prospectus or for additional information, (C) of the issuance by the
Commission
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<PAGE> 7
of any stop order suspending the effectiveness of such registration
statement or the initiation or threatening of any proceedings for that
purpose, (D) if at any time the representations and warranties of the
Company contemplated by Section 3(c)(xv) or Section 5 cease to be true and
correct in all material respects, (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) at any time when a
prospectus is required to be delivered under the Securities Act, that such
registration statement, prospectus, prospectus amendment or supplement or
post-effective amendment does not conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder or contains an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(vii) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriter or underwriters, such agent or
such holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including information with respect
to the principal amount of Registrable Securities being sold by such holder
or agent or to any underwriters, the name and description of such holder,
agent or underwriter, the offering price of such Registrable Securities and
any discount, commission or other compensation payable in respect thereof,
the purchase price being paid therefor by such underwriters and with
respect to any other terms of the offering of the Registrable Securities to
be sold by such holder or agent or to such underwriters; and make all
required filings of such prospectus supplement or post-effective amendment
promptly after notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(ix) furnish to each holder of Registrable Securities, each placement
or sales agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(c)(iv) an executed copy (or, in
the case of a holder of Registrable Securities, a conformed copy) of such
registration statement, each such amendment and supplement thereto (in each
case including all exhibits thereto (in the case of a holder of Registrable
Securities, upon request) and documents incorporated by reference therein)
and such number of copies of such registration statement (excluding
exhibits thereto and documents incorporated by reference therein unless
specifically so requested by such holder, agent or underwriter, as the case
may be) and of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity in all material respects with the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder, and such other documents, as such holder, agent,
if any, and underwriter, if any, may reasonably request in order to
facilitate the offering and disposition of the Registrable Securities owned
by such holder, offered or
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<PAGE> 8
sold by such agent or underwritten by such underwriter and to permit such
holder, agent and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to the
use of such prospectus (including such preliminary and summary prospectus)
and any amendment or supplement thereto by each such holder and by any such
agent and underwriter, in each case in the form most recently provided to
such person by the Company, in connection with the offering and sale of the
Registrable Securities covered by the prospectus (including such
preliminary and summary prospectus) or any supplement or amendment thereto;
(x) use its best efforts to (A) register or qualify the Registrable
Securities to be included in such registration statement under such
securities laws or blue sky laws of such United States jurisdictions as any
holder of such Registrable Securities and each placement or sales agent, if
any, therefor and underwriter, if any, thereof shall reasonably request,
(B) keep such registrations or qualifications in effect and comply with
such laws so as to permit the continuance of offers, sales and dealings
therein in such jurisdictions during the period the Shelf Registration is
required to remain effective under Section 2(b) above and for so long as
may be necessary to enable any such holder, agent or underwriter to
complete its distribution of Securities pursuant to such registration
statement and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such holder, agent, if any, and
underwriter, if any, to consummate the disposition in such jurisdictions of
such Registrable Securities; provided, however, that the Company shall not
be required for any such purpose to (1) qualify as a foreign corporation in
any jurisdiction wherein it would not otherwise be required to qualify but
for the requirements of this Section 3(c)(x), (2) consent to general
service of process in any such jurisdiction or (3) make any changes to its
articles of incorporation or by-laws or any agreement between it and its
shareholders;
(xi) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Shelf Registration or the offering or sale in
connection therewith or to enable the selling holder or holders to offer,
or to consummate the disposition of, their Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or produced
by any combination of such methods, and which shall not bear any
restrictive legends; and, in the case of an underwritten offering, enable
such Registrable Securities to be in such denominations and registered in
such names as the managing underwriters may request at least two business
days prior to any sale of the Registrable Securities;
(xiii) provide a CUSIP number for all Registrable Securities, not later
than the applicable Effective Time;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions relating
to indemnification and contribution, and take such other actions in
connection therewith as a majority in interest of holders of Registrable
Securities at the time outstanding shall reasonably request in order to
expedite or facilitate
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<PAGE> 9
the disposition of such Registrable Securities; provided, that the Company
shall not be required to enter into any such agreement more than once with
respect to all of the Registrable Securities and may delay entering into
such agreement until the consummation of any underwritten public offering
which the Company shall have then undertaken;
(xv) whether or not an agreement of the type referred to in Section
(3)(c)(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent or any other entity,
(A) make such representations and warranties to the holders of such
Registrable Securities and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as are
customarily made by the Company in connection with an offering of debt
securities pursuant to any appropriate agreement or to a registration
statement filed on the form applicable to the Shelf Registration; (B)
obtain an opinion of counsel to the Company in customary form and covering
such matters, of the type customarily covered by such an opinion in
connection with an offering of debt securities by the Company, as the
managing underwriters, if any, or as any holders of at least 25% in
aggregate principal amount of the Registrable Securities at the time
outstanding may reasonably request, addressed to such holder or holders and
the placement or sales agent, if any, therefor and the underwriters, if
any, thereof and dated the effective date of such registration statement
(and if such registration statement contemplates an underwritten offering
of a part or all of the Registrable Securities, dated the date of the
closing under the underwriting agreement relating thereto) (it being agreed
that the matters to be covered by such opinion shall include the due
incorporation and valid existence of the Company and its significant
subsidiaries; the qualification of the Company and its significant
subsidiaries to transact business as foreign corporations, other than such
jurisdictions in which the failure to be so qualified would not result in a
material adverse effect; the due authorization, execution and delivery of
the relevant agreement of the type referred to in Section (3)(c)(xiv)
hereof, the due authorization, execution, authentication and issuance, and
the validity and enforceability, of the Securities; the absence of material
legal or governmental proceedings involving the Company; the absence of a
breach by the Company or any of its significant subsidiaries of, or a
default under, material agreements binding upon the Company or any
significant subsidiary of the Company, except for defaults disclosed in the
Shelf Registration or that individually or in the aggregate would not have
a material adverse effect; the absence of governmental approvals required
to be obtained in connection with the Shelf Registration, the offering and
sale of the Registrable Securities, this Exchange and Registration Rights
Agreement or any agreement of the type referred to in Section (3)(c)(xiv)
hereof, except such approvals as may be required by the Securities Act or
the Trust Indenture Act or under state securities or blue sky laws; the
compliance as to form of such registration statement and any documents
incorporated by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, respectively; and, a
statement by such counsel to the effect that nothing has come to their
attention that would cause them to believe that as of the date of the
opinion and of the registration statement or most recent post-effective
amendment thereto, as the case may be, such registration statement and the
prospectus included therein, as then amended or supplemented, and the
documents incorporated by reference therein (in each case other than the
financial statements and other financial information contained therein)
contain an untrue statement of a material fact or omit to state therein a
material fact necessary to
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<PAGE> 10
make the statements therein not misleading (in the case of such documents,
in the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act)); (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Company addressed to the selling holders of Registrable
Securities, the placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective date of such
registration statement and (ii) the effective date of any prospectus
supplement to the prospectus included in such registration statement or
post-effective amendment to such registration statement which includes
unaudited or audited financial statements as of a date or for a period
subsequent to that of the latest such statements included in such
prospectus (and, if such registration statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such registration statement or post-effective
amendment to such registration statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus, dated the
date of the closing under the underwriting agreement relating thereto),
such letter or letters to be in customary form and covering such matters of
the type customarily covered by letters of such type; (D) deliver
certificates of officers of the Company as to the accuracy of the
representations and warranties of the Company made pursuant to clause (A)
above or those contained in Section 5(a) hereof and the performance by the
Company of all its obligations under the agreement entered into by the
Company and such other matters as may be reasonably requested by any
holders of at least 25% in aggregate principal amount of the Registrable
Securities at the time outstanding or the placement or sales agent, if any,
therefor and the managing underwriters, if any, thereof; and (E) undertake
such obligations relating to expense reimbursement, indemnification and
contribution as are provided in Section 6 hereof;
(xvi) notify in writing the Trustee of any proposal by the Company to
amend or waive any provision of this Exchange and Registration Rights
Agreement pursuant to Section 9(h) hereof and of any amendment or waiver
effected pursuant thereto, each of which notices shall contain the text of
the amendment or waiver proposed or effected, as the case may be;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD") or
any successor thereto, as amended from time to time) thereof, whether as a
holder of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Rules and
By-Laws, including by (A) if such Rules or By-Laws, including Schedule E
thereto (or any successor thereto), shall so require, engaging a "qualified
independent underwriter" (as defined in such Schedule (or any successor
thereto)) to participate in the preparation of the registration statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such registration statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield of such
Registrable Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided
in Section 6 hereof (or to such other customary extent as may be requested
by such underwriter), and (C) providing such information to such
broker-dealer as
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<PAGE> 11
may be required in order for such broker-dealer to comply with the
requirements of the Rules of Fair Practice of the NASD; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as soon as
practicable but in any event not later than eighteen months after the
effective date of such registration statement, an earning statement of the
Company and its subsidiaries complying with Section 11(a) of the Securities
Act (including, at the option of the Company, Rule 158 thereunder).
(d) In the event that the Company would be required, pursuant to Section
3(c)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, the Company shall without delay prepare and furnish to each such
holder, to each placement or sales agent, if any, and to each such underwriter,
if any, a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of Registrable Securities, such
prospectus shall conform in all material respects to the applicable requirements
of the Securities Act and the Trust Indenture Act and the rules and regulations
of the Commission thereunder and shall 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 not misleading in light of the
circumstances then existing. Each holder of Registrable Securities agrees that
upon receipt of any notice from the Company pursuant to Section 3(c)(vi)(F)
hereof, such holder shall forthwith discontinue the disposition of Registrable
Securities pursuant to the registration statement applicable to such Registrable
Securities until such holder shall have received copies of such amended or
supplemented prospectus, and if so directed by the Company, such holder shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
covering such Registrable Securities at the time of receipt of such notice.
(e) The Company may require each holder of Registrable Securities as to
which any registration pursuant to Section 2(b) is being effected to furnish to
the Company such information regarding such holder and such holder's intended
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Securities Act. Each such
holder agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such holder to the Company or
of the occurrence of any event in either case as a result of which any
prospectus relating to such registration contains or would contain an untrue
statement of a material fact regarding such holder or such holder's intended
method of disposition of such Registrable Securities or omits to state any
material fact regarding such holder or such holder's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such holder or the disposition of such Registrable Securities, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
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<PAGE> 12
(f) Until the earlier of the expiration of three years after the Closing
Date or until all outstanding Securities cease to be Registrable Securities, the
Company will not, and will not permit any of its "affiliates" (as defined in
Rule 144) to, resell any of the Registrable Securities that have been reacquired
by any of them except pursuant to an effective registration statement under the
Act.
(g) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
reasonably possible (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but no
later than 30 days after the Closing Date, a registration statement with
respect to the Exchange Registration on any form which may be utilized by
the Company and which shall permit the Exchange Offer and resales of
Exchange Securities by broker-dealers during the Resale Period to be
effected as contemplated by Section 2(a), and use its best efforts to cause
such registration statement to become effective as soon as practicable
thereafter, but no later than 75 days after the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such registration statement for the periods and purposes
contemplated in Section 2(a) hereof and as may be required by the
applicable rules and regulations of the Commission and the instructions
applicable to the form of such registration statement, and promptly provide
each broker-dealer holding Exchange Securities with such number of copies
of the prospectus included therein (as then amended or supplemented), in
conformity in all material respects with the requirements of the Securities
Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder, as such broker-dealer reasonably may request prior
to the expiration of the Resale Period, for use in connection with resales
of Exchange Securities;
(iii) promptly notify each broker-dealer that has requested or received
copies of the prospectus included in such registration statement, and
confirm such advice in writing, (A) when such registration statement or the
prospectus included therein or any prospectus amendment or supplement or
post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same has
become effective, (B) of any comments by the Commission and by the Blue Sky
or securities commissioner or regulator of any state with respect thereto
or any request by the Commission for amendments or supplements to such
registration statement or prospectus or for additional information, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceedings for that purpose, (D) if at any time the
representations and warranties of the Company contemplated by Section 5
cease to be true and correct in all material respects, (E) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Exchange Securities for sale in any United States
jurisdiction or the initiation or threatening of any proceeding for such
purpose, or (F) at any time during the Resale Period when a prospectus is
required to be delivered under the Securities Act, that such registration
statement, prospectus, prospectus amendment or supplement or post-effective
amendment
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<PAGE> 13
does not conform in all material respects to the applicable requirements of
the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder or contains an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;
(iv) in the event that the Company would be required, pursuant to
Section 3(d)(iii)(F) above, to notify any broker-dealers holding Exchange
Securities, without delay prepare and furnish to each such holder a
reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of such Exchange Securities
during the Resale Period, such prospectus shall conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder
and shall 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 not misleading in light of the circumstances then
existing.
(v) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(vi) use its best efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such jurisdictions
as are contemplated by Section 2(a) no later than the commencement of the
Exchange Offer, (B) keep such registrations or qualifications in effect and
comply with such laws so as to permit the continuance of offers, sales and
dealings therein in such jurisdictions until the expiration of the Resale
Period and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each broker-dealer holding Exchange
Securities to consummate the disposition thereof in such jurisdictions;
provided, however, that the Company shall not be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction wherein
it would not otherwise be required to qualify but for the requirements of
this Section 3(g)(vi), (2) consent to general service of process in any
such jurisdiction or (3) make any changes to its articles of incorporation
or by-laws or any agreement between it and its shareholders;
(vii) use its best efforts to obtain the consent or approval of each
United States governmental agency or authority, whether federal, state or
local, which may be required to effect the Exchange Registration, the
Exchange Offer and the offering and sale of Exchange Securities by
broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not later
than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as soon as
practicable but no later than eighteen months after the effective date of
such registration statement, an earning statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act (including,
at the option of the Company, Rule 158 thereunder).
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<PAGE> 14
4. Registration Expenses.
Except as otherwise provided herein or by separate agreement, the
Company agrees to bear and to pay or cause to be paid promptly upon request
being made therefor all expenses incident to the Company's performance of or
compliance with this Exchange and Registration Rights Agreement, including (a)
all Commission and any NASD registration and filing fees and expenses, (b) all
fees and expenses in connection with the qualification of the Securities for
offering and sale under the State securities and blue sky laws referred to in
Section 3(c)(x) hereof, including reasonable fees and disbursements of counsel
for the placement or sales agent or underwriters in connection with such
qualifications, (c) all expenses relating to the preparation, printing,
distribution and reproduction of each registration statement required to be
filed hereunder, each prospectus included therein or prepared for distribution
pursuant hereto, each amendment or supplement to the foregoing, the certificates
representing the Securities and all other documents relating hereto, (d)
messenger and delivery expenses, (e) fees and expenses of the Trustee under the
Indenture and of any escrow agent or custodian, (f) internal expenses (including
all salaries and expenses of the Company's officers and employees performing
legal or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance), (h) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(c)(xvii)
hereof, (i) reasonable fees, disbursements and expenses of one counsel for the
holders of Registrable Securities retained in connection with a Shelf
Registration, other than a Shelf Registration filed by the Company pursuant to
the second sentence of Section 2(b), as selected by the holders of at least a
majority in aggregate principal amount of the Registrable Securities being
registered, and fees, expenses and disbursements of any other persons, including
special experts, retained by the Company in connection with such registration;
provided, however, that in connection with a Shelf Registration filed by the
Company pursuant to the second sentence of Section 2(b), the expenses related to
such Shelf Registration shall be paid by the Purchasers after nine months from
the date of effectiveness of such Shelf Registration ((a) through (i)
collectively, the "Registration Expenses"). To the extent that any Registration
Expenses are incurred, assumed or paid by any holder of Registrable Securities
or any placement or sales agent therefor or underwriter thereof, the Company
shall reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a request therefor.
Notwithstanding the foregoing, the holders of the Registrable Securities being
registered shall pay all agency fees and commissions and underwriting discounts
and commissions attributable to the sale of such Registrable Securities and the
fees and disbursements of any counsel or other advisors or experts retained by
such holders (severally or jointly), other than the counsel and experts
specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Purchaser and
each of the holders from time to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c) or Section 3(g) hereof and
any further amendments or supplements to any
-14-
<PAGE> 15
such registration statement or prospectus, when it becomes effective or is
filed with the Commission, as the case may be, and, in the case of an
underwritten offering of Registrable Securities, at the time of the closing
under the underwriting agreement relating thereto, will conform in all
material respects to the applicable requirements of the Securities Act and
the Trust Indenture Act and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and at all times subsequent to
the Effective Time when a prospectus would be required to be delivered
under the Securities Act, other than from (i) such time as a notice has
been given to holders of Registrable Securities pursuant to Section
3(c)(vi)(F) or Section 3(g)(iii)(F) hereof until (ii) such time as the
Company furnishes an amended or supplemented prospectus pursuant to Section
3(d) or Section 3(g)(iv) hereof, each such registration statement, and each
prospectus (including any summary prospectus) contained therein or
furnished pursuant to Section 3(c) or Section 3(g) hereof, as then amended
or supplemented, will conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and none of such documents will
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities expressly for
use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which the Company or any subsidiary of the
Company is a party or by which the Company or any subsidiary of the Company
is bound or to which any of the property or assets of the Company or any
subsidiary of the Company is subject, nor will such action result in any
violation of the provisions of the articles of incorporation, as amended,
or the by-laws of the Company or any statute or any order, rule or
regulation of any United States court or governmental agency or body having
jurisdiction over the Company or any subsidiary of the Company or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated by this Exchange and Registration Rights
Agreement, except the registration under the Securities Act of the
Securities, qualification of the Indenture under the Trust Indenture Act
-15-
<PAGE> 16
and such consents, approvals, authorizations, registrations or
qualifications as may be required under State securities or blue sky laws
in connection with the offering and distribution of the Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2(a) or 2(b) hereof, and in
consideration of the agreements of the Purchasers contained herein, and as an
inducement to the Purchasers to purchase the Securities, the Company shall, and
it hereby agrees to, indemnify and hold harmless each of the holders of
Registrable Securities to be included in such registration, and each person who
participates as a placement or sales agent or as an underwriter in any offering
or sale of such Registrable Securities against any losses, claims, damages or
liabilities, joint or several, to which such holder, agent or underwriter may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such Registrable
Securities were registered under the Securities Act, or any preliminary, final
or summary prospectus contained therein or furnished by the Company to any such
holder, agent or underwriter, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company shall, and it hereby agrees to,
reimburse such holder, such agent and such underwriter for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, or preliminary, final or
summary prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by holders of
Registrable Securities expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2(b) hereof and to entering
into any underwriting agreement with respect thereto, that the Company shall
have received an undertaking reasonably satisfactory to it from the holder of
such Registrable Securities and from each underwriter named in any such
underwriting agreement, severally and not jointly, to (i) indemnify and hold
harmless the Company, and all other holders of Registrable Securities, against
any losses, claims, damages or liabilities to which the Company or such other
holders of Registrable Securities may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or
-16-
<PAGE> 17
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such holder or underwriter expressly for use therein, and (ii)
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred; provided, however, that no such holder shall be
required to undertake liability to any person under this Section 6(b) for any
amounts in excess of the dollar amount of the proceeds to be received by such
holder from the sale of such holder's Registrable Securities pursuant to such
registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Contribution. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue
-17-
<PAGE> 18
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by such indemnifying
party or by such indemnified party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 6(d) were determined by pro rata
allocation (even if the holders or any agents or underwriters or all of them
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 this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such holder from the sale of any Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) exceeds the
amount of any damages which such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission, and no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities 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 Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and partner of
each holder, agent and underwriter and each person, if any, who controls any
holder, agent or underwriter within the meaning of the Securities Act; and the
obligations of the holders and any agents or underwriters contemplated by this
Section 6 shall be in addition to any liability which the respective holder,
agent or underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company (including any
person who, with his consent, is named in any registration statement as about to
become a director of the Company) and to each person, if any, who controls the
Company within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities covered
by the Shelf Registration are to be sold pursuant to an underwritten offering,
the managing underwriter or underwriters thereof shall be designated by the
Company, provided that such designated managing underwriter or underwriters is
or are reasonably acceptable to a majority in aggregate principal amount of the
Registrable Securities to be included in such offering.
(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder
-18-
<PAGE> 19
unless such holder (i) agrees to sell such holder's Registrable Securities on
the basis provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including the reports under Section 13 and 15(d) of the Exchange
Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission
under the Securities Act) and the rules and regulations adopted by the
Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation hereafter adopted
by the Commission. Upon the request of any holder of Registrable Securities in
connection with that holder's sale pursuant to Rule 144, the Company shall
deliver to such holder a written statement as to whether it has complied with
such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable Securities or any other securities which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any such
failure, and accordingly agree that each party, in addition to any other remedy
to which it may be entitled at law or in equity, shall be entitled to compel
specific performance of the obligations of any other party under this Exchange
and Registration Rights Agreement in accordance with the terms and conditions of
this Exchange and Registration Rights Agreement, in any court of the United
States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 2001 N.W. Sammamish Road, Issaquah, Washington 98027, Attention: Alan Bender,
and if to a holder, to the address of such holder set forth in the security
register or other records of the Company, or to such other address as the
Company or any such holder may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
-19-
<PAGE> 20
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the respective successors and assigns of the
parties hereto. In the event that any transferee of any holder of Registrable
Securities shall acquire Registrable Securities, in any manner, whether by gift,
bequest, purchase, operation of law or otherwise, such transferee shall, without
any further writing or action of any kind, be deemed a party hereto for all
purposes and such Registrable Securities shall be held subject to all of the
terms of this Exchange and Registration Rights Agreement, and by taking and
holding such Registrable Securities such transferee shall be entitled to receive
the benefits of, and be conclusively deemed to have agreed to be bound by and to
perform, all of the applicable terms and provisions of this Exchange and
Registration Rights Agreement. If the Company shall so request, any such
successor, assign or transferee shall agree in writing to acquire and hold the
Registrable Securities subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to the
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of a majority in aggregate principal amount of the Registrable
Securities at the time outstanding. Each holder of any Registrable Securities at
the time or thereafter outstanding shall be bound by any amendment or waiver
effected pursuant to this Section 9(h), whether or not any notice, writing or
marking indicating such amendment or waiver appears on such Registrable
Securities or is delivered to such holder.
-20-
<PAGE> 21
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities for proper purposes only (which
shall include any purpose related to the rights of the holders of Registrable
Securities under the Securities, the Indenture and this Agreement) at the
offices of the Company at the address thereof set forth in Section 9(c) above or
at the office of the Trustee under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
-21-
<PAGE> 22
Agreed to and accepted as of the date referred to above.
WESTERN WIRELESS CORPORATION
By: /s/ Donald Guthrie
_________________________________________
Name: Donald Guthrie
Title: Vice Chairman of the Board
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
TORONTO DOMINION SECURITIES
(USA) INC.
BY: GOLDMAN, SACHS & CO.
/s/ Goldman, Sachs & Co.
___________________________________________
(Goldman, Sachs & Co.)
-22-
<PAGE> 1
WESTERN WIRELESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Year to
Date
June 30, Year Ended December 31,
-------- ---------------------------------
1996 1995 1994 1993
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Income (loss) before extraordinary
items $(40,170) $(49,309) $(25,960) $3,329
Add:
Interest and financing expense 17,014 25,428 10,659 2,242
Amortization of deferred financing
costs 459 1,345 458 195
Portion of rents representative
of the interest factor 1,641 1,600 733 300
-------- -------- -------- ------
Income (loss) as adjusted $(21,056) $(20,936) $(14,110) $6,066
======== ======== ======== ======
Fixed charges
Interest and financing expense 17,014 $ 25,428 $ 10,659 $2,242
Amortization of deferred financing
costs 459 1,345 458 195
Capitalized interest 2,436 404 -- --
Portion of rents representative
of the interest factor 1,641 1,600 733 300
-------- -------- -------- ------
Fixed charges $ 21,550 $ 28,777 $ 11,850 $2,737
======== ======== ======== ======
Earnings Earnings Earnings
are are are
Ratio of earnings to fixed charges inadequate inadequate inadequate 2.22
========== ========== ========== ======
Deficiency of: $ 42,606 $ 49,713 $ 25,960
======== ======== ========
</TABLE>
<PAGE> 1
Exhibit 23.1
[Arthur Andersen LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated March 15, 1996 (and to all references to our Firm) included in or made a
part of this registration statement.
/s/ Arthur Andersen LLP
Seattle, Washington,
October 22, 1996
<PAGE> 1
Exhibit 25.1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------
HARRIS TRUST COMPANY OF CALIFORNIA
(Exact name of trustee as specified in its charter)
California 94-0304530
(State of incorporation (I.R.S. employer
if not a national bank) Identification No.)
601 South Figueroa Street, 49th Floor
Los Angeles, California 90017
(Address of principal executive offices)
Esther Cervantes, Harris Trust Company of California
601 South Figueroa Street, 49th Floor
Los Angeles, California 90017
(213) 239-0675
(Name, address and telephone number for agent for service)
----------
WESTERN WIRELESS CORPORATION
(Exact name of obligor as specified in its charter)
Washington 91-1638901
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
2001 NW Sammamish Road
Issaquah, Washington 98027
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (206) 313-5200
----------
10.50 % SENIOR SUBORDINATED NOTES DUE 2007
(Title of the indenture securities)
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
<TABLE>
<S> <C>
State Banking Department Federal Reserve Bank of San Francisco
111 Pine Street 101 Market Street
Suite 1100 San Francisco, California 94105
San Francisco, California 94104
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each
affiliation.
None.
<PAGE> 3
Item 16. List of Exhibits.
Exhibit T-1A. A copy of the articles of association of Trustee as
presently in effect: Restated Articles of Incorporation
and Amendment of February 9, 1994.
Exhibit T-1A is incorporated herein by reference to S.E.C.
File No. 33-54627 of the Registration Statement of
FirstFed Financial Corp. Exhibit T-1A.
Exhibit T-1B. A copy of the certificate of authority of the
Trustee to commence business, if not contained in the
articles of association: Certificate of Authorization to
transact business.
Exhibit T-1B is incorporated herein by reference to S.E.C.
File No. 333-2688 of the Registration Statement of Western
Wireless Corporation Exhibit T-1B.
Exhibit T-1C. A copy of the authorization of the Trustee to
exercise corporate trust powers, if such authorization is
not contained in the documents specified in paragraph (1)
and (2) above.
Exhibit T-1C is incorporated herein by reference to S.E.C.
File No. 33-69382 of the Registration Statement of Pacific
Gulf Properties, Inc. Exhibit T-1C.
Exhibit T-1D. Copy of the existing bylaws of the Trustee or
instruments corresponding thereto: By-Laws of Harris Trust
Company of California as of April 27, 1995, as presently
in effect.
Exhibit T-1D is incorporated herein by reference to S.E.C.
File No. 333-2688 of the Registration Statement of Western
Wireless Corporation Exhibit T-1D.
Exhibit T-1E. A copy of each indenture referred to in Item 4, if
obligor is in default.
Not Applicable.
Exhibit T-1F. The consents of United States institutional trustees
required by Section 321 of the Act.
Exhibit T-1F is incorporated herein by reference to S.E.C.
File No. 33-69382 of the Registration Statement of Pacific
Gulf Properties, Inc. Exhibit T-1F.
Exhibit T-1G. A copy of the latest report of condition of the
Trustee published pursuant to law or the requirement of
its supervising or examining authority: Statement of
Condition provided to the Administrator of Local Agency
Security for the period ending June 30, 1996. (COPY
ATTACHED)
Exhibit T-1H. A copy of any order pursuant to which the foreign
trustee is authorized to act as sole trustee under the
indentures qualified or to be qualified under the Act.
Not Applicable.
Exhibit T-1I. Foreign trustees are required to file a consent to
service of process on Forms F-X.
Not Applicable.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Trust Indenture Act of
1939 the Trustee, Harris Trust Company of California, a corporation organized
and existing under the laws of California, has duly caused this Statement of
Eligibility and Qualification to the signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Los Angeles, State of California,
on October 25, 1996.
HARRIS TRUST COMPANY OF
CALIFORNIA
By /S/ ESTHER CERVANTES
___________________________
Esther Cervantes
Assistant Vice President
<PAGE> 5
TRUST DEPARTMENT CALLED REPORT OF CONDITION (FIDUCIARY STATEMENT)
- -------------------------------------------------------------------------------
Name of Institution
Harris Trust Company of California
- -------------------------------------------------------------------------------
City County State Zip
Los Angeles Los Angeles California 90017
- -------------------------------------------------------------------------------
At the close of business on (date) State Banking Department Number
June 30, 1996 0642
- -------------------------------------------------------------------------------
Name and title of person to whom Area code & Telephone Number
inquiries may be directed
Esther Cervantes (213) 239-0675
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A. ASSETS MARKET VALUE
1. Investments Dollars in Thousands
- -------------------------------------------------------------------------------
<S> <C> <C>
(a) U.S. Government & Agency Obligations ........... 622952 1(a)
(b) State, County & Municipal Obligations .......... 0 1(b)
(c) Other Obligations .............................. 0 1(c)
(d) Stocks (Common and Preferred) .................. 0 1(d)
(e) Mutual Funds ................................... 15897 1(e)
(f) Real Estate .................................... 0 1(f)
(g) Real Estate Loans .............................. 0 1(g)
(h) All Other Loans ................................ 0 1(h)
(i) Miscellaneous .................................. 34707 1(i)
2. Interest-bearing Deposits
(a) Own Institution ................................ 0 2(a)
(b) Other Federally Insured
Financial Institutions ........................ 0 2(b)
3. Noninterest-bearing Deposits
(a) Own Institution ................................ 0 3(a)
(b) Other Federally Insured
Financial Institutions ........................ 30 3(b)
4. TOTAL ASSETS ....................................... 673586 4
- -------------------------------------------------------------------------------
B. LIABILITIES
5. Fiduciary Accounts
(a) Court Trusts ................................... 0 5(a)
(b) Personal Trusts ................................ 0 5(b)
(c) Employee Benefit Trusts ........................ 0 5(c)
(d) Collective Investment Funds .................... 0 5(d)
6. SUBTOTAL (Items (a) through (d) .................... 0 6
7. Local Agency Security Accounts ..................... 0 7
8. Corporate Accounts ................................. 41336 8
9. Agency, Safekeeping, Custodian, and
Escrow Accounts ................................... 632246 9
10. TOTAL LIABILITIES .................................. 673586 10
- -------------------------------------------------------------------------------
</TABLE>
C. Trust Businesses for Which Securities Are On Deposit
with the State Treasurer
<TABLE>
<CAPTION>
MARKET VALUE MARKET VALUE
Court Trusts Private Trusts
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
11. Trust Business ................ 0 0 11
12. Less Real Estate .............. 0 12
13. Trust Business on Which
Security is Required ......... 0 0 13
14. Amount of Security Required
by Sections 1540 and 1541
of the Financial Code ........ 100 100 14
15. Securities on Deposit with
the State Treasurer .......... 124 124 15
16. Excess or Deficiency .......... 24 24 18
- -------------------------------------------------------------------------------
D. Miscellaneous Information
17. Total Number of Discretionary Accounts ............. 0 17
18. Overdrafts Security Accounts ..................... 0 18
- -------------------------------------------------------------------------------
</TABLE>
Certification
The undersigned,
- -------------------------------------------------------------------------------
Name Title
Steven Rothbloom Pres., Chrmn.,
- -------------------------------------------------------------------------------
and
- -------------------------------------------------------------------------------
Name Title
M. Valoise Douglas V.P. & G.M.
- -------------------------------------------------------------------------------
of the above named bank, each declares, for himself along and not for the other:
I have personal knowledge of the matters contained in this report and I believe
that each statement in said report is true. Each of the undersigned, for
himself alone and not for the other, certified under penalty of perjury that
the foregoing is true and correct.
- -------------------------------------------------------------------------------
Executed on at:
July 25, 1996 Los Angeles, California
- -------------------------------------------------------------------------------
Signature Signature
/s/ Steven Rothbloom /s/ M. Valoise Douglas
- -------------------------------------------------------------------------------
<PAGE> 6
<TABLE>
<CAPTION>
SCHEDULE OF OTHER ASSETS
- -------------------------------------------------------------------------------
Description Amount
- -------------------------------------------------------------------------------
<S> <C>
Receivables ................................................... 656
Goodwill ...................................................... 147
Other Intangibles ............................................. 331
Deferred Taxes ................................................ 35
-----
Total (Same as Item 10) 1,169
=====
SCHEDULE OF OTHER LIABILITIES
- -------------------------------------------------------------------------------
Description Amount
- -------------------------------------------------------------------------------
Payables ...................................................... 301
Accrued Expenses .............................................. 375
-----
Total (Same as Item 14) 676
=====
</TABLE>
<PAGE> 1
FORM OF LETTER OF TRANSMITTAL
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5 P.M., EASTERN STANDARD TIME, ON
________________, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
ISSUER:
WESTERN WIRELESS CORPORATION
2001 NW SAMMAMISH ROAD, SUITE 100
ISSAQUAH, WASHINGTON 98027
Telephone: (206) 313-5200
Attention: Alan R. Bender, General Counsel
LETTER OF TRANSMITTAL
FOR 10-1/2% SENIOR SUBORDINATED NOTES DUE 2007
EXCHANGE AGENT:
HARRIS TRUST COMPANY OF CALIFORNIA
c/o HARRIS TRUST COMPANY OF NEW YORK
By Facsimile:
(212) 701-7636 or (212) 701-7640
Attention: Reorganization Department
Confirm by telephone:
(212) 701-7624
By Registered or Certified Mail:
Harris Trust Company of California
c/o Harris Trust Company of New York
Wall Street Station
P. O. Box 1023
New York, NY 10268-1023
Attention: Reorganization Department
By Hand:
Harris Trust Company of California
c/o Harris Trust Company of New York
77 Water Street, 5th Floor
New York, NY 10005
Attention: Reorganization Department
By Overnight Courier:
Harris Trust Company of California
c/o Harris Trust Company of New York
77 Water Street, 4th Floor
New York, NY 10005
Attention: Reorganization Department
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
-1-
<PAGE> 2
The undersigned acknowledges receipt of the Prospectus dated October ___,
1996 (the "Prospectus") of Western Wireless Corporation (the "Company" or the
"Issuer") and this Letter of Transmittal for 10-1/2% Senior Subordinated Notes
Due 2007, which may be amended form time to time (this "Letter"). The Prospectus
and Letter together constitute the Issuer's offer to exchange $1,000 in
principal amount of its 10-1/2% Senior Subordinated Notes Due 2007 ("Exchange
Notes"), for each $1,000 in principal amount of its outstanding 10-1/2% Senior
Subordinated Notes Due 2007 that were issued and sold in a transaction exempt
from registration under the Securities Act of 1933, as amended ("Senior Notes").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Senior Notes who wish to tender their Senior Notes must,
prior to the Expiration Date: (1) complete, sign, date and mail or otherwise
deliver this Letter to the Exchange Agent, in person or to the address set forth
above; and (2) tender his or her Senior Notes or, if a tender of Senior Notes is
to be made by book-entry transfer to the account maintained by the Exchange
Agent at The Depository Trust Company (the "Book-Entry Transfer Facility"),
confirm such book-entry transfer (a "Book-Entry Confirmation"), in each case in
accordance with the procedures for tendering described in the Instructions to
this Letter. Holders of Senior Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or Book-Entry
Confirmation and all other documents required by this Letter to be delivered to
the Exchange Agent on or prior to the Expiration Date, must tender their Senior
Notes according to the guaranteed delivery procedures set forth under the
caption "The Exchange Offer - How to Tender" in the Prospectus. (See Instruction
1).
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or Alan R. Bender, Esq., General Counsel, Corporate Secretary, and
Senior Vice President of the Company, at (206) 313-5200, 2001 NW Sammamish Road,
Suite 100, Issaquah, Washington 98027.
-2-
<PAGE> 3
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have
the respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Senior Notes of which you are the holder. If the
space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Senior Notes on a separate SIGNED schedule and affix that
schedule to this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<CAPTION>
Name(s) and Address(es) of Principal Amount of
Registered Holders(s) Certificate Principal Amount of Senior Notes
(Please Fill in if Blank) Numbers(s) (1) Senior Notes Tendered (2)
- -------------------------- -------------- ------------------- -------------------
<S> <C> <C> <C>
Totals:
</TABLE>
(1) Need not be completed if Senior Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Senior Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
-3-
<PAGE> 4
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Senior Notes indicated
above. Subject to, and effective upon, the acceptance for exchange of the Senior
Notes tendered with this Letter, the undersigned exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest in
and to the Senior Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Senior Notes, with
full power of substitution, to: (a) deliver certificates for such Senior Notes;
(b) deliver Senior Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuer upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Issuer of the Senior Notes
tendered under the Exchange Offer; and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Senior Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Senior Notes
tendered hereby and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignment and transfer of the Senior Notes tendered.
The undersigned agrees that acceptance of any tendered Senior Notes by the
Issuer and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Issuer of its obligations under the Registration
Rights Agreement (as defined in the Prospectus) and that, upon the issuance of
the Exchange Notes, the Issuer will have no further obligations or liabilities
thereunder (except in certain limited circumstances). By tendering Senior Notes,
the undersigned certifies (a) that it is not an "affiliate" of the Issuer within
the meaning of Rule 405 under the Securities Act, that it is not a broker-dealer
that owns Senior Notes acquired directly from the Issuer or an affiliate of the
Issuer, that is acquiring the Exchange Notes in the ordinary course of the
undersigned's business and that the undersigned has not arrangement with any
person to participate in the distribution of the Exchange Notes or (b) that it
is an "affiliate" (as so defined) of the Issuer or of the initial purchasers in
the original offering of the Senior Notes, and that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable to it.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuer may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below,
the Exchange Agent will deliver Exchange Notes (and, if applicable, a
certificate for any Senior Notes not tendered but represented by a certificate
also encompassing Senior Notes which are tendered) to the undersigned at the
address set forth in Box 1.
-4-
<PAGE> 5
The undersigned acknowledges that the Exchange Offer is subject to the
more detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
[ ] CHECK HERE IF TENDERED SENIOR NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:____________________________________________
Account Number:___________________________________________________________
Transaction Code Number:__________________________________________________
[ ] CHECK HERE IF TENDERED SENIOR NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):___________________________________________
Date of Execution of Notice of Guaranteed Delivery:_______________________
Window Ticket Number (if available):______________________________________
Name of Institution which Guaranteed Delivery:____________________________
-5-
<PAGE> 6
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT SENIOR NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X ___________________________________________ ______________
X ___________________________________________ ______________
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED DATE
SIGNATORY
Area Code and Telephone Number:______________________________________
This box must be signed by registered holder(s) of Senior Notes as their name(s)
appear(s) on certificates(s) for Senior Notes, or by person(s) authorized to
become registered holder(s) by endorsement and documents transmitted with this
Letter. If signature is by a trustee, executor, administrator, guardian, officer
or other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below. (See Instruction 3)
Name(s)_________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity________________________________________________________________________
Address_________________________________________________________________________
__________________________________________________________(INCLUDE ZIP CODE)
Signature(s) Guaranteed ____________________________________
by an Eligible Institution: (AUTHORIZED SIGNATURE)
(If required by Instruction 3) ____________________________________
(TITLE)
____________________________________
(NAME OF FIRM)
-6-
<PAGE> 7
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME: HARRIS TRUST COMPANY OF CALIFORNIA
SUBSTITUTE PART 1 - Please provide your Social Security Number
FORM W-9 TIN in the space at right and or Employer
DEPARTMENT OF certify by signing and Identification Number
THE TREASURY dating below. ______________________
INTERNAL REVENUE
SERVICE =========================================================
PAYOR'S REQUEST PART 2 - Check the box if you are NOT subject to backup
FOR TAXPAYER withholding under the provisions of Section 2406(a) (1)
IDENTIFICATION (C) of the Internal Revenue Code because (1) you have not
NUMBER (TIN) been notified that you are subject to back-up withholding
as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to back-up
withholding.
[ ]
=========================================================
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE,
CORRECT, AND COMPLETE
SIGNATURE____________________________ DATE_______________
=========================================================
PART 3 - Check if Awaiting TIN [ ]
-7-
<PAGE> 8
BOX 4
To be completed ONLY if certificates for Senior Notes in a principal amount not
exchanged, or Exchange Notes, are to be issued in the name of someone other than
the person whose signature appears in Box 2, or if Senior Notes delivered by
book-entry transfer which are not accepted for exchange are to be returned by
credit to an account maintained at the Book-Entry Transfer Facility other than
the account indicated above.
Issue and deliver: (check appropriate boxes)
[ ] Senior Notes not tendered
[ ] Exchange Notes to: Name____________________________________________
(PLEASE PRINT)
Address_________________________________________
________________________________________________
Please complete the Substitute Form W-9 at Box 3
________________________________________
(TAX I.D. or SOCIAL SECURITY NUMBER)
BOX 5
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Senior Notes in a principal amount not
exchanged, or Exchange Notes, are to be sent to someone other than the person
whose signature appears in Box 2 or to an address other than that show in Box 1.
Deliver: (check appropriate boxes)
[ ] Senior Notes not tendered
[ ] Exchange Notes, to: Name____________________________________________
(PLEASE PRINT)
Address_________________________________________
________________________________________________
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Senior Notes
or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents required
by this Letter, must be received by the Exchange Agent at one of its addresses
set
-8-
<PAGE> 9
forth herein on or before the Expiration Date. The method of delivery of this
Letter, certificates for Senior Notes or a Book-Entry Confirmation, as the case
may be, and any other required documents is at the election and risk of the
tendering holder, but except as otherwise provided below, the delivery will be
deemed made when actually received by the Exchange Agent. If delivery is by
mail, the use of registered mail with return receipt requested, properly
insured, is suggested.
Holders whose Senior Notes are not immediately available or who cannot
deliver their Senior Notes or Book-Entry Confirmation, as the case may be, and
all other required documents to the Exchange Agent on or before the Expiration
Date may tender their Senior Notes pursuant to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedure: (i) tender
must be made by or through an Eligible Institution (as defined in the Prospectus
under the caption "The Exchange Offer"); (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by telegram, telex,
facsimile transmission, mail or hand delivery) (x) setting forth the name and
address of the holder, the description of the Senior Notes and the principal
amount of Senior Notes tendered, (y) stating that the tender is being made
thereby and (z) guaranteeing that, within five New York Stock Exchange trading
dates after the date of execution of such Notice of Guaranteed Delivery, this
Letter together with the certificates representing the Senior Notes or a
Book-Entry Confirmation, as the case may be, and any other documents required by
this Letter will be deposited by the Eligible Institution with the Exchange
Agent; and (iii) the certificates for all tendered Senior Notes or a Book-Entry
Confirmation, as the case may be, as well as all other documents required by
this Letter, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in the Prospectus under the caption "The Exchange
Offer - How to Tender."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Senior Notes will be determined
by the Issuer, whose determination will be final and binding. The Issuer
reserves the absolute right to reject any or all tenders that are not in proper
form or the acceptance of which, in the opinion of the Issuer's counsel, would
be unlawful. The Issuer also reserves the right to waive any irregularities or
conditions of tender as to particular Senior Notes. All tendering holders, by
execution of this Letter, waive any right to receive notice of acceptance of
their Senior Notes.
None of the Issuer, the Exchange Agent or any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount
of any Senior Note evidenced by a submitted certificate or a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal amount
tendered in the fourth column in Box 1 above. All of the Senior Notes
represented by a Book-Entry Confirmation delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. A certificate for
Senior Notes not tendered will be sent to the holder, unless otherwise provided
in Box 5, as soon as practicable after the Expiration Date, in the event that
less than the entire principal amount of Senior Notes represented by a submitted
certificate is tendered (or, in the case of Senior Notes tendered by book-entry
transfer, such non-exchanged Senior Notes will be credited to an account
maintained by the holder with the Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Senior Notes, a notice of withdrawal must: (i) be received by the
Exchange Agent before the Issuer notifies the Exchange Agent that it has
accepted the tender of Senior Notes pursuant to the Exchange Offer; (ii) specify
the name of the person who tendered the Senior Notes; (iii) contain a
description of the Senior Notes to be withdrawn, the certificate numbers shown
on the particular certificates evidencing such Senior Notes and the principal
amount of Senior Notes represented by such certificates; and (iv) be signed by
the holder in the same manner as the original signature on this Letter
(including any required signature guarantee).
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If
this Letter is signed by the holder(s) of Senior Notes tendered hereby, the
signature must correspond with the
-9-
<PAGE> 10
name(s) as written on the face of the certificate(s) for such Senior Notes,
without alteration, enlargement or any change whatsoever.
If any of the Senior Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Senior Notes are held
in different names on several certificates, it will be necessary to complete,
sign and submit as many separate copies of this Letter as there are names in
which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Senior Notes are tendered; and/or (ii)
untendered Senior Notes, if any, are to be issued to the holder of record, then
the holder of record need not endorse any certificates for tendered Senior
Notes, nor provide a separate bond power. If any other case, the holder of
record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Senior Notes are tendered: (i) by a holder who has not completed the Box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
this Letter; or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP) (collectively,
"Eligible Institutions"). If Senior Notes are registered in the name of a person
other than the signer of this Letter, the Senior Notes surrendered for exchange
must be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Issuer, in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Senior Notes not exchanged are to be issued
or sent, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the Tax Identification
Number ("TIN") of the person named must also be indicated. Holders tendering
Senior Notes by book-entry transfer may request that Senior Notes not exchanged
by credited to such account maintained at the Book-Entry Transfer Facility as
such holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Senior Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct TIN, which, in the case of a
holder who is an individual, is his or her social security number. If the
Exchange Agent is not provided with the correct TIN, the holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery
to the holder of the Exchange Notes pursuant to the Exchange Offer may be
subject to back-up withholding. (If withholding results in overpayment of taxes,
a refund may be obtained.) Exempt holders (including, among others, all
corporations and certain foreign individuals) are not subject to these back-up
withholding and reporting requirements. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; or (ii) the Internal Revenue Service has notified the holder that he
or she is no longer subject to back-up withholding; or (iii) certify in
accordance with the
-10-
<PAGE> 11
Guidelines that such holder is exempt from back-up withholding. If the Senior
Notes are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for information on which TIN to report.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Senior Notes to the Issuer or its order pursuant
to the Exchange Offer. If, however, the Exchange Notes or certificates for
Senior Notes not exchanged are to be delivered to, or are to be issued in the
name of, any person other than the record holder, or if tendered certificates
are recorded in the name of any person other than the person signing this
Letter, or if a transfer tax is imposed by any reason other than the transfer of
Senior Notes to the Issuer or its order pursuant to the Exchange Offer, then the
amount of such transfer taxes (whether imposed on the record holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of taxes or exemption from taxes is not submitted with this Letter, the
amount of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to
amend or waive any of the specified conditions in the Exchange Offer in the
case of any Senior Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Senior Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the addressed indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating
to the procedure for tendering, as well as requests for additional copies of
the Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: This Letter (together with certificates representing tendered
Senior Notes or a Book-Entry Confirmation and all other required documents) must
be received by the Exchange Agent on or before the Expiration Date (as defined
in the Prospectus).
-11-
